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?
Victor Cheng (victor_at_smallbizsavings.com)
Tue, 26 May 1998 22:12:55 -0400
It seems to me that many web publishers have not examined
their economics in enough detail. There are two sources of
profit improvement potential, revenues & costs (no big
surprise).
I think its fair to say that the highest revenue web
publishers (on a per XXXX basis) have been been able to
offer advertisers and marketers a TARGETED audience that is
attractive to the advertiser. For example, Yahoo's pricing
scheme is structured so that serving ads to visitors using
specific key word searches is higher than a run of the site
type banner campaign. I also believe, but do not know for
sure, that certain niche content site's also have pretty
high advertising rates... with my favorite example being
Physicians Online. I had the chance to browse the site with
a Physician friend of mine. Every banner promotes a new
drug. In addition, Physicians Online also has specific
sections on cardiology, family medicine, OB/GYN,
etc....which provides the potential for further targetting.
So the name of the game on revenue enhancement is to be able
to acquire a specific user segment that is attractive to
somebody else. I think niche's are a great way to do this.
It is very hard to be everything to all people. While having
a niche is critical, this doesn't mean that a site or a
publishing company has to be small. It just means that big
site's have to have many small sub-communities.
For example, www.ivillage.com targets women... yet they have
sub-communities focused on parenthood, careers, health,
etc.... and within each of these sub-communities, they offer
even more micro-communities (e.g., Parents of 1-2 year
olds.)
While the revenue improvement opportunities may or may not
be obvious, I think the improvement opportunities on the
cost side favor larger entities that can build/acquire/buy
lots of small niche sites and sites that can get their users
to generate a substantial portion of the content (such as
this mailing list).
There is a certain minimum size that a site needs to be in
order to support a dedicated sales force. Small niche sites
provide a lot of value to their members, but are not as
cost-effective when it comes to generating advertising,
partnerships, etc... One of my favorite online community
organizer companies is www.vertical.net they organize
business-to-business communities in a dozen or so specific
vertical markets. Examples include:
www.propertyandcasualty.com www.wateronline.com (for
municipal water companies), www.solidwaste.com (yup, you
guessed it). Frankly, I find these sites boring... but
people in these industry may find these sites to be
extremely useful... And word is vertical.net is doing just
fine financially.
In addition, sites that offer lots of user generated content
have a big advantage in their cost structure. Sites like
geocities, tripod, hotmail are good examples. Think of the
profitability of a single web page... If you have a reporter
write an article and place it on a single web page... it
probably costs one several hundred dollars in time,
research, and office expenses. In contrast, a home page on
geocities or maybe a single post from a community member on
tripod is created at very little cost to the publisher. Of
course, the article may get more page views than user
created content... but if the article cost say $500 to
write, and the geocities home page cost $1... will the
article generate 500 times as many page views? I don't know
the answer to that question... but the example tries to show
that user created content has a high degree of leverage.
At the end of the day, my take is do the best you can to
create one or more targeted communities (that is attractive
to some segment of advertiser/marketer)... and find ways to
leverage user generated content.
So can a stand-alone publishing model work? If it were me,
I'd work hard to find other revenue sources so that I would
never have to answer that question.
______________________________________________________
Victor Cheng
victor_at_smallbizsavings.com
http://www.smallbizsavings.com
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