The big dot com crash sounded a warning to all Net entrepreneurs. The warning?

You can't give everything away!

Many smart operators have remodeled their businesses and are now charging for the information they supply.

You see the big dot coms that went belly-up in the crash had a flawed business model. In hindsight, it never was going to work for long. Sure, it worked for a while by going public and offering shares. But shareholders soon demanded a return on investment ... sadly, most companies couldn't deliver.

What was this flawed business model?

Simply give everything away for free and get revenue from advertisers. By giving away everything these sites attracted thousands of visitors, gaining them high search rankings, guaranteeing them a high price from their advertisers.

Makes a bit of sense doesn't it? Build up the numbers of visitors and get a high search ranking and then charge big dollars for advertising space. Sounds simple.

Unfortunately, advertisers were not seeing a return on their investment and so they drastically reduced their spending. The bubble burst, the foundation (advertising revenue) on which these online entrepreneurs built their empires crumbled ... and many companies went down the drain.

So what can we learn from this?

You can't give it all away ... you've got to charge for your hard earned, and hard learnt information. It's that simple.

So what's the answer? If you publish your own information, what should you do? What's a successful online business model that you can follow?

Selling E-books

Well many found selling e-books was the answer. The smart operators who came in early found selling their information via e-books was the perfect business model.

No inventory, automatic product delivery, the customer received instant gratification as they didn't have to wait for their information; they could just download it straight away after their order was confirmed. So everyone was happy. This was an easy, usually uncomplicated way to operate a business.

Unfortunately, some cracks began to appear in this business model.

Low Perceived Cost Of E-books

One of the problems e-book authors soon realised was they couldn't charge as much for an e-book as they could for an offline manual. The perceived value of an e-book is low in the eyes of the buying public.

One of the reasons for this perception may be the fact that free e-books can be found all over the web. Many authors even offer free reprint rights with every order. E-book publishers soon realised they had to compete on price ... an e-book that sells for more than $50 is a rarity.

The smart publishers knew that if they competed on price alone there would always be someone who sells the product cheaper. They needed to offer customers more than just the cheapest price. But what was the solution? We'll look at that shortly.

TIP: Here's a good point to remember.The quality of your customer list is also lower when you compete on price alone. Your customers are "price shoppers" ... they are easily swayed by a better offer. You'll find repeat sales more difficult with a customer list such as this.

Easily Copied

Another potential problem e-book publishers faced is the fact that e-books are easily copied. In fact, some net experts say that within 24 hours of an e-book's release, illegal copies are distributed over the net. Many of these illegal copies can be found on eBay.

TIP: Some brazen thieves not only steal your e-book, they "clone" your site. This is basically a second site that looks like your website, sells the same product as your site, uses the identical copy and graphics as your website, but it's operated by some bootlegger looking to make a fast buck. The sharks are out there and they are getting more audacious each day.

As this problem became worse, various "locking devices" were added to e-books to make them more secure, to make it harder for unscrupulous third parties to copy. However, I've been told by those in the know, that even these devices are no deterrent to those who know what they're doing. They can still be copied.

So what's the answer? What are the smart online marketers of information doing? What direction are they moving towards? The answer? Subscription websites! Smart operators are now moving huge amounts of data away from the free-to-view public, and locking it away into one super site that can only be viewed by paying members.

So if you're an expert in, or passionate about, a certain niche topic, then a subscription website may just be the business model to follow. It's proving to be successful as more net-surfers begin to get used to paying for their information.

What's a Subscription Website?

A subscription website is a website where only those visitors who have paid a membership fee (subscription ... just like this newsletter) are allowed to access premium content on the site. It's basically the same kind of thing as a newsletter subscription. You pay your subscription fee and you get your newsletters sent at regular intervals. With a subscription website, you pay your fee and then you can access all the information on that site. Usually the site will have extra bonus downloads for members plus a highly active discussion board.

Benefits To The Consumer

From a consumer point of view, membership sites are a fantastic place to find the right kind of information about your particular interests. For me personally as a writer, it cuts down my research time by more than half. I'll gladly pay the price to find the info I need if it's gonna save me some time.

For others, their membership site is devoted to their passion, their hobby. They can go to one site, get the info they need to solve a problem or learn something new, and they can post their questions on the discussion board and get answers from experts in their field.

So as a business model, membership sites are succeeding because of one very powerful element. They are selling what people want! Not what they "need" but what they want. And if you're selling information, make sure it's of the "want" variety ... otherwise you're going to have a difficult time selling your info.

More Benefits ... An Exclusive Club

If you have ever taken part in a discussion group that can be accessed by anyone, then you know just how disruptive some posters can be. I've been to many discussion forums where the main topics have been lost under a deluge of personal attacks and free-for-all slanging matches. If you are a member of a subscription site, this doesn't happen.

It's kind of like an exclusive club where like-minded people come and share their wisdom. You ask questions and get intelligent answers. Plus most paid sites have articles that are exclusive to that site. The articles contain premium information; information that only a select few can access.

This type of exclusiveness develops a community-minded feel to the site and keeps subscribers coming back for more.

The Advantages

The main advantage of running your own subscription website is obvious. Recurring income. Most sites offer quarterly subscription rates that are billed automatically to the member's credit card. Of course, the member can quit at any time. But if they don't, their cards are automatically billed the required fee.

Now, if you've done a good job on your site you'll find many will choose to stay with you. But the real beauty is...

"Unless they quit, they will be billed automatically."

Now, take it from me, that's a very leveraged position to be in. Let me explain...

As a newsletter publisher with a few years under my belt, I've learnt some valuable lessons. Take this newsletter as an example. I have a high renewal rate ... meaning many who subscribe for one year come back and do it again. I'm thankful for that.

You see with newsletters, when a subscription expires, the subscriber is sent via the mail a renewal notice. Basically this is a sales letter and an order form. Many subscribers don't respond on this first offer.

Now why is that?

Well some can't afford it, some may find it not worth the money, but I know from experience that many simply put away the letter to be looked at later. We are all busy people ... we've got our own lives and concerns to deal with.

So I have a series of around five letters that are posted out to subscribers. This is where the vast majority of my renewals come from ... from repeat mailings. And some of the letters I get are really encouraging. Telling me about how they keep forgetting to re-subscribe, how busy they've been, and how they're happy now that they've gotten around to re-subscribing! Believe me, I appreciate those letters.

But just take a look at the membership site business model. You are not invited back. Once you subscribe, that's it until you contact the site manager and quit. Now that's fantastic news for the person running the site. He or she is getting automatic renewals with no expenses. But it's also good for the busy consumer. If she wants to quit, so be it. But if she doesn't, she knows she doesn't have to bother to renew, she's still a member until she decides otherwise.

The One Crucial Element

In coming issues we're going to look at subscription websites in detail. We'll look at how to set your own site up, we'll take a look at successful sites and see what they have in common, plus a whole lot more. But for now, I'm going to finish this article by revealing the most critical element of any paid-to-view website. Get it wrong and you won't be in business long. Get it right and the profit potential is staggering!

Okay, here it is...

The topic you choose for your site will determine your success. It's that simple. Choose one on let's say, Internet Marketing, and you're in trouble. It's too competitive with many savvy experts flogging their wares. Plus, the price that you can charge in this category is low. It seems everyone is an expert in this field and pricing is very competitive.

But choose a subject that people are passionate about, choose a topic that people clearly want to know more about, and you have laid the platform for your future success. But what kind of information?

Basically it's the same principles that apply to selling information by mail. Don't try to sell to everyone. Do that and you'll fail. Find a niche that people are spending their money on, then develop your products to suit. Same with membership sites. Find a specific audience that is narrowly defined, and then develop your site to suit those people's wants, desires, and needs.

Hobbies, business, education, and investing are all popular themes.

Within these broad themes are many niches ... many opportunities for you to stake your claim. The list of potential topics you can use to form the basis of your site are numerous. The niches are there ... you've just got to fill them.

Over the last few months while researching membership sites I've seen examples of several successful operations. I've discovered many of these sites have similar approaches, similar characteristics that make them successful. I've also come across heaps of profitable topics that you can use. This and more I will be sharing in the next issue and in issues to follow. If you're serious about turning your information into online cash, then you won't want to miss out on what's to follow in the months ahead.

Peter Tonks is a direct response marketer and sells products produced by leading Australian marketers including Peter Sun, Mal Emery and Brett McFall.