Adman David Ogilvy was right: "Advertising is a fundamental part of our business model."

Coming from Martin Nisenholtz, CEO of New York Times Digital division, those words must have been a relief to the Internet media faithful who keep hearing that "Internet advertising doesn't work."

But he also threw in a qualifier as he addressed the Jupiter Media Metrix online media forum in New York Monday. "We shouldn't be talking about pay versus free anymore," Nisenholtz said of the shift away from ad-supported content online. "It's the wrong debate. The right one is about focusing on profitable businesses that can actually scale in the marketplace as more consumers turn to digital in a variety of forms."

In the case of the New York Times Digital, he said "about a third of our revenues come from display advertising, another third from syndication and pay products and the remaining third from a mix of classified marketplaces and direct e-mail."

Nisenholtz's comments come at a time when online media companies, coping with the plunge in online ad dollars during the past 18 months, are shoring up their revenue base by putting more of their content behind a paid firewall.

And just as many media plays concede that the gambit is as risky as relying on ad dollars alone. How does one decide what should be paid? Is tiered content, such as the premium archives that the NYTimes.com offers along with its free site, the way for smaller media companies to go?

Even as the debate continues at the two-day online media conference, Jupiter's own poll of Internet-using adults said that 70 percent of the sample "can't understand why anyone would pay for content."

Yet people are. The same study predicts that online content revenues will "only" reach $5.8 billion by 2006, up from $1.4 billion this year.

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"One of the metrics that's going to judge whether or not your business can charge for content is how free are the alternatives," said Charlie Fink, president of AmericanGreetings.com Network, during a discussion at the Jupiter forum Monday.

"The free alternatives in your category are going to dramatically affect your ability to control pricing," he said. With competitors such as Hallmark and Yahoo! Greetings offering free online cards, for example, AmericanGreetings.com has to be as elastic as it can by keeping its annual subscription fee at $11.95.

"As more free content goes away, we may be able to charge more but for now, we are limited" to the $11.95 a year it now charges, according to Fink. For this company at least, the free vs. paid mix appears to be working. Fink said the site has over 100 million registered users. The ability to convert just 7 percent of those numbers to paying customers "is a sweet business."

Brand Matters

Playboy.com, the online division of the men's lifestyle magazine and media company, is leveraging its franchise to carve out four revenue streams: advertising; licensing; e-commerce, and tiered subscription services, starting from about $5 a month to $9.95 a month. The content and services include online auctions, back issues of the magazine, betting on games (for users outside of the US) and, of course, racy videos of Playboy bunnies.

But brand recognition is just as effective in a free model, such as with the success of CBSMarketwatch.com, the financial news site which launched with the blessing of the CBS news brand. It started with free content and has quickly built a major audience.

"The eyeball grab did work for us," said Larry Kramer, chief executive of the site. "To a certain extent, it still does." CBSMarketwatch is still largely free and ad-supported, though it diversifies with licensing deals with Yahoo! for example, and with e-commerce offerings.

It also sells its registered base of users to companies pitching financial services products, for example. For now at least, the site's free model is staying in place. But with Kramer hinting at the forum that the company is testing out a possible tiered subscription offering, the pressure of the shift in the marketplace is showing.

On the other end of the spectrum is the Wall Street Journal Interactive, which has been paid since the site launched in 1996 and so far has about 625,000 online subscribers.

"If you try to tier the content, it becomes challenging for people wandering around on the site, they run into walls," said Neil Budde, publisher of WSJ.com. "Our philosophy is to put very little out there for free" beyond the site's summary of top stories, and to focus on bringing all the company's news gathering and editorial forces to use on the range of paid content. The mix seems to work. Budde said 60 percent of the site's original subscribers are still paying.

A tiered plan may not be the chosen path for the Journal Online, which is working from a more qualified base while the NYTD, on the other hand, is casting its nets more widely with its free/paid mix.

Nisenholtz said the free/paid model the site is pursuing wouldn't work without sticking with the request that users register, despite the conventional wisdom that once called it a deterrent to site traffic.

"We decided to do this at the outset and we have stuck with it for six years, through all the fads and trends of the dot-com boom. How many times have I heard that big is all that matters? What matters, folks, is revenue per user and a way to upsell millions of users to value-added products and services."

Using that approach, the NYTimes.com continues to roll out free e-mail newsletters such as e-mail blog DealBook and the latest Times News Tracker in hopes of converting more freebies to premium content such as archive access and crossword puzzles. "Registration qualifies your audience [and] establishes more formal terms for the use of your site. It also sets up mutual conditions for value exchange between publisher and user that have implications for privacy, data ownership and the role of any third parties who might seek to disintermediate this primary relationship," he said.

If content providers have learned anything in the past ten years, it is that "there are no silver bullets, no major formulas for achieving online economic success." The other lesson, or rallying cry perhaps for a beaten down industry, "is that online advertising will grow as the industry establishes standardized metrics, targeting capabilities and more robust, interactive formats."