NONE: Re: ONLINE-ADS>> The math just doesn't work...Or does it?
Re: ONLINE-ADS>> The math just doesn't work...Or does it?
Bob Stewart (rstewart_at_vmirror.com)
Tue, 26 May 1998 10:22:05 -0400
At 07:01 AM 5/22/98 -0500, Richard Hoy wrote:
>So is there a way to make web publishing viable strictly through advertising?
>
>One obvious answer to me is get your content produced for you at little
>cost, like what Andy Bourland at ClickZ has achieved. He's got great
>content produced by knowledgable people who aren't looking for cash, but
>for fame.
>
>Another one is to go niche. The narrower your subject, the less content you
>have to produce. This is why I think major publishing efforts online are
>doomed to failure unless they diversify their revenue bases.
I think it has to be a combination of the two. Right now, it's impossible
to make money paying writers for original content. But that's not really
playing to the Web's strongest hand anyway. For one thing, people generally
don't like to read articles of any length on the Web.
At our GardenWeb site, about 85% of the traffic is in our user forums.
About 250 new pages of content (threads) are created everyday. I wouldn't
make the claim that this content is of the same quality as that of a good
gardening mag, but then they can't host user forums. Another attraction we
have is a searchable database of gardening events. The events are posted by
the those giving them and are automatically deleted after they've occurred.
We don't have to do a thing. This is cheap content and it's something a
magazine couldn't do.
So we've kept the cost of content very low. But if we were a general
interest site I still don't think that would be enough.
We are now the largest gardening site and so we'll now have an edge with
gardening advertisers. We want to make sure were the first site they think
off for advertising on the Web. But the quote from Rick Bruner is exactly
right, even if you can sell the ads, costs have to be in line with the
reality.
In the long run, a site that can deliver the goods for less is going to win
out.
I don't know how closely you all look at these things, but I did some
simple analysis of the last quarterly statements from Yahoo and Excite.
Yahoo spent about $25m and brought in $30m, a $5m profit. Excite's numbers
were something like $27m in expenses, $23m in income, for a loss of about
$4m.
On the one hand, Excite's revenue per page viewed was about twice as high
as Yahoo's (This is mainly due to a higher percentage of pages sold.) But
their expenses per page were 2.5 times higher!
As it's likely that CPM's will continue to fall, it's obvious Yahoo has a
big advantage. I think 50-70% of their inventory is unsold. They can afford
to let prices drop, allow entry to a greater number of advertisers and make
more money. But Excite has less unsold inventory and higher costs. A price
drop of 20-30% might just increase demand for pages they're already selling.
If it cost 250% times as much to make Pepsi as it costs to make Coke, how
much money would you invest in Pepsi?
We took top position in the gardening niche from Time-Warner's Virtual
Garden. Though we did far better in the interactive areas, in other areas
their content was superior to ours. But there expenses were much, much
higher and had no basis in reality.
The costs of entry for Web publishers are still very low and I see the
biggest threat to our position to be small publishers with little or no
costs. Most of our bigger competition has the same problems Time-Warner
had. The only way to keep newcomers at bay is to keep our costs per page
extremely low.
Bob Stewart
The Virtual Mirror
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