Web Business Engineering: Information Currency
Besides using Web Business Engineering, I teach people how to create profitable Web businesses using advertising as the primary revenue model. One of the things that I always tell my students is this: Never, ever give anything for free. The information on your Web sites is valuable, and your users should pay for it. This statement always brings snickers of disbelief from my students, who are quick to point out that no one is going to whip out their credit card to pay for a Web page unless there's extremely valuable information on that page. But I'm equally quick to point out: "Who said anything about a credit card?" Money is only one kind of currency that users can pay with. Information is another currency that users can "pay" you for the privilege of accessing your Web pages. And the bottom line is this: If you want to optimize the revenues from your Web site, for each Web page that your users access, you need to get them to pay you in either money or information currency.
To see an example of an information payment, go to my Dating Expert Web site, http://www.datingexpert.com/.
After reading the legalese and continuing to the front page, search for a date by clicking on the Search Ads button. The first time you do so, you'll be forced to log in, register for a secret name, provide contact information, and place your own personal ad. What you've just done is an example of an information payment. The information that you provided is currency in two ways. First, I can convert your information into money at some later time, for example, by selling the contact information in my database as a mailing list (I don't do this, in case you're wondering). Second, even if I don't convert your information into cash you're still giving me something of value because my database of personal ads grows. Suppose, however, that instead of making you sign up, I asked you for money. Would you have paid? Probably not. But information payments are quite a different matter altogether.
Exactly what is information currency, and when you should charge money versus an information payment is what we'll look at next. If you haven't already done so, click on the Search Ads button. You should see the following pages:
A search page, where you can enter the type of data you're seeking, such as single, Catholic, female. Clicking on the Find Matches button, brings up the next page.
A search results page, which lists the matches to your search and includes their score, horoscope, and distance from you. Clicking on a listing brings up the third page.
A personal ad page, which describes the person in more detail. There's a link on this page to the fourth page.
An email page, where you can send an anonymous email to a person requesting a meeting or further information. For privacy reasons, this person must retrieve their mail from the private mailbox page.
A private mailbox page, where he or she can read the email you sent. You don't actually see this mailbox. However, if the person responds, you will get a message in your own private mailbox.
Which of these pages can you charge money for? Pages 1–4 are providing valuable information, but I claim that the user won't pay money because there's too much "risk" associated with the information in those pages. For example, users won't pay money for searches because the searches may come up empty. Even if the search returns a list of names, when the user clicks on a name and reads the personal ad, it may not be what he or she was looking for.
Finally, users probably won't pay to send an email because there's the risk that they won't hear anything back. So, because of the riskiness of the information in pages 1–4, users aren't willing to pay money for them, despite the information being potentially valuable. However, page 5, where the users read e-mails, is a good place to charge money. Why? That is a point where the users know that a person has read their personal ad and is interested in them.
This is a page where the value of the information is high and the risk of the information is low. Whenever you have a situation like that, you can charge money. Otherwise, charge an information payment. In general, pages will fall into one of four categories, depending on how valuable the information is on that page and whether the information is safe or risky (see Figure 1).
Four categories of information, depending on its value and risk
Depending on what quadrant your Web page's information falls under, you charge either money or an information payment. I've been putting off describing other kinds of information payments besides user information. Under an advertising revenue model, the types of advertisers that you sign up for determine the kinds of information payments that you can ask your users for. In the following activity, map P is a content provider, W is P's Web site, C is P's customer, and A is an advertiser. In exchange for showing A's banners on W, A agrees to pay you money for each click, lead, impression, or sale from C (see Figure 2).
Four categories of information, depending on its value and risk
My experience is that pay-per-lead advertisers generate the highest revenues for a site. So, if you have information that's high in value but is risky, instead of charging money, have the users give "lead" information to an advertiser. If information is low in value but is safe, "charge" either clicks or impressions. Finally, if the information is low in value and risky—home pages fall under this category—that page should be free. Or, you can put a pay-per-impression ad on the page because the user isn't likely to stay long on that page—with a pay-per-impression ad, you'll at least get some revenue. Figure 3 summarizes one way to distribute payments.
Payment types for the four categories of information
To summarize, take all the Web pages on your site. Decide what value-risk quadrant they fall under, and charge the appropriate payment. In this manner, you can get payment for each page on your Web site, without your users actually having to pay anything.
If you have any questions, don't hesitate to email me at email@example.com. And if you liked what you've read, please buy my book, Web Business Engineering, (Addison-Wesley Information Technology Series), or visit my Web site, http://www.webbusinessengineering.com/, for further information.
This article was excerpted from Nick and Nancy V. Flor's forthcoming book, Entrepreneur's Web Guide.