Health, wealth and sex sell best on web

Health, wealth and sex are what sell the best on pay sites on the web, says the author of perhaps the most comprehensive survey to date of interactive revenue strategies.

After systematically surveying 550 subscription and membership sites, Anne Holland, who is best know as the founder and former proprietor of the popular Marketing Sherpa website, reckons that American consumers will shell out nearly $15 billion this year to buy content on the web.

Holland conducted the survey to kick off her newest venture, Subscription Site Insider, which, naturally, will be a membership-supported service providing data and best practices to those operating paid websites – or who aspire to do so. The new report, which represents possibly the most ambitious effort to date to capture the state of play in pay, can be purchased here for $247.

Holland decided to scope out the emerging pay market as her next act after Marketing Sherpa, which she sold in 2006. She quickly identified the three areas that are the most productive for web publishers who want to charge for access to content via either subscription or membership fees.

“They are the usual ones,” she chuckled in a telephone interview. “Health, wealth and sex.”

Holland defines “health” sites as those that either entertain or contribute to the sense of well-being of their customers. She said this category, which includes sites like World of Warcraft, Ancestry.Com, Classmates.Com and Match.Com, will produce a collective $5.9 billion in sales in 2009.

Holland said the wealth category, which consists of sites that help people make or save money, will generate $5 billion in sales this year. And sex, of course, refers to the adult- entertainment sector, which Holland pegged as a $4 billion annual business.

Getting down to the nuts and bolts of running pay sites, the survey found that a surprising 42% of business-to business (B2B) sites said they achieved profitability within six months of launch and that 40% of consumer-oriented (B2C) sites reported that they were profitable in the same period.

Only 9% of B2B and 3% of B2C sites said they waited two years or longer to achieve profitability, suggesting that most operators bow out quickly if they can’t see a path to profitability within a short period of time.

“Not every subscription site is profitable,” warned Holland in a report on her findings. “At less than $10,000 in initial investment (if you create your own content), the barrier to entry is low enough that some entrepreneurs get into the industry who are not capable of the precise and sustained effort required to make a profit. This means that every year dozens of sites are launched and then abandoned a few weeks or months later.”

Still, 17% of the sites covered by the survey said they were making in excess of $1 million in annual profits, and Holland said there’s a “happily prosperous ‘middle class’ of sites making profits in the solid six figures.”

As for how to build a subscriber-supported web business, Holland said 48% of sites recruit new subscribers by offering a free trial to those willing to furnish a credit-card number. She said 28% of sites allow free trial without a credit card for a period of time but that 24% of sites require consumers to begin paying on day one.

Holland said most evidence suggests that offering a free trial without taking a credit card “is a losing proposition,” adding: “Asking for a credit card upfront is good – and honest – business.”

Subscription or membership fees are only part of the revenue mix at most sites, the survey found.

Half of the sites supplemented subscription fees by selling additional published material, 43% offered consulting or coaching services, 39% booked income from alliances with affiliate marketers like Amazon, 32% carried network advertising and 32% sold ads directly. Other revenue streams included ticket sales, list rentals, software sales and classified ads.

In addition to developing the right sort of content and go-to-market strategy, the research suggests that the key to a healthy interactive venture is to build a matrix of revenues, rather than simply relying on monolithic advertising or subscription strategies.

“Of course you should have additional revenue streams,” agreed Holland. “In fact, you need them for optimal profits.”