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Designing a website

Step 1 - Planning your site

Making money from user fees & subscriptions

For many years, conventional wisdom held that people wouldn't pay for anything online. There was an abundance of free information and services, and people were uneasy about using credit cards online. It seemed impossible to charge for anything.


But people are always willing to pay for things they need or want. And many online players—from newspapers to software to games—are now making a living through user fees and subscriptions.


3 ways to collect user fees:

  • Subscription-only services

  • Tiered services with free and premium offerings

  • Pay-as-you-go services


Subscription-only services: Subscription services charge users an up-front fee for unlimited access to content or services over a set period of time; nothing is given away for free. Great work if you can get it!


But not many businesses can get away with a subscription-only model, because web users rarely invest money up front in an unknown quantity. Only deeply compelling services or established brands can pull it off. A success story: Both Consumer Reports and The Wall Street Journal bucked the industry trend in 1996 by establishing subscription-only content sites that continue to this day.


tiered services Tiered services put the psychology of salesmanship to work on the web. They offer users free access to a site—or, rather, part of a site—and then sell them premium services or content. This approach has worked for a wide range of businesses, including magazines, research services, software, and games.


What subscribers want

  • Value. They'll pay for a service they need that they can't get elsewhere.

  • A free sample. They want to try the product before committing to a subscription.

For instance, the financial information service Hoover's Online offers free access to its basic descriptions of companies and industries. But its premium services—in-depth reports, competitive profiles, targeted searching—require an annual subscription.


The tiered approach has also worked well for ESPN. Its sports news is available free, but users a-plenty pay to join fantasy sport leagues (baseball, basketball, and football) timed with each major league season. Sports fans pay around $30 per season to assemble and coach a team (based on pro athletes) and get a shot at the (fantasy) championship.


This model works for software, as well. Atomz provides a free, basic version of its site search engine, which brings search capabilities to sites with under 500 pages. Although customers can use this free service indefinitely, Atomz uses it as a lure for their full-featured services, for which customers pay a monthly fee.


pay-as-you-go services Pay-as-you go services allow consumers to sample a site little by little, paying only for the content or services they use. The fee may be applied based on the service rendered or time elapsed. Content sites, for example, may charge by the article, whereas game sites may charge by the hour.


The problem with this model is that the payment system really isn't there yet. Once consumers can make true micropayments—a few pennies per article, for instance—this model will become far more viable.

Making money from match-making

Matchmaking is all about connections: connecting people to people, connecting people to jobs, connecting people who want a particular product to people with the products they need.


So match-making sites play the role of middleman. They make money by bringing together buyers and sellers, and facilitating successful transactions. The job's not that different from the traditional romantic match-maker, like the one in the famous song from Fiddler on the Roof ("Match-maker, match-maker, make me a match. Find me a find, catch me a catch...").


Good match-makers—whether they're of the old-fashioned or the new-fangled online variety—all have a lot in common. They have access to a lot of people, they understand the criteria of a good match, and they can help people articulate what they're looking for. They also know how to arrange a safe environment to explore the idea of a potential match.


3 ways to charge for match-making:

  • Subscription services

  • Pay-as-you-go services

  • Commission-based services


Subscription services: Subscription services grant unlimited access to the system for a specific period of time. This fee is the same, regardless of how often you use the system or whether you find a successful match.


For example, the dating site Match.com charges users a monthly subscription fee (roughly $25) for full access to the site. However, Match.com lets you sample the service for free: You can browse the system and post your profile before you join. But you have to pay if you want to contact someone or reply to someone who's contacted you.


What match-seekers want

  • A large selection of potential matches to choose from—whether that means people, products, jobs, or something else.

  • Effective ways of searching for the right match. They want the site to help them describe what they're looking for, find potential matches, and evaluate how good each match is.

  • A safe, confidential way of exploring a match before committing to it.

Pay-as-you-go services: Pay-as-you-go services charge a set amount each time you use the system, but this access can take different forms, depending on the site. For example, the employment site Monster.com charges a set rate for employers to post a single job listing for a set period of time (usually 60 days).


Same dating sites use the same pay-as-you-go approach, but they go about it differently. The personals service on Nerve.com lets you post a profile and browse the system for free. You pay a small amount (roughly $1 per message) each time you want to contact someone—or reply to someone who has contacted you.


commission-based services Commission-based services charge a set amount—or percentage—for each successful transaction. This obviously wouldn't work on dating sites (how would you define "successful"?), but it is commonly used on sites where a clear dollar value is attached to the transaction, or sale.


Commissions are often charged—to one or both clients—on used car sites, real estate sites, and auction sites, such as eBay.

Online payment options

If you plan to sell things over the Internet, you'll also need to plan out how people will pay for them.


Collecting money online:

  • Credit card. The most basic payment method requires a merchant account and a secure server to process the transaction.

  • Online cash. Online cash services, such as PayPal and Yahoo! PayDirect, let you exchange money between two online accounts set up for this purpose.

  • Micropayments. Micropayment services will someday allow you to pay for services in tiny increments—a few pennies or less.

  • Cash, check, or money order. These are sent by mail.


Credit card: Credit cards may be the most familiar method of collecting online, but they aren't the cheapest or the easiest. If you have an existing business, you already know about merchant accounts. If you don't, you're about to learn. In order to receive credit-card payments online, you have to first establish a merchant account with an FDIC-insured merchant bank.


Be warned: This is a bureaucratic process, and a costly one. Between account set-up fees, processing fees, and transaction fees, you'll pay quite a bit for the privilege of accepting credit cards. So smaller merchants sometimes use cash-payment services like PayPal.


online cash Online cash isn't exactly cash. These services—like PayPal and Yahoo! PayDirect—play the middleman, letting you transfer money directly from one person to another, while ensuring that it actually gets where it's going (and taking a cut for themselves, of course).

"You'll be happy to know I just invested in a company which is developing technology which will allow me to wirelessly beam e-dollars to you, but to answer your question: Sorry dude, no change."

PayPal is the best known e-cash service, commonly used on auction sites like eBay, where individuals are selling to each other. It's a simple system. Users set up a PayPal account by transferring money from a bank account, charging it to their credit card, or sending a personal check. They can then buy online using this account. When someone buys from you, the amount is transferred from their account to yours (with roughly a 3% commission).


micropayments Micropayments allow users to pay tiny amounts of money—a few pennies, say, or less—for a service they use online. This approach would be perfect for content sites of all sizes: The tiny payments would mean little to any individual consumer—Why not pay a penny for an article, so long as it's easy to do so?—but it could add up to significant revenues for the site.


The trick, then, is making it easy. And that's the missing piece in this puzzle. Although several early players attempted to put such a system in place, none gained critical mass and they all died trying. File this idea—lovely as it is—under "someday.


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