Consumers More Reluctant to Pay For Online Services Than Content

Posted on May 29, 2002

Jupiter Media Metrix, a provider of new technology analysis and measurement, reported that more than two-thirds of U.S. consumers would not pay for any services on the Internet, including enhanced email, instant messaging or file-sharing capabilities. According to a new Jupiter Research Report entitled "Paid Consumer Services: Assessing Market Opportunities," consumer resistance to paying for online services (69 percent) is higher than paying for content (63 percent). Given these findings, Jupiter analysts caution companies that bundles of services could prove more attractive than separate offerings.

"Jupiter's latest research indicates that there is no obvious killer-app online service that consumers would pay for," said David Card, Jupiter Research vice president and senior analyst. "Companies should bundle online services and price them at less than 30 dollars per year. When transitioning from free to fee, service aggregators must solicit early consumer feedback and promote packages aggressively with email."

Although about one-third of online adults in the U.S. use a free service as their primary personal email account and over 60 percent use an ISP, only 12 percent would be willing to pay for enhanced email. Furthermore, a March 2002 Jupiter Consumer Survey reveals that only eight percent of online adults would pay to access recruitment and job sites and six percent would pay for enhanced instant messaging and file sharing capabilities. Respondents indicated they are least likely to pay for personals and dating services (two percent).

"With high consumer resistance in the air, companies that want to profit from online services should consider the Chinese menu approach. To date, no portal or ISP has experimented with it -- those that do will have a jump-start on the market," Card said.

The survey indicates that consumers are less confused about where they might purchase online services than where they would content. Consumers would feel most comfortable with paying their ISP (47 percent) or a portal (16 percent) for online services. According to Jupiter analysts, ISPs that have an existing billing relationship with their customers should have the easiest time selling services, with portals being another logical aggregator.