The business world thrives on information. Company valuations can change with the dip of a stock price, the hint of a scandal, or the report of a change in executives. More and more, companies are relying on online information providers to deliver up-to-date factual business data. As the Information Age continues to develop, this reliance on online providers is likely to continue to grow. The demand for fast, timely, and accurate information isn't going to decrease. The question then becomes can online information companies capitalize on this demand and successfully turn a profit in a post-dot.com crash world?

Information in Demand

The demand for online content clearly exists. According to a study of over a million U.S. consumers conducted by the Online Publishers Association and comScore Networks Inc., spending for digital information nearly doubled between 2000 and 2001, growing from $350 million to $675 million. The study also found that the number of people buying online content increased. Some 12.4 million people made online information purchases in the first quarter of 2002, up from the 5.3 million who made such purchases a year earlier.

Turning a profit in online information services is not as easy as hanging out a digital shingle and waiting for customers to log on. Analysts from market research firm IDC argue that to succeed, online content providers must expand their subscriber base while continuing to satisfy the customers they currently have. In addition, content providers must constantly update their data and maintain the technology to answer queries quickly and correctly.

Price Models

Since many consumers expect to find free information available on the Internet, finding the best way to profit from online data services can be tricky. There are a number of price models that have been attempted to allow content providers to achieve a profit.

The Online Publishers Association report cites subscriptions as the dominant pricing model online content sales. In a simple subscription service, users pay for a password that allows them to search for data at the company's site for a specific period of time. Some data providers, such as TheStreet.com, Done Deals, and Hoover's, have a tier-pricing subscription structure, allowing the consumer to pay more or less depending on the type of access granted by their subscription.

The major alternative to subscription services is the single fee structure. Researchers pay a one-time fee in exchange limited data access. Either specific data is compiled for the customer by the data company, or the customer purchases a specific report, article, or analysis.

Some online information providers have a partially free service structure. Online versions of newspapers and journals, for example, often provide recent articles for free but charge users for archived materials. Business information sites, such as Hoover's and Yahoo Finance, provide basic information for free but also sell more detailed third-party reports. EDGAR Online, Inc., a service that provides access to SEC filings, allows a limited number of free searches per month. After this number is exceeded, users must have a subscription to continue searching.

These mixtures of free and paid services draw customers who may be initially searching for strictly free data to online information sites. Once at a site, however, the customer may choose to purchase more advanced access, a subscription service, or a report 6r other data product. Even if they do not, the customers may also be subject to another revenue generator: advertising. Since online information providers often serve a specific audience, advertisers can create banner ads targeted to that audience.

America Online is adopting a more complex model. AOL is promoting web events, encouraging specific targeted audiences to log on at specific times. The idea is to create Internet viewing habits, not unlike hooking viewers on a regularly scheduled television show. Sunday morning news content may be provided, for example, or Sunday afternoon football coverage. The goal is to reduce subscriber losses by creating habitual viewers who know when their content is available. At the same time, AOL hopes to attract advertisers by providing them more specific audiences.

The Future of Online Information

Many consumers are still reluctant to pay for online content. Slate and Salon both tried unsuccessfully to convert the majority of their readers into paid subscribers. But some content providers are still trying to move into entirely pay-based services. Clare Hart, CEO of the news service Factiva, has predicted that consumers will be paying for all online media by 2004. Given the current state of the industry, it is more likely online content will remain a mixture of free content and premium services available for pay.

Market research firm IDC predicts that worldwide spending for online content will increase, forecasting global spending in excess of $50 billion in 2002 and in excess of $108 billion in 2006. IDC contends that the market will be driven by businesses and consumers increasingly willing to pay for timely and accurate information. For these profits to be realized, it will remain necessary for content providers to continually update their sites with quality information.