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AM: FW: Why Advertising Isn't Enough

To:     "'ad-market@netpreneur.org'" <ad-market@netpreneur.org>
Subject:     AM: FW: Why Advertising Isn't Enough
From:     Mitch Arnowitz <marnowitz@morino.org>
Date:     Tue, 10 Jun 1997 16:50:22 -0400

All:

With Paul's permission, I am passing along a recent 
post- 


Paul Albert wrote:

>More Fuel for Thought

> I've found the Internet advertising list 
> (mailto:i-advertising@groupserver.revnet.com)
> to be an extremely useful source of information.  
> Below is a recent post from that list that I think 
> people on this list could find useful in 
> considering Internet ventures.

> Regards,

>  -- Paul Albert
>     President, RouteLink
>     "Helping America Run"

From: Adam Boettiger, mailto:ab@mmgco.com (list moderator)

I recently finished putting out some great information by Mark
Welch, who spoke at Web Advertising 97, to the Web Advertising '97
mailing list.   For those of you that don't know of it, it
was/is a temporary list that I set up to report by email about
the conference held in Monterey, CA.  If you missed the reports,
they are on the web at: http://www.mmgco.com/webad97/ .

Anyhow, Mark wrote an insightful review of Ad Networks and
Management agencies, and I wanted to see what your thoughts were
on the big question:  Should a site farm the management of
the selling of ads on their site to an outside company?
If so, why, other than convenience?  What choice do the
smaller sites have that don't have one million visitors per
month?

As Vice President of Business Development for Multimedia 
Marketing Group http://www.mmgco.com/ , it is my job to evaluate
new business and prepare online marketing campaigns for our
clients.   One of the first questions I ask them when conducting
an initial qualification interview is: "What is the revenue model
for your site?" (How will you make money from it?)

Far too often the first words out of peoples' mouths are:
"We're going to sell banner advertising on our site."
--This is their sole revenue model, and they haven't launched
the site yet...

I am of the strong opinion that NO ONE should list Web site
advertising as their sole revenue-generating model, unless you
are one of the Top Ten trafficked sites on the Internet,
such as Netscape, Yahoo, etc.   If you are considering getting
on the Web only to sell advertising, DON'T.  Why?

I'll tell you why.   In order to simply pay for your Web site
design and monthly fees, let's say you spent $10K on designing the
site, $50/month ($600/yr) to your hosting company, minimum of $200
for the ad rotation software -- you'd have to sell 550,000
banner exposures just to break even.   This is assuming that
you are paid 2 cents per exposure of a banner on your site.

Now let's add the marketing campaign.  What?  You mean you 
have to promote your site if you want people to come to it?

You HAVE to have a marketing campaign or you won't have traffic
to your site.  If you don't have traffic to your site, you won't 
be able to sell banner ads.  If you aren't able to sell banner ads, 
you won't be able to pay back the web site designer.  
(Remember: Our revenue model here is ONLY selling ads on our web site.)

Marketing campaigns run an average of $1K/month minimum with
no ad buys, so add on another $12,000/year, and now in addition
to the 550,000 banner exposures you have to sell to pay for your
site, you now have to sell 600,000 more per year to pay for
an ongoing marketing campaign.

So, over a period of a year, if our site's revenue-generating
model is ONLY the sale of advertising on our site, we need to sell
One million, one hundred and fifty thousand banner exposures
on our site just to break even.   This is assuming, of course,
that our staff works for free. <g>

So what's my point?  My point is, THINK before you LEAP.
YES, you CAN make some money from selling ads on your site,
especially if your site targets a niche market and you can
charge a higher CPM.   But the point is that it is unrealistic
to think that the traffic to your site will go from zero
to one million something in 3 months or even a year - unless
you buy advertising and conduct an extremely large online and
offline campaign and your site is the hottest thing since
flying toasters.   Therefore, I can conclude that it is
unrealistic for any new site to expect to use the sale
of banner advertising on their site as the sole means of
revenue for their business.

AB
Adam Boettiger, Moderator, I-Advertising Digest



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