Business Model as a Moving Target -- ScienceWise Goes from Fee to Free, to Fee, to Free, to Fee

CHALLENGE
Are you ready? This gets a little confusing, so hang on. ScienceWise, Inc. was founded about 11 years ago to publish print subscription newsletters for scientists seeking funding opportunities such as government grants. Then, as Jamie McKee Executive VP Electronic Commerce explains it, "The Internet came along."

Scientists were among the very first professionals to go online, so in the early '90s ScienceWise switched business models and got a Federal grant to follow scientists online, posting content for free on online bulletin boards.

By 1997, when "push" technologies came into fashion, ScienceWise realized they could use email to provide a much more useful service. The Company expanded its coverage area and developed a personalized email service whereby scientists could customize their own email newsletter to receive information on funding opportunities in just the areas they cared about. This was so much more useful than the old bulletin board service that ScienceWise decided to switch back to a for-fee subscription basis. About 7-8% of original free bulletin board readers converted to paying about $100-$120 per year each.

Next came 1999, the year of the Internet Gold Rush. McKee says, "Capital was suddenly pretty easy." ScienceWise began pitching for VC funds in Fall 1999 and got about $7 million April 2000. Only thing was the VCs wanted to change the business model from for-fee to free. McKee says, "The things they were funding were content and community. You made your money by bringing in big numbers of subscribers and selling space to advertisers. Your goal was pageviews and numbers of visitors." So, ScienceWise dutifully switched to free access for everything and ramped up marketing until they were sending a total of 1.3 million free emailed issues to subscribers a month.

But some problems cropped up: ScienceWise had very little experience selling advertising; the scientific community actively loathed receiving emails with ads in them; and, the whole online ad marketplace got tougher to sell to as 2000 wore on. By the end of the summer, ScienceWise decided to switch back to a paid subscription model again.

CAMPAIGN
Based on their experience before, ScienceWise knew they couldn't simply switch people from free to fee without giving them a substantially improved or premium product. McKee says, "You've got to make a very substantial difference between what you offer for free and what you're offering for a fee. Otherwise they'll just drop the service. When the Wall Street Journal first went online, the first three months were free but they made it clear the start that you would have to pay after that." In other words, unless you've told people something's worth cash from the start, you can't easily switch later on.

Instead of tossing their whole free business model aside to go for-fee, ScienceWise decided on a three part model that took advantage of everything they'd been successful at in the past:

1. They continued the free version to take advantage of the limited ad sales they were able to make, and to serve as a marketing device for the paid version.

2. They created an even more premium version of the service, including more content and value, to sell at a subscription rate of $120 per year to individual scientists.

3. They went after government grants to distribute the premium version to groups of scientists.

RESULTS
Unlike the free-to-fee conversion of 1997 that got a 7-8% response rate, ScienceWise's latest free-to-fee conversion started slowly at only about 1%.

So, they surveyed their free subscribers to find out why they weren't converting. Although most said they didn't understand the difference between the free and the fee service, 7% of respondents said they were definitely planning on paying and an additional 40% said they were considering it but needed more information. After ScienceWise adjusted all marketing to more clearly show the difference between the free and fee services, an additional 3% of free subscribers converted, making a conversion total of about 4%. Paid subscribers are now a small piece of ScienceWise's income, as are ad sales.

The grant seeking process was far more successful. ScienceWise was able to get a cash grant to supply 45,000 minority scientists with paid subscriptions to the service.

NOTE: ScienceWise, like several other content-related companies including SmartMoney.com, is actually making more profits these days selling software programs (in this case funding proposal management systems) they developed for their marketplace.

Just goes to show, you never know where your business model is going to end up!