New Web Survival Guide

Hard times for dot coms mean tough choices for users. Here's how to make the most of the Net ahead.

Well, it was a good long ride. But events of the past year have left a lot of bumps and potholes on the information highway, with the final results still to be determined. As the economy continues to weed out bad ideas, poorly executed business plans, and unrealistic expectations, we're beginning to see road signs for the landscape ahead. Instead of "Next stop: Dougey's Diner. Eat free--in exchange for your personal information!" the signs say, "All you can eat--in exchange for as much of your cold, hard cash as we can charge."

For users, the Web differs strikingly from what it was a year ago, with more hazards to avoid and hard choices to make--about ensuring privacy, paying for formerly free services, and gauging the solidity of sites with whom you do business. Nothing is certain anymore. Consider the casualty count of online companies caught in the pile-up: EToys, Furniture.com, Kozmo.com, Pets.com, Quokka Sports, Webvan, Zing, and many more.

Search engines and directories now offer privileged placement to online companies that are willing to shell out some dough for it. The broadband arena is morphing rapidly too, as DSL providers wink out of existence and the cable modem market consolidates.

Consumers haven't gone unscathed. Some customers of online currency service Flooz and incentive retailer CyberRebate.com lost serious money--thousands of dollars, in the worst cases--when the companies died. And some users taken in by the wild promises of eager broadband providers have been stranded on the side of the road, waiting for a tow.

But the journey hasn't been all bad, and there is still plenty to enjoy on the Web--as long as you keep your eyes peeled for blind curves and slippery conditions. Here's your map for the road that lies ahead.

Changing Net: Old Web vs. New Web

Fee vs. free: As Web sites try to figure out new ways to make money, you can expect to start paying for content and services that were previously offered gratis. Look for an increase in subscription-based services and possibly in micropayment models (such as per-item fees) as well.

When dot coms die: As smaller, independent dot coms fail, there's a danger of your getting caught in the undertow. If you've accumulated points, be aware that if the company folds, your points go down the drain.

Paid placement: Many well-known search engines, including AltaVista, LookSmart, and Overture, allow advertisers to pay for prominent positioning on your search results page. Look twice to make sure you distinguish between what's paid for and what isn't.

Broadband woes: Rampant consolidation in the cable modem industry and a steadily dwindling number of independent DSL providers mean less competition for broadband Internet access. Less competition often translates into higher prices and shabbier customer service.

Fee At Last

With three notable exceptions--specifically, a few focused-information services (such as Consumer Reports Online), various gaming sites, and countless, um, clothing-optional domains--subscription-based Web services have not fared well on the Net.

But neither have sites offering free services. Companies scrambling to find new sources of revenue are being forced to alter their strategies. What used to be free now often comes for a fee. No two sites seem to take the same approach to charging customers for previously gratis goods. For several years, many sites have offered a limited area of free services and content, with a charge for "premium" versions that include extra features. After attracting users to the free product, these sites hoped to convince them to migrate to the fee-based version. Whit Andrews, research director with market analysis firm Gartner, expects that we'll see the free versions of many sites get skimpier.

"When it started, the idea was only to charge for really [advanced] services," Andrews says. "Premium service now means less than it did."

Two years ago, for example, the online storage site FreeDrive provided 20MB of storage space at no charge; premium deals let you buy more space for a fee. But today, FreeDrive offers only a tiered system of subscription plans that are priced at up to $10 per month, and users must agree to accept outside ads sent by e-mail. FreeDrive's competitors--Driveway, I-drive, and My Docs Online--have all suspended their free services, too.

The venerable Encyclopedia Britannica made a splash a couple of years ago by offering the unabridged content of its volumes at no charge on its Web site. But last July, amid a round of layoffs at the company, the site changed its policy. It now charges $8 per month or $50 per year for access to the encyclopedia. The site's spokesperson, Tom Panelas, says the change has been a success, with many users of the formerly free service signing on.

"We believe that there is a value to what we offer that customers are willing to pay for," Panelas says. "People are realizing that not all information on the Web is quality information. And people have always been willing to pay for quality."

Online magazine Salon.com is another content site that introduced a subscription plan. Though some of the site's articles remain free, for $30 a year readers gain full access to all of the site's news, political stories, and columnists. Patrick Hurley, Salon's senior vice president of business operations, says the change has been well received by readers. The magazine signed up 20,000 subscribers in the first six months of the plan's launch. More important, according to Hurley, the amount of traffic to the site has not decreased since the changeover.

Another strategy some sites pursue is to charge for services that are available for free elsewhere. For example, the site www.555-1212.com now charges variable amounts for its residential and business phone directory services. One option lets you buy a block of 100 lookups for $10. At 10 cents a call, it's cheaper than dialing directory assistance over the phone. But of course, you can get the same information for free at every major Web portal.

So what's a savvy Web user to do? As always, exercise caution. Be wary of long-term commitments, especially since so many dot coms are disappearing without warning (see " Dealing With a Dead Service.") And carefully read the terms of any fee-based premium service before putting your money on the line.

Payment Plans

The trend toward subscription-based services translates into more hassles for users. Even if you're willing to pay a nominal fee for Web content, the work of establishing and tracking dozens of different subscription plans can be a pain.

Enter micropayments, an idea whose time has come but may not stay. Micropayments enable you to pay for content as you go--50 cents here for a Wall Street Journal Online article, or a dollar there for a PDF file containing some market analysis.

Micropayments (which never exceed $10 and can be as low as a few pennies) are drawn from a credit or debit account maintained either by the Web retailer that sells you the product or service or by a third party that partners with online retailers to manage individual customers' micropayments. For instance, a number of media companies--such as Consumer Reports Online, The New York Times, and The Wall Street Journal Online--use a payment system called Qpass. If you're looking for an archived article that's more than a week or two old, you can pay a small amount via your Qpass account to gain access to that article. Qpass simply monitors all of your micropayment purchases across various publications and then bills your credit card monthly.

But micropayments haven't caught on among sellers in a big way. Many Web content providers already have their own methods of delivery and billing, and they are reluctant to switch to a payment approach that involves a third party.

"The technology has emerged to support micropayments at almost any level," says Gartner's Andrews. "You just don't have any real passionate desire from content publishers to adopt it." And that brings us back to square one--dozens of accounts with different providers.

Andrews suggests there may be an incentive for sites to switch to a micropayment model in the future.

"Where micropayments might [be] relevant is [as] a third-party system that's more of a metering...model, cell-phone style. 'This person has listened to x percent of their allotment of downloadable music,' for instance, or '[has read] x percent of articles from participating publishers.'"

Time will tell whether this type of purchasing model gains wide adoption.

Dealing With a Dead Service

The ramifications of the changing Web can be much more painful to consumers than a simple conversion from free to fee services. Just ask Dawn Czajak (pictured), who lost several hundred dollars when Flooz.com went under.

Flooz, which sold online gift certificates that consumers could use to buy products from affiliated online retailers, filed for bankruptcy in August. This event left thousands of people stuck with worthless certificates that retailers refused to honor because they in turn couldn't collect the price of the purchases from Flooz.

"I purchased $650 worth of [Flooz currency]," says Czajak, "and had only spent $124.94 from my account when Flooz went out of business. I tried to use it weeks before Flooz actually went under, but its Web site was down with no explanation and with no way to reach the company."

Little more than a week after Flooz folded, Beenz.com, a similar gift certificateA-based site, announced that its members would have ten days to redeem their online currency.

Consumer rights lawyer Edgar Dworsky, who runs the watchdog Web site Consumer World, advises consumers to cash out of troubled programs early, before bankruptcy laws enter the picture.

"Look for warning signs," he says. "If they cut half their staff, you'll want to pay attention. Convert whatever you have to some real-world equivalent [if possible]--real airline miles, hard currency and goods, or paper gift certificates."

Probably the most egregious case of a dot com pulling consumers down with it came when online retailer CyberRebate.com filed for bankruptcy and left a reported 200,000 customers with more than $80 million in unfulfilled rebates. Until it folded, CyberRebate.com offered consumers a tempting deal: 100 percent rebates on electronic and household goods that it sold. The catch was that the site's prices were higher than those of other retail sites, and you had to wait 90 days after purchasing to get your refund. The idea spread faster than a computer virus--at one point CyberRebate was the number three Web retailer, after EBay and Amazon.com. And for the first year at least, CyberRebate (which was founded in 1998) delivered as promised.

"The consumers who got in early had empirical proof that this wasn't a scam--they got their merchandise and they got their rebate," says Dworsky.

But eventually the plan imploded.

"My guess is that [CyberRebate] had to keep raising prices [to pay rebates that were coming due]," Dworsky continues, "to the point where they were charging up to ten times the usual retail price. When you've got to get new people in to pay the old ones, that [might be] called a Ponzi scheme [named for scam artist Charles Ponzi]. The point is, consumers lost, and they lost big."

One CyberRebate victim, Janice Leverentz, lost $4300 when the company folded. "I was willing to pay the grossly inflated prices, figuring I'd be making about 10 percent on my time and money investment," she says.

Leverentz appealed to her credit card company to recoup her loss--to no avail. Credit lenders are required to investigate when a cardholder has a problem with a purchase bought on credit. But there's no guarantee your lender or card company will agree that you have been swindled.

Dworsky has seen hundreds of complaints from CyberRebate victims. "[Credit lenders] seem to be saying, 'You got your merchandise; it's not our fault you didn't get the rebate,'" he says.

It's unclear whether CyberRebate did anything illegal, but the end results mirrored those of any pyramid scheme: The people who got in early made out fine, and those who came in late got burned. The lesson: If it sounds to good to be true...

Coming Up: Paid Placements

The shifting economics of the Web are also producing a number of subtler--but potentially equally vexing--effects.

The stalwart search engine, an entity nearly as old as the Web itself, is undergoing significant change as some search sites begin charging other sites for listing them on their search results pages.

There are two practices at work here: paid inclusion and paid placement. Paid inclusion means that a Web site pays to get itself listed in a search engine's results for relevant topics. Paid placement means that a site pays for premium positioning of its listing at or near the top of a search results page. Both practices are common, in one form or another, at virtually every big-name search engine or Web portal.

Paid placement isn't new; your local Yellow Pages is a nondigital form of the same thing. But the practice gets shifty when search engines do not clearly distinguish between results that were bought and results that weren't.

Overture Services (formerly GoTo.com), which syndicates its service to thousands of other search services, is wholly predicated on paid placement. The practice's pioneer, Overture is so forthright about its policy that it reports next to each listing on its results page the amount a site pays Overture every time a user clicks on its listing.

Other search engines, like AltaVista, LookSmart, and Lycos, are less forthright about who has ponied up and who has not. These companies identify paying sites as sponsored links or--even more ambiguously--as featured listings. The Ralph Nader consumer group Commercial Alert has filed a complaint with the Federal Trade Commission asking that search engines be required to clearly mark as ads any listed links that third parties have paid for (see " Nader Group Bashes Search Engine Ad Policies.")

Marissa Gluck, a market analyst with Jupiter Media Metrix, says paid placement is useful to consumers in certain kinds of searches. "When it comes to searches for transactional information, for commerce or retail--yes, it's a good thing for consumers," says Gluck.

For example, in response to our query "motorcycle insurance," AltaVista, LookSmart, and Overture all gave the top listing to paid-for links of national insurance providers that offer and/or specialize in motorcycle coverage. The paid-for rankings may be less distinguishable than they ought to be, but the results are useful when you're looking for a specific item or service that you want to buy--search engines with paid placement spit out Web sites that want to sell. The same query at Yahoo's site yielded some insurance companies, but they were mixed in with FAQ pages and motorcycle fan sites.

The primary drawback of paid placement comes when you're looking for simple information on the Web and you have to wade through a river of e-commerce listings in order to get to the content sites that you really want to consult.

For example, in response to our query "J.D. Salinger," all of Overture's top five returns led to online bookstores that offer the author's literary works for purchase. In contrast, the editorially driven Yahoo returned a healthy cross section of academic sites, biographical resources, fan pages, and FAQs. It should be noted that Yahoo does permit a commercial Web site operator to pay a fee to expedite the review process in which Yahoo considers including the site in the directory's index. But Yahoo's site states that payment "does not guarantee inclusion in the directory, site placement, or site commentary."

Search services that provide paid and unpaid links should clearly mark the two types. Consumers should let search engine operators know when that doesn't appear to be the case. Regardless, you need to use an eagle eye when paid placement is involved. Remember, the inclusion and placement of a link on a results page doesn't always mean it's among the most relevant or informative results.

Searcher Beware: Paid Placement Moves In

Overture Services (formerly GoTo.com) was the first search engine to use paid placement. The results page clearly indicates how much a site pays Overture each time you click the site's link.

Lycos is less clear than Overture about identifying the sites that have paid for top placement in its search results. The search engine refers to these links ambiguously as "Featured Listings."

Broadband Narrows

As if you needed more to worry about: The high-tech economy's drift into the doldrums has also affected the availability and price of broadband Net connections.

For several years now, PC World has noted the advantages of a Digital Subscriber Line over cable modem service--such as more-reliable performance and better security. Unfortunately, the DSL industry has been hit hard by the changing economic climate of recent months. In the past year, numerous national and regional DSL providers have gone bankrupt, including 360networks, PSINet, Rhythms NetConnections, and Winstar Communications. Another major player, NorthPoint Communications, had upward of 100,000 business customers when it abruptly shut down, leaving its clients in the cold land of dial-up connections.

Some DSL providers are accusing the major phone companies of trying to squeeze them out of business. The Baby Bells, such as Verizon and SBC's Pacific Bell, are required by law to provide leased phone lines and other services to third-party DSL providers. But that doesn't mean they have to make it easy--after all, the Baby Bells offer their own, competing DSL plans. Last summer, several ISPs in California filed a complaint with regulators, charging that Pacific Bell was unfairly trying to stifle competition within the high-speed Internet market.

While this is clearly a dire situation for DSL providers, consumers are adversely affected, too. Stretched as thin as they are, many remaining DSL providers are having trouble providing basic customer support. And long-term, lack of competition is likely to mean higher prices, poorer service, and fewer promotional perks for consumers.

"I think it's less a problem for residential consumers than for small businesses," says Lynda Starr, Probe Research's vice president of U.S. carrier research. "When a provider like NorthPoint or Rhythms goes down, it has a large impact, obviously."

Starr says that the Baby Bells are dragging their feet because they're essentially monopolies that have been told to open their lines to competitors.

"The Bells are stuck in the middle. When you open yourself to competition, there's only one place your market share can go, and that's down. It's like a child's reaction, you know: 'You can make me do it, but not happily.'"

Making matters worse, DSL troubles have left cable modem services with less competition than expected. The recent spate of substantial price hikes (up to 25 percent) by major providers is likely a result of that lack of competition.

The cable industry may consolidate further. Cable giant Comcast tried to buy out AT&T Broadband last summer, and AOL Time Warner is rumored to be planning a bid. One firm could end up controlling a huge percentage of broadband access--and that's bad news for users.

So where does all this leave broadband customers? Forced to choose from among a dwindling number of DSL providers, consolidating cable modem services, and a handful of distant-third options such as satellite connections, users may want to play it safe by going with a big company that's unlikely to fold. Kathie Hackler, senior analyst with Gartner, suggests that having many options among smaller carriers is probably not as important for consumers as being able to pick what they want from a handful of reliable, competing broadband providers.

"If you use the long-distance telephone market as a historical example, after divestiture there were thousands of little long-distance companies," Hacker says. "Over time they came together, and you ended up with a top three and some secondary players. That's likely what's going to happen in this environment as well."

Riding Out the Storm

The jolt back to grim economic realities has been painful, but many analysts believe it may be positive for the Web, overall. Gartner's Andrews sees the dot-com implosion as a necessary weeding-out process. Only sites that successfully leverage the Web's strengths will survive.

"The grassroots Internet, the Web sites created for the like-minded--by the passionate for the passionate--will still be there," Andrews says. "We'll see a refocusing of free sites and personal publishing projects"--sites with useful content run by dedicated people. On the business end, Andrews foresees similar growth.

"We'll see a steady, relevant, and increasingly visionary exploitation of the Web by established companies and well-funded--but not radical--smaller companies. Generally there will be a more sensible use of the Web to drive new models of entertainment and information delivery--and the development of new takes on old models."

The good old days of the Web won't return. But the new Web will likely be a hardier construct, with a sturdier internal economic base. That may mean you'll have to pay for some things or put up with more-intrusive advertising. But the Web will right itself.

Janet Daly, communications director of the nonprofit World Wide Web Consortium (W3C)--the closest thing the Web has to a standards body--believes we haven't seen the best the Web can offer.

"It's only been 11 years since the first successful implementation of the Web, where a browser communicated with a server and got an answer," Daly says. "The Web is still in its infancy."

Glenn McDonald

Web Deals: Three Web Services Worth Paying For

Sure, the Web's free ride is over. But there are still some online services that we would happily pay good money for.

1. Carfax.com: In the market for a used car? Carfax.com's vehicle history reports can help protect you from scams and lemons. For $15 (single report) or $20 (unlimited reports in a two-month period), Carfax.com will tell you whether the car you're considering was previously reported in an accident or belonged to a rental agency. Each report also lists title history and odometer readings (recorded at the time of emissions tests, for instance) as checks on possible illegal rollbacks. Best part? The report arrives instantly via e-mail, or you can view it on the Web site.

2. Ofoto.com: This printing service for digital camera users gave out ridiculous quantities of free prints in the past, but we like the quality of the prints so much we'd cheerfully pay for them now (50 cents for each 4-by-6 print and $1 for each 5-by-7 print). The site is well designed and turns orders around quickly. And though it charges for prints, it still offers free online photo sharing.

3. ConsumerReports.org: What more can we say about the granddaddy of consumer publications? For $24 a year, you can get all of the great, unbiased reports about thoroughly tested products that you're used to getting in the print magazine, and save a forest of trees to boot. Now that's advocacy for the masses.

Glenn McDonald is a freelance writer living in North Carolina.