With advertising revenues falling at many web sites, venture capitalists are reverting to traditional valuation standards. Commentators are taking a fresh look at new sources of revenue (a) for content-oriented websites; and, (b) for banks, ISPs, telcos and companies with customer relationships they'd like to retain and extent online.

One of the most cogent such analyses appeared recently in ComputerWorld magazine in a  column by Don Tapscott. Don's Toronto-based consultancy has built a global reputation for thought leadership in e-business strategy consulting and research. Don is chairman of Digital 4Sight (www.digital4sight.com) and co-author of the book, "Digital Capital." Contact him at dtapscott@digital4sight.com.

Here’s what Tapscott has to say:

"Many skeptics e-mailed me after last month's column [News Opinion, Nov. 20] to say people will never use micropayment systems to buy small chunks of online content such as news, music or videos.

This is wishful thinking. Free content subsidized through advertising is unsustainable.

"WSJ.com is now my principal business information portal. If I want a New York Times or USA Today article from last year, I can find it through WSJ.com's publication library. WSJ.com has successfully positioned itself as an intermediary between me and 6,000 other publications, profiting from its competitors' content. My searches appear as one lump-sum charge on my credit card.

"At the moment, WSJ.com aggregates these services. But wouldn't it be great if I could go to a totally unrelated site such as MP3.com, buy a copy of a song for 50 cents, and simply charge the cost back to my WSJ.com account?

"A new company called Clickshare Service Corp. in Williamstown, Mass., has developed such a system . . . . "

Giving a Lift to Micropayments

By Don Tapscott

excerpted from ComputerWorld Magazine, Dec. 18, 2000

Another thought-provoking piece appeared a couple of weeks ago at:

HEADLINE: Time for Subscribers

It appeared in the Online Community Report, a twice-monthly e-mail newsletter covering current events and trends in online communities.  The Report is edited by Dan Shafer and Jim Cashel <cashel@OnlineCommunityReport.com>. The duo wrote, in part:

"While online communities are more popular than ever, the finances to support online communities have evaporated. It is time that the sector develop a new stream of revenue -- subscriber income for premium services -- or risk a huge retrenchment. Most online communities have depended until now on three sources of funding: venture capital, which has all but dried up for the sector;  advertising income, which has plummeted to pathetically low levels this holiday season; and e-commerce tied to community, which has yet to grow to the point of financial consequence."

Shafer and Cashman go on to write that the climate is changing for charging for content. Yahoo is speaking publicly about charging for certain premium services, "everyone recognizes that traffic is valuable only if it can be monetized", and many community sites are facing the choice of "charge, or

die." They then write:

"The main barrier to offering subscriber services may not be psychological or competitive, but logistical. There are major complexities of managing very large subscriber populations who pay very low subscription fees. Any firm that could outsource this service to major online community sites would be overwhelmed with business. . . Someone needs to solve the payment and account management issue  for the sector."

Finally, check out Steve Outing’s thorough look at the alternate-payments space for digital content in a column which ran Nov. 25, 2000 on the Editor & Publisher website.  Click here for the full article.