RealTime IT News

Paid Online Services a Tough Sell: Jupiter

By Erin Joyce

If you thought pitching people to pay for online content was hard, try pitching paid online services -- especially dating and file-sharing.

A new research report from Jupiter Media Metrix says consumers are even less interested in forking over money for online services than they are paying for content online.

The tech and Internet measurement firm polled a test sample of 2097 consumers about their attitudes about what they would pay for online. The results show 69 percent were resistant about signing up for paid services online, which is more than the resistance to paying for content it found among 63 percent of a prior poll sample. More than two-thirds of those in the survey would not be willing to pay for any services on the Internet, including enhanced e-mail, instant messaging or file-sharing capabilities.

Jupiter analyst David Card says there is no obvious killer-app online service for consumers right now. He says companies pitching online services might consider pricing them in bundles, priced below $30 per year, as a package that might prove more attractive than separate offerings.

The report, "Paid Consumer Services: Assessing Market Opportunities," says although about one-third of online adults in the U.S. use a free service as their primary personal e-mail account and over 60 percent use an ISP, only 12 percent would be willing to pay for enhanced e-mail.

The results dovetail with a March 2002 Jupiter Consumer Survey that showed only 8 percent of online adults would pay to access recruitment and job sites; that 6 percent would pay for enhanced instant messaging and file sharing capabilities. Those willing to pony up for personals and dating services amounted to 2 percent of the group polled.

"With high consumer resistance in the air, companies that want to profit from online services should consider the Chinese menu approach. To date, no portal or ISP has experimented with it -- those that do will have a jump-start on the market," Card says. In addition, because ISPs already have an existing billing relationship with their customers, they are seen as the likely near-term winners in the battle for a bigger share of consumers' wallets.

The survey says consumers would feel most comfortable with paying their ISP (47 percent) or a portal (16 percent) for online services. Portals are seen as another logical aggregator. But even major players such as Yahoo! appear to be easing up in some areas of its paid pitches. Yahoo! has reportedly decided to drop the $4.95 fee it was charging on its monthly personal ad subscribers in order to enhance their personal advertisements.

And as the music industry lines up behind efforts to offer paid music subscription services online, the Jupiter research is likely to confirm what they expected: the migration to customers paying for services online will take a lot longer than originally thought.

But people are paying. Despite the resistance it found in the poll sample, Jupiter also says it expects revenues from online games and digital music will reach an estimated $1.8 billion and $1.7 billion by 2006, respectively (up from $260 million and $30 million in 2001).