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The Profitability Threshhold for Web Publishing

You know, it just occurred to me that there’s not a lot of collaborating going on with the literary side of the web. The old model was to write your masterpiece, then submit it to a prestigious journal that hopefully will pay you something. Next stage of development: bloggers “steal” from commercial publications by linking to them for free. Then, bloggers “steal” from one another (and that is good, although nobody is making any money from it). The problem is that there are a lot of lone voices out there screaming for attention (and blogging about all kinds of things). Unless you know the right people, it’s really hard to get your stuff heard.

The current stage of development is “loose self-funded collaborations”. Blogcritics, slashdot, crookedtimber and many2-many (as well as many of the Corante zines ) are having open memberships, with bloggers crossposting in two places.

The question again boils down to money. Can group blogs make enough advertising bucks to pay for content? If not, is it worth an individual blogger’s time to set up advertising?

A friend who?s the proprietor of the popular blog The Minor Fall, The Major Lift (TMFTML, for short) told the New York Observer last fall, ?I?m actually curious as to what people did in offices before the Internet. My theory is that every job only requires about thirty minutes of hard work a day and the rest is bullshit.?

My answer is that people are more productive today than 20 years ago. They have busier schedules and more pressures at work (and probably harder jobs, from a purely intellectual point of view). Says Jay Leno: “According to a new book called “The Human Resources Guide to Worker Web Use,” surfing the Internet at work leads to less stress, better time management and sharper skills. Which they say are the three most important things you?ll need when your boss fires you. ”

We have four choices: 1)admit that writing/blogging brings no income, and that we’re just going to have to get by sinecures or guerilla blogging or depending on our independent wealth or 2)the online publishing world is going to have to be more cutthroat about digital rights management and subscriptions in order to pay for original content(see my discussion of online business models here) or people will pay for bundled services rather than content.

Turn the question around. What services/products do you pay for online? Is it the honor system, the convenience factor, the ability to receive support, or satisfaction in knowing that you’re helping a worthy cause? I’ve written before that as soon as content or web services start to resemble chump change (an amount of cash so insignificant that it’s not worth trying to circumvent), that’s when people start to pay. On the positive side, transaction costs are getting lower. On the negative side though, audience may potentially drop and you need a huge audience to reduce transaction costs. See my calculations Assumptions for this chart: Adviews can be sold at $2 for 1000 adviews (which as you see below, is extremely optimistic). ; Membership rates are annual. Annual budgets don’t include taxes, capital expenses, depreciation, etc.

Content Sites and Membership Numbers
Possible Revenue Strategies $50,000 Annual Budget $100,000 Annual Budget $200,000 Annual Budget
100% from Advertising 70,000 daily traffic 140,000 daily traffic 280,000 daily traffic
50% from $20 Membership;
50% from advertising
1250 Signups + (35,000 daily traffic) 2500 Signups + (70,000 daily traffic) 5000 Signups + (140,000 daily traffic)
75% from $20 Membership;
25% from Advertising
1875 Signups (17,120 daily traffic) 3750 Signups (34,240 daily traffic) 7500 Signups (68,480 daily traffic)
50% from $50 Memberships;
50% from Advertising
500 Signups/70,000 daily traffic 2000 Signups/140,000 daily traffic 4000 Signups/280,000 daily traffic
75% from $50 Membership;
25% from Advertising
750 Signups (17,120 daily traffic) 1500 Signups (34,240 daily traffic) 3000 Signups (68,480 daily traffic)
100% from $50 Memberships 1000 Signups 2000 Signups 4000 Signups
100% from Memberships @ $20 memberships 2500 Signups 5000 Signups 10,000 Signups

Here’s what’s clear. For a $50,000 annual budget, which is somewhat generous–enough to pay for one full time salary and for one consultant’s salary at half time or 1/4 time, you are going to need 2500 signups…which is impossible for 99% of the community sites out there. The most heavily trafficked blog, dailycos, is selling 300,000 page views per day in a nonpremium spot for $79 /day (or $550/week). That amounts to 26 cents per thousand page views. For their premium adspace, 1.06$ per thousand ad views, or 321$/day or $2250 per week. I suspect that technology blogs might command a somewhat higher rate, but that is made up by the lower traffic.

The question is whether overall web traffic will increase or decrease over time. The number of people surfing worldwide will skyrocket, but so will the number of people posting content (think of 10 times the porn, 10 times the spam, 10 times the web server breakins) and so web traffic will be distributed more thinly, although coporations with marketing resources might be able to get seen above the pack. With a larger audience, it certainly will be possible to have massive web traffic and potential web traffic. But getting traffic will be just as hard as it ever was, if not harder.

What conclusions can a person draw?

For me, at least, it implies that memberships are more important than web traffic and that it’s important to bundle community benefits beyond content for members. Prize eligibility and promotional possibilities are lures for potential members as is the ability to host original content (although that entails additional infrastructure costs). If one accepts the premise that content should have liberal licenses (or that controlling piracy is impossibility), it implies that more money should be spent on marketing and membership benefits than obtaining original content.

Actually though, one needs to define what profitability means. In this context it has several meanings.

First, sustainability. Can you make enough to pay for bandwidth and software?

Second, attracting enough premium content and customers to develop critical mass. Can a site pay for high-demand content?

Third, chance to realize potential. With a money cushion, a site can develop more functionality; an individual content creator can have more money to buy books/videos/tools.

Fourth, extra money. Maybe not enough to make a living out, but enough to say, ?this is worth my time to be doing.?

Fifth, financial independence. A content creator or community site might allow people to work on content full time.

Sixth, promotional benefits. If I don?t make any money from my book reviews, but if my publication credits impresses a future employer, that?s like money in the bank. Similarly, if Maud writes a book, she already has a builtin audience ready to appreciate her talent. Blogging is self-promotion.

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