LinkedIn Joins ESPN, Skype in Shifting from Free to 'Freemium'

Sites that initially gained users with free content are now boosting sales with features you have to buy

By Ari Levy and Greg Bensinger

(Bloomberg) — LinkedIn Corp., Walt Disney Co.'s (DIS) ESPN, Skype Ltd. and other Web sites, which reeled in users with free content, are now boosting sales by adding features that customers have to pay for.

LinkedIn introduced a product last month that helps recruiting agencies scour the networking site for job candidates. In June, ESPN merged its online magazine with its Insider service, which costs $6.95 a month. Skype has added features such as voice mail and calling plans that allow users to dial land-line phones for a monthly fee.

The shift reflects a desire by Web site owners to reduce their dependence on online advertising. Instead, they're attracting visitors with free content and then selling them premium services or subscriptions, a model known as "freemium." U.S. consumers will spend $8.55 billion on Web content such as games, music and dating in 2010, up 13 percent from this year, according to Forrester Research Inc.

"They're finding things that are valuable to people that they're willing to pay for," said Charlene Li, an analyst with Altimeter Group LLC in San Mateo, California. "Diversity in terms of revenue stream is always healthier because they're never dependent on a single stream."

Recruiter Services

LinkedIn said in October that it's ahead of financial targets for this year. While users can create personal profiles for free, the Mountain View, California-based company introduced paid subscriptions in 2005. Those services give recruiters more access to job candidates and provide business professionals with ways to communicate with one another. Prices range from $24.95 to $499.95 a month.

"Professionals have consistently shown a high willingness to pay for unique value-added tools and content," said LinkedIn Chief Financial Officer Steve Sordello. The company doesn't disclose its revenue or the percentage of users who pay for the service.

A feature called LinkedIn Recruiter, introduced in November, makes it easier to search for workers and send messages over the site. Prices vary depending on the number of subscriptions and job listings included.

Spending for online content in the U.S. will increase 9.3 percent a year on average through 2013, reaching $10.8 billion, according to Cambridge, Massachusetts-based Forrester (FORR). While new revenue opportunities are emerging, advertising will remain the biggest source of growth, Forrester predicts. Ad sales will rise 17 percent a year on average to $47.4 billion in four years, the company estimates.

ESPN Online

ESPN, the sports cable-TV network and Web site owned by Burbank, California-based Disney, started charging for ESPN Insider in 1998. Subscribers have more than doubled since 2005 and number in the hundreds of thousands, according to ESPN spokeswoman Kristie Chong.

Sports content also has allowed The Milwaukee Journal-Sentinel, owned by Journal Communications Inc., to charge for a service called Packer Insider. Started in 2001, the feature focuses on the National Football League's Green Bay Packers.

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