The weather was springlike and the mood positively buoyant at the ContentBiz 5th Annual Selling Subscriptions to Internet Content Summit in New York.

The numbers behind the smiles included:

-> 19 million US consumers paying a total of $1.8 billion for online content in 2004, up 16% from 2003.

-> Internet-content-buying household penetration of 11.6% in Q4 of 2004, up 4.5% from Q4 2003.

-> Higher home broadband use driving entertainment and lifestyle purchases totaling $413.5 million, almost double the $217.6 million total of 2003, largely due to music downloads (single sales of music were up 690%).

-> 54% of low-ticket month-to-month subscribers and 43.8% of higher-ticket monthly subscribers staying active an entire 12 months.

-> 87% of business-to-business database publishers able to price online versions (often significantly) higher than print editions.

As the Internet shakes off the final vestiges of the “Bust,” venture capital is becoming more available, entrepreneurs are reappearing, advertisers are knocking, and more consumers are plugging into the Internet with broadband connections and wireless technologies. “For a large number of content sites, subscription was the only way to stay in business for the past few years,” observed Anne Holland, President of ContentBiz and its sister site, MarketingSherpa. “That’s changing and changing fast.”

ContentBiz’s 2005 Entrepreneur of the Year, Tim Carter, founder and CEO of Askthebuilder.com, commented: “People are tapping on their computer screens with their credit cards. Money is everywhere and it’s just going to get better.”

Ad growth raises business model questions

Online advertising is growing, raising strategic questions for subscription sites. How much content should be free? Is it enough to draw traffic for advertisers? How much content goes behind the curtain? Is it enough to entice users to pay for it? How does a subscription site serve advertisers and users? Can it?

Earlier this month, eMarketer predicted that online advertising would grow 33.7% overall this year, to $12.9 billion, while paid search advertising increases 40% to $5.4 billion. Meanwhile, thousands of content sites get monthly checks (many fatter than you might think) from Google's expanding AdSense program.

Therefore, subscription sites are considering — or reconsidering — opening up some or all of their content for free viewing and taking advertising support.

At Time Inc., where access to online content was largely tied to subscriptions to the print publications, Ned Desmond, executive editor of Time Inc. Interactive, commented: “In 2005, we’re waking up the world that most of our sites have a pretty good experience for both free and paid users. Across Time Inc., you’ll see a number of approaches to paid subscriptions vs. free sites supported by advertising.”

HighBeam Research recently added a free category called "Basic Membership," which now attracts 1.4 million registered users and “allows us to accept advertising for the first time,” said Kathy Greenler Sexton, CMO. Through a recent five-day Open House, HighBeam “secretly” tested some of their assumptions about the impact of advertising on the business and the subscribers. “We learned that advertising can co-exist with paid subscriptions,” said Greenler Sexton, citing the following results:

- a 61% increase over average in ad impressions

- 169% increase over average in basic signups, “a key metric for advertisers”

- a 6% lift in paid subscription starts

Tim Carter of Askthebuilder.com actually made the move from a subscription site to an ad-supported business. Although he made over $9,000 in the first nine months as a subscription site, he ended up with a deficit of $8,800. “Then, I started the AdSense program with Google. Suffice it to say I can average $1.35 per page per day and I’ve got something like 1,400 pages,” he said. “It’s intoxicating to watch your income go up.”

Five specific tactics to raise your online subscription sales

In the spirit of ContentBiz sharing, speakers offered some of their most effective marketing and testing tactics. We would like to highlight four:

#1. Two ways to get subscribers to choose what you want through the “order” button.

Using a vendor called Optimost, The Motley Fool used multivariable testing, which Motley Fool’s Greg Martz (director of new member experience) called “A/B testing on steroids.” The winning click-to-order button used the words "Best Deal" to highlight the value of the two-year subscription. “We’re telling the subscriber, ‘You want a two-year subscription,’” said Martz. “We’re going to make that decision for you.”

At rivals.com, a subscription site for avid fans of high school and college sports, seasonality has always been a major issue. To eliminate worries about off-season cancellations, EVP and General Manager Bobby Burton wants to convert monthlies to annuals and get more annual subscriptions from the start. One tactic he uses is a radio button that’s pre-set to the annual subscription option, alongside copy that asks subscribers to “compare monthly price” between a $8.33 per month (billed annually) and $9.95 for a monthly subscription.

#2. Five ways to lower credit card declines

Paul Larsen, a credit card payments and operations consultant, explains that declines have gone from 10% to 40% over the past decade or so. Hard declines come primarily from credit card numbers that don’t work. The soft declines, now around 60% of all declines, are caused by problems such as credit limits or insufficient account balances with debit cards. “40% of primary accounts are within 5% of their credit limits at any given time,” said Larsen. He advises online content sites to devise a comprehensive decline recovery strategy that includes:

o Recycling the charge to see if it can be paid. Larsen recommends four attempts at 15-day intervals.

o Participating in Visa/MasterCard recovery programs and American Express continuity billing programs.

o Processing payments even if the expiration date has passed. “There’s no difference in recovery rate because of expiration,” said Larsen.

o Using descriptors that will help consumers identify you when the bill comes to avoid chargebacks caused by simple confusion.

o Having customer service available 24/7. "If they can’t get you to answer a billing question, their next call will probably be to the credit card company for a chargeback,” Larsen noted.

#3. How to reduce cart abandons for subscription purchases

Dr. Flint McLaughlin is the director of MEC Labs, which runs MarketingExperiments.com. Once you have an email address, there are several opportunities to get him or her as a customer, even if the registration was not completed.

If the potential subscriber has typed in an email address but abandons registration, McLaughlin suggests sending an automated email that asks, “Can we help?” It assumes the consumer abandoned because of a technical issue. Even if that wasn’t the case, it may trigger another try.

After a person has participated in a free trial but has not become a subscriber, McLaughlin sends an invoice by mail. “We get strong response, as much as 10%,” he said.

#4. Five tactics to combat email nondelivery and lift open rates

MarketingSherpa’s President Anne Holland offered these six tactics:

o Use text only in all or some of the emails to get past filters.

o Keep emails brief. MarketingSherpa found that email newsletters with one story had open rates five points higher than those with multiple headlines.

o Use a vendor who will track deliveries and nondeliveries for you by ISP. “Where aren’t we getting through?”

o Request an alternate email at signup because people change jobs, move, or change service providers.

o Send a postcard (USPS) to email hard bounces to get a new email address.

#5. Reduce churn -- keep subscribers for a longer lifetime

Over the past two years, rivals.com went from 60,000 to 130,000 subscribers. “One of the key reasons for that was reducing churn,” said Bobby Burton, who shared four tactics for reducing churn (including five components of a member loyalty program):

o Only accept cancels offline. “We save 50%-60% of cancellations by making members call to cancel.” The call center can often solve the problem that made the member want to cancel.

o Promote annual (vs. monthly) subscriptions: “The number-one thing is a good registration form page. You’ve got to put the proper emphasis on this page with initial registration.”

o Properly promote future coverage/events: “Bake it into what you do,” such as a countdown to football season that starts 60 days out.

o Start a loyalty program. Rivals.com started its Gold membership program in November 2002. Members get:

- A badge with the months of membership inset. If their membership lapses, they go back to zero (“and they don’t like that,” says Burton).

- A members-only video product called "Amp."

- Incentives such as a free one-month membership for a friend and first-to-buy promotions at an online store.

“We’re always looking for unique ways to add value to the membership,” Burton concluded.