NONE: ONLINE-ADS>> The cost of content
ONLINE-ADS>> The cost of content
Mark Montgomery (markm_at_virtualfranchise.com)
Wed, 24 Sep 1997 16:15:07 -0700 (MST)
Dr. Kenneth J. Henry <ken_at_trainingpros.com> wrote:
>I fear that many sites will cease to exist if this type of advertising
>becomes the norm on the web. And many of these are quality sites, mine
>included. We need to be able to have a predictable revenue stream in order
>to pay overhead and meet other obligations. In addition, as we expand our
>web sites, development costs must be recouped via some means. For those of
>us who are content providers, there is really only one viable way--CPM
>advertising. We have learned from experience that fee-based approaches
>don't work well on the Web, so we have this one avenue to develop our
>revenue.
>
>I certainly hope advertisers take a look at this perspective, because I
>think they are getting tremendous value for their CPM advertising
>expenditures, and these revenues help us who are content providers maintain
>and grow our sites.
>---------------
>
Now we are getting to the core of the revenue modeling issue on
the Web, i.e. who should be paying for content. That's the real
question over the long term.
First of all, CPM is not a viable revenue model for content with the
exception of very, very few sites. If you take averages, CPM is covering
only about 30-40% of expenses. Now if you want to compare apples to
apples, how many traditional training companies have corporate advertisers
paying for the school. The closest beast of comparison would be a high
quality trade magazine, most of which are very expensive to the subscriber
in addition to very expensive albeit highly targeted advertising.
Look, Forrester and others disagree, but I have absolutely no problem
forecasting that CPM will never pay for all of the functionality that this
medium provides over any other. Actually, subscriptions are growing very
fast at multiple levels using the Net and the only companies of any
scale in the content business near the break even point are employing
multiple revenue streams. The WSJ for instance still loses money with
a very successful subscription and advertising program. AOL is break even
with commissions, advertising, subscriptions, and "real estate" rentals
coming in at tens of millions per year.
It's way past time that the online community wakes up to smell the
roses. Tens of thousands of sites are not going to be paid for by
advertisers, especially in an increasingly competitive global economy
where downsizing is a permanent trend and efficiency is the name
of the game. Monopolies paid for most traditional publications
and they are being introduced to free market economics.
We've studied this issue as intensely as anyone alive and broken
the segments down in our own internal forecasting over the next
ten years. Training is at the high end of pay for use, with perhaps
20% of revenue coming from advertisers or sponsors, unless one is
training for a specific product like NT or 747s. The rest will
need to come from somewhere else, just like the real world which
has been selling electronic training products for some time. This
is the real world.
Small sites are being duped a bit, dragged into a price war they
have no way of winning using mass advertising as a revenue model.
Let's not make the transition any more painful than it needs to
be OK. It's time for users to learn that it is in their best interest
to pay part of their own way on the Web, particularly if they want
premium content to survive outside of five or six global super
conglomerates that have endless conflicts of interest. We've
tested pay for use and so have dozens of others. It's not easy,
and it only pays for a portion of overhead, but that's business.
Actually, subscriptions have been growing very fast at multiple
levels but receives less press coverage by the media which is
obviously bent on the advertising model, in part due to the
follow the sheep mentality which unfortunately has a negative
affect on consumers.
Look at the facts, they are all around, and it's pretty clear
what they point to. Web content is one of the largest subsidies
in the history of commerce, in the tens of billions. It will require
all of the forecasted growth in advertising, plus massive
pay for use options, and commissions on sales, sponsorships, and
the occasional portal link-auction for $20 mil to pay for a
fraction of it. It's very much like cable TV, only much broader
and global in terms of modeling.
Mark Montgomery
Founder
GWIN- Global Web Interactive Network
http://www.virtualfranchise.com
markm_at_virtualfranchise.com
Voice: 1-520-632-4119
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