Sites Worth Paying for?

The paid Web is a work in progress, but some are already getting it right

The early days of the Web were a great party, no? The CEOs all seemed to be about high school age. And we know what happens when Mom and Dad come home after a high school party. They say: "Somebody is going to pay for this mess." In the aftermath of the Net shindig, Web sites as big as portal Yahoo! (YHOO ) and as small as online magazine Salon (SALN ) hope that convincing people to pay for information and services will be to their income statements what a mop and some Mr. Clean are to a suburban kitchen. But will Web users, weaned on the philosophy that valuable information should be free, start opening their wallets?

The paid Web is still a work in the very early stages of creation. And it's not at all clear which mix of services will make people part with their pennies. But common sense tells us a few things. One, to convince people to pay for online services, they had better be something you can't easily get free somewhere else. And Web services that carry a price will have to have obvious utility. They have to help you make or save money, or greatly simplify something you already do.

By these standards, the early generation of paid Web services is a mixed bag. A look at efforts from Yahoo and financial news site (TSCM ), as well as the established pay-to-view site, gives some idea of what people can expect--and what it'll take to succeed.

Consumer Reports Online. This $3.95-a-month site (or $24 a year, discounted to $19.95 a year for magazine subscribers) is a beacon of the paid Web. It's even profitable. Surely, one of the grand ironies of the Web's spree of greed is that one of the few content sites with a paid audience and profits belongs to a nonprofit. Consumer Reports Online meets both of my success tests. This site is tailored to help make decisions that can involve tens of thousands of dollars, and Consumer Reports Online's approach separates it from free competition on the Web and elsewhere.

The annual fee gets you access to archives from Consumer Reports magazine. And you get detailed reports on cars at $12 per model. I tested Consumer Reports Online right before my 40th birthday last month. Like any good new 40-year-old, I used it to shop for red convertibles. I pulled reports on a Porsche Carrera (if you think I'd buy something this expensive, let me show you my paycheck), a Mazda Miata (if you think I'm confident enough to buy something this small, you should see my motor-vehicle records), and a Saab 9-3 (still expensive, but closer to the mark). Then I compared what I got from the archives to what's available for free at car-enthusiast site

Each site gives you all the basics on options, gas mileage, and such, but Consumer Reports Online's 20-page-plus analyses teach you things Edmunds doesn't. Its breakdowns on safety and resale value are deeper and easier to understand than Edmunds'. For example, Consumer Reports told me that a Toyota Camry Solara convertible is likelier to hold its value than the Saab. That info could save me many times the $12 the reports cost. People clearly will pay for that. I've always liked TheStreet, even though some of my colleagues at BusinessWeek grind their teeth about it and gloat over its vanquished stock. The site stubbed its toe trying to charge fees for its basic version, but it doesn't sell enough ads to live by ads alone. So TheStreet is scrambling to find premium subscription services that add more value. And they're pretty good--for some people, some of the time.

The best of the bunch, I think, is, a sister site where top pundits such as Jim Cramer and money managers such as Don Luskin give unvarnished opinions and investment advice. One example: Cramer's mid-April column promoting Qwest Communications International Inc. (Q ) It's tightly reasoned--and contrarian enough that, if he's right, people who listen to him will make much more than the $400 a year TheStreetPros costs. TheStreetPros reminds me of the once-pioneering Dow Jones services (where I once worked) that professional investors paid thousands for. It was no mystery why: We found stuff on short-swing trading that was interesting only to a small number of people--but tremendously valuable to that select few.

This is the kind of stuff some people are likely to pay for. In a market such as today's, it's too much to expect every one of TheStreetPros' tips to pan out. That's not the test. The test is whether TheStreetPros generates information and insight you can't get elsewhere, at a price that's attractive. And TheStreetPros passes this test. Cramer may be a little ubiquitous for some people (me, I love the guy), but he's a real, live professional trader who has made money for clients of hedge fund Cramer Berkowitz. Most of his TheStreetPros buddies are traders, too. The staff at TheStreet's free service, and at competitor, are journalists, many of whom are just a few years out of college. That's why no one pays to read them. The product isn't the same.

Yahoo! It's under more pressure than perhaps any other Web company to find a way to depend less on online ad revenue. Toward that end, Yahoo has started to charge for premium services. Two early examples are its $4.95-a-month online bill-paying service and its $9.95-a-month service for a package of real-time stock quotes, including an alert service that tells you when stocks hit a certain price or trade especially actively. For Yahoo's sake, let's hope these offerings are a rough first draft with more to come. This early effort isn't going to cut it.

The basic problem is these services aren't unique. Want free real-time quotes? You can get them anywhere. Try Raging Bull. Want free stock alerts? You'll find them at On top of that, some of the other sites offering quotes--such as online trading sites Datek and E*Trade (ET ), for instance--also let you put your newfound information to work immediately. That's kind of the point. Yahoo can't directly do that and can't subsidize the service by including its cost in your trading commissions.

The paid Web is likely to be a component of many businesses but the linchpin of only a few. Don't run out and buy dot-com stocks again because the paid Web is coming: A look at TheStreet's numbers will illustrate why. TheStreet lost about $40 million last year. They'll have to sell lots of $400-a-year TheStreetPros memberships to fix their problem.

There may be some surprises, though. Think cable TV: In 1975, nobody knew how that would work out, either. Today, a mix of ads and fees collected from system operators pays for cable programming, and services such as Home Box Office cost extra. The Web is looking for a similar mix. And for those sites that don't find one...Paging Mr. Soprano, Mr. Tony Soprano.

By Timothy J. Mullaney

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