Is running a subscription web site your ticket to profitability? We take a closer look.

If there is one clear lesson from the dot.com crash it is this - you can't give everything away for free. At some point, you have to figure out a way to generate revenue - if you hope to stay in business.

A lot of people learned this lesson the hard way. They spent millions developing grand web sites, yet never figured out a way to generate any revenue. And now the money spent and the sites themselves are mostly memories.

But not all internet sites disappeared.

Some discovered that their road to profitability lay in subscription sales to access the content on the stied. For many of these sites, the revenue generated by subscription sales kept them in business while sites that pursued other business models floundered.

Subscription Web Sites

Basically a subscription web site is one where only those visitors who have paid a membership fee (subscription) are allowed to access premium content on the site. It's the same concept as a newsletter or private club - only those who have paid to join, can get in.

The main advantage of running a subscription web site is obvious - it allows the site operator to generate revenue to cover the cost of creating and maintaining the web site.

Other advantages are less obvious.

For example, many free sites have high overhead required by the large number of visitors to the site. The more visitors that use the site, the heavier a load on the server, and other site infrastructure. This load usually equates to much higher dollars spent in support and site maintenance.

With a subscription web site, you only have a fraction of the visitors using the site - and this equates to much less load on servers and maintenance.

And while fewer visitors sounds like a bad thing, many site owners have discovered that it is far better to have lose 99% of your free visitors in return for the revenue that the 1% of paying members generate. (In essence you lower your overhead, and raise your revenue at the same time.)

There are advantages to subscribers who join subscription web sites.

Much like an exclusive gated community or 'members only' country club, subscribers gain access to unique content within the members only area, usually not available anywhere else on the web. This content often includes exclusive articles, exclusive access to an expert, and exclusive access to software and file downloads not available to non subscribers.

Like private country clubs, there is the social aspect of being a member of an exclusive 'club' (subscription site), where members find a community of like minded people that come together with a common focus or goal. Often members of subscription web sites make valuable contacts and connections through the private discussion areas on the site.

Another major benefit of being a member of a subscription web site is that the 'members only' walls delivers a certain degree of privacy and protection from forces that might want to interfere or disrupt forums and other resources within the site. (If you have ever participated in a free discussion group, you probably have seen how just a few bad eggs can cause its ruin.)

Profit Potential

So how profitable can a online, 'by subscription' web site be?

It depends on three things.

1. Subscription Price - the amount you charge each subscriber to access your site
   
   
2. Number of paying subscribers - the actual number of subscribers who have paid the subscription price
   
   
3. Overhead - the total expense of running your 'by subscription' web operation.

The good news is that two of the three elements are within your control. You set the subscription price, and you control the overhead.

The only thing you can't control is the number of members you sign up. (But since you are the one who decides the topic covered in your subscription site, and since that has a huge impact on the number of subscribers you attract, you do control that element to a large degree.)

In a later article I'll discuss the relationship between choosing the right subscription site topic, setting membership fees, and the number of subscribers you are likely attract. But for the moment, let's look at the revenue relationship of member fees and number of subscribers.

The table below illustrates that subscription web sites can be profitable with even small numbers of subscribers.

As the chart clearly illustrates, you don't need thousands of members to generate healthy revenue streams - if your membership fee is a little higher.

Attracting Members

Before a subscription web site can be profitable, it must be able to attract paying members. And to do that, you must provide potential subscribers a good reason to join the site. These reasons are generally one of the following:

1. Business or career related - becoming a subscriber to the site provides benefits that are work related
   
   
2. Investment related - becoming a subscriber to the site provides benefits that are related to finance or investments
   
   
3. Hobby Related - becoming a subscriber to the site provides access to information, communication and other things related to a specific hobby
   
   
4. Education Related - becoming a subscriber to the site provides access to some kind of educational experience
   
   
5. Service Related - becoming a subscriber delivers some kind of service

There are other reasons that people join subscription web sites, but your goal is to give potential subscribers at least two, and preferably three immediate reasons to join when they first visit your site. If you can do that, and if you can price your subscription within the impulse buy comfort range of your intended audience, you have a better chance of success.

I firmly believe that success with your own 'by subscription' or 'member site', depends largely on choosing the right topic before you create the site. If you get this wrong, almost nothing can be done to correct it - except changing topics.

But if you get it right, or even close, you can do quite well. Always keep in mind, the topic of your site and the authority you bring to it, pretty much determines your subscription price, as well as who be in your target market.

The mechanics of setting up and running a subscription web site

There are basically two ways to go when developing your subscription web site. You can:

1. Do everything manually - learn how to manually set up the protected areas on your web site, manually create the web pages, manually sign up subscribers, manually create user names and passwords, manually send out renewal notices, manually handle lost passwords, etc. etc. etc.

   This is the way I did it with my first two subscription web sites. I had to do everything, from setting up the servers, creating all the html on all the pages on the site, manually processing and assigning all new subscriber passwords, responding to lost passwords, and updating all the menus on the site every time I added a new page. It was a lot of work, so much so that I didn't really want to expand the sites and eventually closed them (even though they were both profitable, I simply couldn't keep up with the work involved.)
   
   

2. Put it on auto pilot - The alternative to do it manually is to use a software package to automate everything. This allows you to spend your time finding new members and adding new content to the site rather than being a full time code technician.

   This is the way we do it now. We use MemberGate to build and manage our subscription web sites. It automates all aspects of running a member web site, and makes it a pleasurable business to be in. Some of our MemberGate customers have sites with close to 20,000 members (and are able to manage their entire sites with just one person). Another one of our MemberGate clients is signing up on the average 25 new members a day (most clients average 2-10 new members a day). This is not a plug for MemberGate. Just a discussion of how using the right tool can substantially reduce the amount of work involved in managing a subscription web site.

My advice - if you want your subscription web site to grow, find a way to put it on auto-pilot as soon as possible. Otherwise you'll end up spending most of your time doing work that benefits neither you nor your members. And you'll soon come to dread all the work and time involved.

Other Considerations

If you are considering getting into the subscription web site business, do your homework first. Define your target market, define what features potential members will want in a subscription web site, what they are willing to pay, and most importantly, how much work you are willing to do to keep the site up and running.

Then look for a few models of success, and learn from what they are doing. Being a subscriber to www.bmyers.com means you can see first hand how a successful subscription web site run by just one person can work.

If done correctly, running your own subscription web site is a very rewarding business. And it sure beats creating and managing a web site where you don't get paid a penny for your efforts.