Tuesday, August 26, 2008

Website Economics

The web has certainly changed my world. Our websites, including our law firm site and our traffic court site, are the main drivers for our business.

There are a bunch of websites out there that seem more successful, yet apparently struggle. I just got an e-mail from one where I'm a "member." The site gets over a million page views a month, and is in the ballpark of 500K unique visitors a month. That's about five times our traffic court directory site. It's within the top 50,000 websites on Alexa.com, which impresses me anyway.

So this e-mail surprised me a bit:
We're still in the same month when we faced, at it's beginning, running out of funds to pay the bills. We are always close to the edge. I'm hoping you'll look at this news and seriously consider just how well we're doing our job -- all of us -- our 40 editors, our 15,000 members. And I'm hoping you'll send in a contribution to support [us], or, even better, sign up for a monthly automatic contribution subscription (cancellable at any time.)

It's amazing that a site could be that successful and still struggle economically. As a guess, let's say they make $0.10 per thousand pageviews (an industry standard measure is "cpm", or cost per thousand). I've read the average is a little higher, but 10 cents is easier to work with. So a million pageviews a month adds up to only $100 per month in revenue. Even at a cpm of $1, that'd be only $1000/month.

The secret to success on the web is not just pageviews, but the relevance of the pageviews to a topic and the value of that topic. So town-court.com, which has less than 200K pageviews a month, generates more revenue. And redlichlaw.com, which gets less than 20K pageviews a month, generates even more revenue.

Apply this logic to a celebrity fan site, like www.miley-cyrus.com. I chose this one over sites for Britney and Paris because this one has a higher Alexa ranking, at around 72,000. Here's the economics question -- What advertiser would benefit from ads on this site?

For a law-related site, you can see that lawyers would be interested in advertising. For town-court.com, someone who searched for information about a court might be interested in hiring a lawyer. Similarly, a car-related site like Edmunds.com (one of my favorites) probably does well because the advertising proposition is clearer. Someone looking at that site is probably interested in buying a car, so car companies advertise to people viewing those pages.

But what does a Miley Cyrus fan want to buy? I see ads for Sears (specifically referencing "back to school" which makes sense for this audience at this time of year), some kind of Hannah Montana quiz (that can't make much money) and some diet nonsense.

There's some webonomics for ya!


Anonymous said...

I think this is an excellent post; especially for new Internet entrepreneurs in general. The more targeted your website, the more valuable (assuming you can still generate enough traffic to make it worthwhile).

Nice website and overall Internet marketing strategy.

Good luck,

Anonymous said...

using Alexa figures to compare is terribly misleading. Alexa only records hits from people that have Alexa tool bars. Who in hell needs or wants an Alexa tool bar that carries adware. Dumb dumb dumb. Those Alexa figures really mean nothing except

Unknown said...

Anonymous is incorrect. Alexa changed its ranking system a few months ago.