END OF THE FREE RIDE
(UPDATE 2.14.06: Relevant story on Microsoft opting to offer Prizes to MSN Searchers)
Looks like Yahoo! is considering incentive programs for users committing to use it's search services as their primary search engine on the web. As CNET notes:
"Yahoo confirmed on Wednesday that it's polling some Yahoo Mail users about what they would want in exchange for making Yahoo their primary search engine. The survey was sent to a random sampling representing about 5 percent of its Yahoo Mail users, a Yahoo representative said."
This follows public rumination by Bill Gates on Microsoft doing something similar for it's search services last December.
This is not new stuff. As I highlighted in a post titled "Paying for Peer Production" back in October (and a follow-up post here),
"It's been tried before of course in Web 1.0 days...the notion of paying money to search users. iWon.com is the poster child here, which continues to pay users in cash prizes to this day (over $64 million to date according to their website).
Of course back in the web 1.0 days, the prize money was a customer acquisition expense. Today in the world of paid-search, there is real revenue that can be split with users."
In that post, I speculated that
"search engines could offer a loyalty program a la the airlines that offers specific awards and benefits for sustained usage and loyalty".
Well, Yahoo! seems to be including that and much more in it's potential experiment. The company seems to be potentially taking a "choose from a basket of prizes" approach, as CNET describes:
"(Yahoo!) then listed 10 different potential reward options:
• No Yahoo Mail ads.
• Unlimited Yahoo Mail storage, versus the one gigabyte now provided for free.
• Outlook Access to Yahoo Mail. Users could use Outlook or Outlook Express to manage their Yahoo Mail as well as download and read it while offline. This is not currently offered.
• Five free music downloads a month for playing on a PC or portable MP3 player.
• Discounted music subscriptions. Users would pay nothing for the first month of unlimited access to Yahoo Music Unlimited and $3.99 a month thereafter, rather than $6.99 a month for unlimited access.
• Donations to charity. Yahoo would give a percentage of revenues generated from user searches to nonprofit organizations of the users' choice.
• PC-to-phone calling credit. Users could receive $5 in calling credit per month for PC-to-phone calls over Yahoo Messenger with Voice, which costs 15 cents a minute.
• Netflix discount. Users could receive one month free Netflix DVD rentals and pay $10.99 thereafter, rather than $17.99 a month.
• Discounted Yahoo Personals subscription. Users could receive the first month free for joining Yahoo Personals and pay $19.95 thereafter, compared to the current cost of $24.95 a month.
• Frequent flyer miles. Users could earn 250 frequent flyer miles each month that could be transferred to most major airline mileage programs."
Each of these options have a specific financial benefit for a mainstream user, and conversely, a specific financial cost to Yahoo! This should be viewed as a "Customer Acquisition" cost for it's search services.
At first glance, the option that has the highest financial benefit or highest customer acquisition cost for Yahoo! seems to be the Netflix discount option, which has a surface price tag of around $104 per customer per year.
Now, the actual cost could be much lower to Yahoo! depending on the how the cost is split with Netflix in exchange for promotional and marketing, ALONG with the customer acquisition fees that Netflix is willing to pay to Yahoo!
What all this means is that the days of debating over WHETHER mainstream users will get something for their peer production are coming to an end. It's not IF it's going to happen, but more of a question of WHEN.
And as highlighted in the last two posts (here and here), it does illustrate that the game forward for all the GYMAAAE companies is about customer acquisition the old-fashioned AOL way.
The halcyon days of easy, low-cost, viral customer acquisition for "Web 2.0" services and companies are mostly over, at least for the current crop of services offered by the major players.
And this also portends the same for the burgeoning crop of "Web 2.0" consumer services companies that have been to date mostly gotten new customers due to the novelty of their services (and the fact that they were free).
Certainly, many of them will continue to get the rush of early adopter users eager to try them out in their "beta" stages, but acquiring meaningful chunks of mainstream users is going to be a far more expensive game.
We're going back to the future.
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