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Turning Users Into Members

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Turning Users Into Members

From The Search Engine Report
Feb. 3, 1998

Yahoo took another large step in its online service evolution by announcing an agreement last month with MCI to offer Internet access under the name "Yahoo Online." Meanwhile, Excite made a partnership with Prodigy. Both moves raise some questions about whether these users of these services will slowly begin to think of themselves as "members."

It's a subtle change, best illustrated in this way. Ask someone who subscribes to AOL, CompuServe or MSN if they are a member. Chances are, they'll say yes. Now ask someone if they are a Yahoo, Excite or Lycos member. Chances are, they'll scratch their head and look a bit puzzled.

No doubt, people consider themselves users of these search-oriented services. But the addition of free email, free web pages, chat and other the other trappings of online services haven't yet produced the attitude change from user to member.

Brett Bullington, Executive Vice President of Strategic and Business Development at Excite, says his service has dedicated users that it considers members, but he doesn't expect they think of themselves this way.

It's similar at Yahoo. Do users think of consider themselves Yahoo members? "I honestly don’t know," said Diane Hunt, Director of Corporate Communications.

Does it make a difference? One advantage the online services have from members is that they pay cash. The Ad Age article below speculates that the Yahoo Online service could bring Yahoo up to $20 million in revenue, presumably per year. That's about quarter of what Yahoo earned in 1997. For a service heavily dependent on advertising, subscription fees would be a nice alternative stream of revenue.

One of the things Yahoo Online subscribers will get is custom content. Take that a step further and envision that Yahoo offers some premium content for a small fee to the 2.5 million or more people that have signed up for Yahoo Mail, or even to the 26 million or more visitors it receives per month. If significant numbers of these people signed up, Yahoo could have substantial subscriber revenue in addition to its advertising earnings.

The change from being a user to a member also has some intangible benefits. It can help build the brand, reinforces loyalty and expands a base of people that bring in new members, says Excite's Bullington.

So will we see an effort to change users into members, perhaps using the offer of premium services as the prime lever? Yahoo and Excite both say they have no current plans to do this to the range of personal services they currently offer.

"It's advertising supported and always has been, and that's how we plan to keep it," Yahoo's Hunt said.

Excite's Bullington says the same and goes a bit further. He raises the point that Excite and Yahoo are heading toward the online service model from a different place than where AOL and MSN started. Access and subscriber fees were never part of their original game plans, and they can build and profit from a membership without these.

"AOL has had years to build their model," Bullington said. "For ourselves and Yahoo, we're both still understanding what it means for someone to be a member or subscriber," he said. "I think its is better for us to find free ways through sponsorships or promotion and get those [services” in the hands of the consumer."

He uses television as a model, where people have loyalty to programs, and producers turn that audience into revenue.

"You don't feel like you subscribe to a TV show," he said. Similarly, people may never feel they subscribe to Excite. But if they behave like subscribers, returning regularly and viewing the Excite programming, then Excite can benefit from them without charging directly.

Yahoo/MCI Internet deal raises competitive issues
Advertising Age, Jan. 1998
http://www.adage.com:80/interactive/articles/19980119/article2.html

Good quotes from other search engines and others.

New Yahoo, MCI Service May Pose Challenge to AOL
Web Week, Jan. 19, 1998
http://www.webweek.com:80/current/news/19980120-mci.html

Fighting To Keep Eyeballs
Web Week, Jan 19, 1998
http://www.webweek.com:80/current/news/19980120-eyeballs.htm

Deals with the continuing goal of search service to keep their visitors. Of interest is the resurrection of the idea we'll be seeing fewer search engines in 1998, rather than more. This is exactly what was expected for 1997, and the reverse happened. We ended up with more major players.

Excite, Prodigy do content deal
News.com, Jan. 21, 1998
http://www.news.com/News/Item/0,4,18333,00.html

Excite and Prodigy Pair Up
Media Central, Jan. 22, 1998
http://www.mediacentral.com/Magazines/MediaDaily/Archive/1998012202.html/634827


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