Where's the revenue model?

There are two kinds of online publishers in this world: those who depend on their advertisers for survival and those who depend on their readers.  

I was speaking with a publisher of a big media company at the Syndicate Conference in San Francisco and sharing my excitement over the Open Content session with the Washingtonpost.  His first question was, "Where's the revenue model?"  I was surprised by the question...not because I didn't have an answer but because that was his first question.  He didn't see that this was a good idea and threw out the time-tested dismissive challenge to new ideas, "That's fine, kid, but we've got mouths to feed here."

The concept that a publisher should do whatever possible to give his readers what they want is idealistic to him.  The revenue model is what rationalizes his decisions, not the wants and needs of his readers.  

Of course, you have no business if you don't have revenue.  And there were a lot of companies that were rewarded for not jumping into the late '90's dotcom madness when they stepped out of their bombshelters in 2003 with all their parts still functioning...including their old revenue streams.  It's understandable that someone leading a large business would think that an idea whose revenue model is unproven should be considered cautiously.  Nobody wants to be the fall guy when this next bubble bursts.

But the economics don't add up for the old school revenue-ists.  There are more and more people creating content and publishing it on the Internet every day.  Groups of people are forming around issues and topics spontaneously.  More and more tools are learning how to aggregate content and facilitate dialog amongst people.  The supply of information and sources for it is far too great to satiate the demand.  And even if the supply of really really good and highly relevant information is low in your little market, you command less and less ownership of your audience's attention.  

Advertisers get this.  They know they have to distribute their marketing dollars widely.  They're aware that it makes more sense to spend more money for custom programs at niche sites that yield better leads, but they also know that they can always spend their money elsewhere to hit their targets.

So, the revenue-ists are stuck with web sites that have a revenue cap.  You can't raise your rates, because your advertisers will go elsewhere and still achieve their goals.  Your traffic is inching up a little each month, but you're spending more and more to acquire it.  And that means your margins are falling.  

Ugh.  How do we get out of this death spiral?  Call in the idealists! 

The revenue models are all around you, and you'll kick yourself for not starting sooner when it begins working for you.  What do the following models all have in common?
  • McDonald's Franchises
  • Wintel (Windows and Intel)
  • Google AdSense
Yes, I'm suggesting that you OEM your core assets to benefit other businesses.  Make it self-serve and make it useful.  It doesn't have to be free, but the cost to your customers is not cash.  It's branding, links, share of revenue, and customers.  Tim O'Reilly wrote a great post defining this market.  He said that data was the new 'Intel Inside'.  You have data.  Let people put it inside their products and share the benefits.

In nearly every meeting I've had at Yahoo!, the driving force behind every decision is the question, "What do users want?"  People often disagree on the answer, but Yahoo! knows that you lose when users aren't satisfied.  Somebody else will satisfy them, and they will leave. 

It's not idealistic.  It's just smart.

Tags:  models, advertising, web2


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