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Snapfish scales back free pricing model

The online photo company says it is changing its pricing for film developing by offering customers only the first three rolls of film free instead of the first 24.

    Online photo company Snapfish.com said Thursday it is changing its pricing for film developing as a result of uncertainty in the online advertising climate.

    Beginning the last week of March, the San Francisco-based company said it will offer customers the first three rolls of film developing free rather than the first 24 rolls, which it offers now. After the first three rolls, customers will pay $1.99 per roll for developing, regardless of the number of exposures, plus $1.99 for shipping and handling. Under Snapfish's current pricing model, each additional roll after the initial 24 costs $2.49 apiece plus $1.69 for shipping and handling.

    Snapfish's move comes as online companies are faced with a slow advertising market that is forcing some to alter their services from a free model to a paid one. Under its current model, Snapfish had said the reason it could offer free film developing was because the costs of development were being paid for by its online sponsors.

    "For these companies to stay around, I think they'll definitely start imposing some fees," said Suzzana Ellyn, research analyst for La Jolla, Calif.-based ARS. "There's only so much revenue you can earn off of print and photo products, and obviously the advertising strategy isn't bringing as much revenue as hoped."

    Other online companies recently have started charging for formerly free services. Last month, BlueLight.com changed its Internet access service, limiting customers' free Web access time and charging a fee for additional usage.

    FreeEdgar, which offers free access to Securities and Exchange Commission filings and other financial data, warned some customers its free e-mail notification service would only remain free for people tracking fewer than five companies. And in January, Yahoo said it would start charging for its auction services.

    Snapfish Chief Executive Raj Kapoor said that despite the changes in Snapfish's pricing model, the company's business model is sound.

    "Our strategy is to be the AOL of online photography," Kapoor said. "Although we've been hitting our advertising revenue every single month on target, the outlook going forward in 2001 is uncertain for advertising revenue. We want to add (these charges) to reduce the reliance on advertising because it's become less certain."

    Snapfish said it has also made other cost changes. The company raised the price for 5-by-7-inch jumbo prints from $1.99 per roll to $2.99 per roll; however, the 5-by-7-inch enlargements ordered through Snapfish's Web site will remain at 99 cents each. In addition, Snapfish said it will no longer require customers to pay a $3.99 fee if they do not view the online version of their photos within 30 days of them being posted.

    While other online photo companies, such as Ofoto and Shutterfly, have trimmed their work forces and made minor pricing adjustments, the competition in the market remains competitive as each company attempts to capture customer attention and funding.

    In January, Ofoto received $41 million in its second round of funding from Apple Computer, Hewlett-Packard, Benchmark Capital and The Barksdale Group, among others. In February, Shutterfly--Netscape co-founder Jim Clark's start-up--said it snagged $23 million in its third round of financing.