'On the internet, everything wants to be free. Send $9.95 for more information." That used to be a joke against the commercialisation of what had been an academic network; now it is coming true. With the drying up of funds from investors and a slump in the online advertising market, thousands of websites are either closing down or trying desperately to find new sources of income. Someone has to pay, so every week, more sites change from free to fee.

Want to listen to music? Free file-swapping services, under attack from copyright lawsuits, are on the way out; paid subscription services from Real Networks and BT Openworld are on the way in. Want to watch Big Brother or CNN news videos or Wisden's international cricket online? You have to pay. Want to read last month's Financial Times? Pay again. Gone are the best days of free internet service providers such as Freeserve, free storage and free web space with unlimited free bandwidth.

Surfers can still get lots of free software and services, but companies like Another.com and Bigfoot have started charging for email. Yahoo wants money for mail forwarding, which used to be free. Hotmail wants money for extra mail storage. Many of the "free" shareware programs have become "nagware" - they use popups to annoy you into paying - or increasingly come with parasite programs that serve up advertising.

It is not hard to understand why. Writing on the Kuro5hin website late last month, Kennon Ballou, who used to be a programmer at Audiogalaxy, put it like this: "Towards the end of my time there, online advertising budgets fell through the floor and we were forced to find other methods of income. Sometime around then we began bundling so-called spyware into the satellite installer, simply because they paid good money and nobody else was."

During the internet's reprise of tulipmania, the main idea seemed to be to attract the biggest audience in the shortest possible time, even if "customer acquisition" cost a fortune. Later, someone would surely find a way to convert all these "eyeballs" into profits. Today, those same users are expensive to maintain in terms of server use, disk space, bandwidth (communications costs), content and support, but the profits have failed to materialise. As Judy Gibbons, European vice-president of Microsoft's MSN, says: "It's very challenging to generate revenue from free services. Free and subscription have to work together in one business model."

And as Steve Bowbrick, Another.com's chief executive, points out, "The problem with being free is that you've got no leeway at all. You've got no way to promote or do discounts because you have an ARPU (average revenue per user - we've borrowed that from the mobile people) of zero."

The good news is that people will pay, and Gibbons claims MSN Extra Storage has been "enormously successful". The bad news is that most people won't. Bowbrick reckons Another.com has just about made the transition from free to 20,000 paying customers: "One advantage was that we were a little, private firm, and we're a lot littler than we were before."

People will also pay for unique content, as the Wall Street Journal has shown. The online version started charging soon after its launch in 1996, and its US-based founder and publisher, Neil Budde, says the Journal would have gone online even if the internet had not taken off. WSJ.com has its own news staff of 60, and 640,000 subscribers paying $29 or $59. (The lower rate is for people who also get the paper version.) In 2001, its income was $37m.

Budde is the first to admit that the Journal had advantages in terms of its existing brand name and its business readership. "We felt from the beginning that the audience we were targeting would be willing to pay, so in a way it was easy for us to do that from the start. I don't know that everyone could or would charge. In fact, we operate half a dozen sites that are free, or supported by advertising." The free sites cater to more specialised audiences - careers, real estate, small businesses and so on.

But one thing WSJ.com does not do is mix free and paid-for. This kind of tiered service is becoming common on the web: some things are free for everyone but subscribers have access to a premier level of content. "We debated making more of the Journal available, but a mixture of free and paid-for content can be very confusing to people," says Budde. "Some links work, some don't..."

There is nothing in Budde's voice to suggest he could possibly be thinking of any other company, but the Financial Times has just introduced a three-tiered service. Everyone gets the past week's content for nothing, as before. Level 1 subscribers who pay £75 a year get access to all FT content, including Lex items not published in the paper. Level 2 subscribers, who pay £200 a year, also get access to a database of more than a thousand newspapers and magazines. It sounds a lot, but a decade ago, FT Profile/World Reporter cost about £1.50 a minute.

Zach Leonard, director and chief operating officer of FT.com, is keen to stress that the FT hasn't gone from free to fee. "We have a very diverse revenue model," he says, "which includes advertising, which we still believe in, and e-commerce. Finally we've just added subscriptions, but there's quite a bit that's free, and that's deliberate." The free content is helping to establish the FT's name outside the UK. "It's a good means to sell newspapers, which we are doing as well," he says.

It's one thing to charge for new services, but much harder to charge for something that has been free for years. As Gibbons says, "that upsets your customers". But Leonard says there hasn't been a significant backlash. "It's something we're going to continue to monitor, but generally, people can't believe it's taken us this long to charge for information."

The bad news is that the vast majority of websites won't be able to follow WSJ.com and FT.com, according to Forrester Research senior analyst Rebecca Ulph. "It only works for people who have content you can't get anywhere else. There's very little of that, and mostly it's generated from the business market. Everyone likes to think their content is unique, but it usually isn't."

Ulph expects to see "a lot of consolidation - a lot of sites won't survive" - and a lot more syndication. She thinks companies that have good content could be better off supplying it to other sites, much like Reuters and AP provide hundreds of sites with news, rather than seeing themselves as destinations. The big sites will do well, by reaching a mass market, and the little sites will do well in their specialised niches. "But if you are in the middle ground," she says, "you've got a problem."

None the less, content can gain in value through being delivered over the internet, and this is the message that comes most strongly from Mark Hall, RealNetworks' vice president of RealOne subscription services in Europe. I'd suggested music, video and games as key content areas: RealOne already delivers music, and Real announced a similar games service in the US on Monday. "But we've built our success out of news and sport, which you didn't even mention," exclaims Hall.

RealOne's American successes have included commentaries on Major League Baseball and Nascar racing, video streams of the Big Brother television series, and TV news channels. "Partly it is to do with time-shifting," says Hall. "If a baseball game is being played during the day while people are at work, it may be that the only way to follow the game is online. The other thing is the 'displaced fan' - the New York Yankees supporter who moves to Los Angeles and finds there is no local coverage of his favourite team."

Hall hopes RealOne will have a similar success in Europe by carrying live commentaries of Uefa Champions League football games. And where the US service has CNN and ABC News, he will have a live feed of BBC World News. "It's a very strong offering."

The RealOne subscription service also acts as an aggregator or consolidator, like a satellite TV company. "We don't have a direct pipe or a settop box, but we offer a similar sort of service," says Hall. "Putting 10 or 12 channels into one package increases the chances that someone will subscribe - there's a network effect - so each one gets more users than they would otherwise."

But like Leonard at FT.com, Hall stresses that RealNetworks has not suddenly switched from free to paid-for. "We continue to be in the business of making things free, but free was just not tenable in the long term," he says. "We've added some balance to what was a relatively unbalanced [business] model before."

But if you are not the FT, and not big enough to do deals with the likes of RealNetworks, MSN or the BBC, there is little you can do, except throw yourself at your users' mercy. Sometimes it works.

Last month, it worked for Rusty Foster, the man behind Kuro5hin (a mangling of corrosion, as in rusty). "We're broke," he announced. "I come to you, Kuro5hin community, in an hour of need." Income from text advertising had fallen from $4,182 in March to a projected $1,241 in June. There was no way he could make his $70,000 budget, but if the site's 381,000 monthly visitors just chipped in a buck each, he'd be rich.

In this case, there was a happy ending: Kuro5hin raised $35,000 in less than a week. But I wouldn't bank on that happening another 50,000 to 500,000 times, depending on how many small sites hit the wall. The web makes it easy to click to almost anywhere, but it is just as easy to click away.