Well done to The Age today for gently undermining sister Fairfax publication, the Australian Financial Review, and for exposing some of the battles being waged in the disputed territory of business online media.

Matthew Ricketson’s piece exposed some of the flaws in the user-pays business model adopted by afr.com and hinted at some of the ructions going on behind the scenes at Fairfax where the Digital division is believed to be ideologically opposed to the user-pays approach being pushed on-line by the Business Media division.

The general consensus around the traps is that afr.com is moribund with neither the subscribers nor the strategy to recover. The head of Fairfax Media, Michael Gill, took a risk and opted for a user pays model but appears to be paying a heavy price. Although no one is releasing figures, the best estimates are between 890 and 2000 subscribers for a site that had set out to attract as many as 20,000.

The problem, say observers, is that afr.com has priced its own content too high and failed to embrace the worldwide trend towards free on-line content. By taking the user-pays approach it has reduced both its exposure on search engines and the flow of traffic through the site – both of which lead inexorably to a reduction in marketing opportunities and advertising revenue.

A quick visit to afr.com highlights the problem. The website appears to be a hybrid of free and locked material but the free stuff is generally lifted from agencies such as Reuters or other places where it can also be viewed gratis. There are problems with the locked material too with users complaining the site is cumbersome and downloads are too slow.

So all eyes are now on the upcoming launch of the rival on-line site Business Day, being promoted by Fairfax Media. Although it is not billed as competition, it will go all-out to grab the advertising and readers that Fairfax Media believes are ignoring afr.com because of its user-pays approach.

Pippa Leary, the Media General Manager at Fairfax Media told Crikey that it is overstating things to call it a battle but confirmed that Fairfax Media will adopt a different approach to the one taken by Gill at afr.com. She said content on the new Business Day site will be free, including the breaking intraday news stories that are currently not available on the aggregated Age and SMH sites.

Crikey understands that the alternative model has been submitted to Fairfax CEO David Kirk for approval but is awaiting his signature when he returns from his investor tour of Europe in three weeks time.

Business Day will contain links to afr.com in the hope that some subscribers will pay for the specialist content. But based on current trends, no one at Fairfax Media is holding out a lot of hope.

Gill is on leave today and unavailable for comment.

Meanwhile, Crikey should disclose it is not a disinterested party as Crikey publisher Eric Beecher has a shareholding in Business Spectator, the online business publication set to launch this month. Business Spectator has just decided to adopt a free model, no doubt partly inspired by the unspectacular performance of afr.com.