NONE: Re: ONLINE-ADS>> Unsold Inventory
Re: ONLINE-ADS>> Unsold Inventory
Mark J. Welch, Esq. (markwelch_at_ca-probate.com)
Wed, 29 Oct 1997 13:38:54 -0800
At 01:38 PM 10/29/1997 -0600, Jason Rapasky wrote: [in part]
> I believe that
> the move to subscription fees is the result of high CPMs. Many sites,
> even those asking for CPM's in the $20 range, are pushing advertisers
> away. Advertisers simply want to get the most for their money. When
> average sites ask for an above average CPM, why blame the advertiser for
> not being interested? As a result the publishers have to become
> creative, and that's how we get the advent of subscription fees. Here
> is a simple formula: High CPM = Unsold Inventory = Publisher Panic =
> Subscription Fees.
Whoa. Let's start with the "correct" equations for web publishers:
EXPENSES =
(Amortized Startup Costs) +
(Content Costs) +
(Server & Bandwidth Costs) +
(Overhead)
PROFIT = REVENUE - EXPENSES
If the cost to "launch" a site, create and maintain content, and deliver
the content is $10,000 per month, then the site must generate $10,000
per month in revenue to cover those expenses. Revenue can come
from several sources: advertising, subscription fees, sales, government
grants or subsidies, and probably other avenues. (The money you get
from investors or venture capital firms or stock sales is NOT "revenue,"
in my view, although a lot of internet companies seem to think it is.)
Jason is certainly right that if a site is refusing to accept ads for rates
under $20 or $30 CPM, and is therefore only selling 10% of inventory,
one obvious option is to lower the advertising rates to generate more
total sales. But a site that can sell only 10% of its inventory at $50
CPM is *not* going to make any more money by selling 50% of its
inventory at $10 CPM or 100% at $5 CPM. (The site would make more
money if it can sell 10% at $50, plus 40% at $10, plus 50% at $5.)
Although I firmly refuse to accept "consulting" work that involves
advising individual sites on how to enhance ad revenues, I keep
getting calls from sites asking for help. (Side note: who wants
the referrals from these calls?) In almost all cases, these sites
are generating only mininal ad revenues (through FlyCast or
Adbot, for example). Usually, the sites are NOT in the most
desirable categories (such as "Business & Finance" or
"Computers & Internet").
Thus, my "automatic" suggestions for enhancing site revenue
are as follows:
(1) Focus on traffic-building. If a site is earning $500 per
month from 10,000 visitors, it will almost certainly earn much
more money if it can drive traffic up to 100,000 visitors. (But
don't pay more to acquire new visitors than you can ever
generate in revenue as a result of those new visitors.)
(2) Gather information that you can use to modify your site
and support ad sales pitches. Use WebTrends or another
statistical analysis program so you can distinguish "hits"
from "pageviews" and "unique visitors." Find out where your
visitors are coming from, and see if there are patterns of
traffic at your site that suggest opportunities (e.g. ways to
bring visitors back more often, or to increase the number
of pageviews per visitor).
(3) Put together a business plan for your site. If your web
activities actually include several different projects or
activities, break them apart and prepare business plans
for each.
(4) Look at your "competitors" for opportunities. Who is
advertising on other sites that your audience also visits?
What are competitors doing to build traffic? Are there
"competitors" who might actually offer complementary
products and services so that you might develop a
business relationship, by affiliating or even merging
your sites?
(5) When you are approached by an ad broker or network,
pay attention to the questions they ask. One web publisher
told me that a large ad-rep firm approached them about
representing their site, but the broker never asked any
questions about the demographics of the visitors (even
though the site has registration data from the majority
of visitors). By NOT asking questions about audience
and demographics, the ad rep was silently disclosing
that the firm would not make use of that data and thus
would NOT be seeking to maximize ad revenue for
the site, but only to include the site in other deals or
as part of "run of network" sales. (See other questions
and issues at http://www.markwelch.com/bannerad.htm)
(6) If you love what you are doing, don't let that blind you
to the basic math of the business you are in. I have had
some very sad conversations with web publishers who
had built grand dreams on expectations of $50 CPM
rates for an entertainment site, and who were devastated
to learn that likely revenue would be one-tenth that amount.
Suddenly, the entire business plan fell apart, and the grand
dreams were wiped away. This does NOT mean you
should not dream or that you should practice delivering
the line "Would you like fries with that?", but it does mean
you need to sit down and look for realistic ways you can
make money doing what you love.
My own opinion is that subscription fee-based sites will
always be a tiny minority of web sites, at least until there
is some way to do "micro-transactions" so that sites can
charge very small fees (e.g. 25 cents per month, or one
cent per pageview).
However, I do believe that there is and should be a strong
movement toward collecting more registration data in order
to support ad sales: and I do NOT think that the registration
data needs to be very intrusive or detailed: just asking your
visitors their age, sex & zip code will allow you to profile
and target advertising adequately about 90% of the time.
(For this reason, I strongly endorse the concepts behind
the "Open Profiling Standard" which is described at
http://developer.netscape.com/ops/ops.html).
-- Mark J. Welch, Esq. (510) 462-8483 http://www.ca-probate.com/
-- Note: area code will change in April 1998 to (925)
-- Web Site Banner Ads and Web Counters: http://www.markwelch.com/
-- Small Office / Home Office Consumer: http://www.sohoconsumer.com/
