Wireless Internet is here, but who will pay for it?
By Andrea Orr
PALO ALTO, Calif., March 24 (Reuters) - It could be the biggest Internet breakthrough since the Internet itself.
The wireless Internet is here, freeing up consumers from their clunky PCs and bringing stock quotes, weather reports, and online shopping to tiny cell phones.
By all accounts the market for this new, ubiquitous Internet content will be huge. But no one has figured out one detail: who will pay?
"We don't really know yet how we will make money on this," said Sadhana Joliet, producer for Yahoo's <YHOO.O> Everywhere division, which this week made much of its content available over a new Web-enabled cell phone, and announced a similar deal for palm devices.
Dozens of other online companies that are putting their own content on wireless devices are asking the same question.
"We are looking at a bunch of different models to make this work," said Jason Pavona, director of wireless strategy at the Internet portal Lycos <LCOS.O>. Lycos has not yet introduced its own wireless content, but says the launch is imminent.
Clearly, the wireless Internet will be a boon for equipment makers who have every reason to believe they will sell more devices if they have more uses.
The Yahoo-enabled phone, though it is small as any cell phone, is like a phone on steroids, letting users receive and send email, check stock prices, read horoscopes, and even check on Yahoo auctions.
WILL ADVERTISERS PAY FOR TINY ADS?
The dilemma for companies like Yahoo is whether to charge consumers for the data, charge the device makers for encouraging more frequent use of their products, or come up with some still-undiscovered way to make money.
It is a problem reminiscent of the early days of the consumer Internet five years ago, when several content sites tested subscription models, generally without much success. Today's Internet is largely a free Internet, with few consumers willing to pay for much of the information they can find for free on another Web site.
But the free Internet is made possible mainly through advertisers who sponsor Web pages with small banner ads or other promotions. Industry analysts see several reasons why the same model may not work with cell phones, the most obvious being that there is just no space for even a small banner ad.
"Advertising may play a role (on handheld devices)," but there is the issue of clutter," says Forrester Research analyst Bruce Kasrel. "It's one thing when you can put an ad up on a page that is packed with other content, but it's another thing when the ad is the whole page."
Not everyone is dismissing the ad model yet. Yahoo's Joliet says that a tiny, three-line ad fitted for a cell phone screen, may have even better attention-grabbing potential than the banner ad. If such promotions are interspersed with content, she says, consumers may not object.
INTERNET LOSS LEADERS
At the same time, companies know they must consider other ways to make money.
Along with charging consumers or the cell phone companies, some have even proposed keeping the wireless business as so-called "loss leaders" -- businesses that do not make money on their own but help build the brand and drive consumers back to the PC-based Internet, where there is more profit potential.
"eBay <EBAY.O> is a perfect example of one that could use online content to drive more traffic to its main site," says Kasrel. For all the content these small devices may provide, they will ultimately offer a tiny silver of what you can find using a PC, he says, so the wireless and PC services are likely to compliment each other.
Still, with so many Internet companies not yet making any money from their main business, setting up a wireless division as a loss leader could be problematic, says Kasrel.
Getting consumers to pay is a model many companies see as viable, especially once they start delivering highly-personalized content.
"It's nice to get the weather report, but wouldn't it be better if you could get an alert telling you that it was going to rain?" says Lycos' Pavona. "Wouldn't you pay for a service that would alert you to when there's been an accident in your regular commuting route?"
Internet companies have clearly not written off some kind of corporate sponsorship either, and say that they may be able to generate a slice of the revenues from things like movie ticket sales, completed over a cell phone.
Others wonder whether any consumer would really use a cell phone to connect to the Internet and go through the multiple steps and keystrokes to order movie tickets. They say it is probably still easier to just use the phone the old fashioned way -- and call the movie theater. |
