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Popularity Might Not Be Enough
By DAN MITCHELL
LET’S say you wanted to build an advertising-supported online media business that took in $50 million a year in revenue. How many users would you have to attract to get there?
Probably too many for most people to even try, if the numbers run by Jeremy Liew, a venture capitalist at Lightspeed Venture Partners, are accurate. On his blog (lsvp.wordpress.com), Mr. Liew determined that even the type of site that can get the largest advertiser payments per user would have to be immensely popular before it made that kind of money.
The analysis is “sobering,” wrote Tim O’Reilly, the chief executive of O’Reilly Media, a publisher of computer books. “This may be why more entrepreneurs are going for low-investment sites that don’t need an exit but provide ‘lifestyle businesses’ for their owners,” he wrote on Radar, his company’s blog (radar.oreilly.com).
That is, rather than seek venture financing and hire a staff, it may be better for one or two people to create a relatively simple site — say, a hobbyist blog for guitar enthusiasts — and use a service like Google AdWords to, hopefully, make enough money to live on.
But to make $50 million with a big staff-produced content-rich guitar site, sponsored by, say, Fender and Gibson, a site would have to generate more than 200 million page views a month, Mr. Liew estimated.
A site aimed at a specific demographic, like teenagers or Asian-Americans, would need to generate 800 million page views a month, by Mr. Liew’s reckoning.
And for a general-interest site, the ad rates go even lower, so traffic would need to be much higher to generate $50 million — about four billion page views a month, which would put it in the top 10 of all the sites on the Web.
All of which is to say that even though advertisers are flocking online, there is still a long way to go before they start paying the kind of rates they pay to traditional media outlets.
There are other options, of course, including charging for subscriptions, or, as Mr. O’Reilly pointed out, aggregation. He noted how outfits like Weblogs Inc. and Gawker Media create multiple sites, “publishing blogs like they were books, with some expected to succeed and others to fail.” And independent sites can be brought together in a network, like FM Publishing, which sells ads for dozens of sites.
Stemming the Video Tide Online video may soon overwhelm the Internet, creating problems for Internet service providers and potentially for users. Help could come from new technology being developed for peer-to-peer networks, according to Wade Roush, writing for Technology Review (technologyreview.com).
I.S.P.’s are wary of peer-to-peer networks not only because of their use for piracy, but also because they hog bandwidth and turn users into distributors of content who don’t pay anything extra for the burdens they place on the system. But Mr. Roush examines new technologies that could make such networks more efficient and could allow I.S.P.’s to identify the biggest bandwidth users and charge them accordingly.
That second idea might make advocates of “network neutrality” a little nervous, since it would let I.S.P.’s favor some content providers over others. But Hui Zhang, the computer scientist at Carnegie Mellon University who developed the technology, says such concerns are overblown.
“Of course, we don’t want the service providers to dictate what they will carry on their infrastructure,” he said. “On the other hand, if P2P users benefit from transmitting and receiving more bits, the guys who are actually transporting those bits should be able to share in that.”
Super Suers It became even clearer this week that the Recording Industry Association of America isn’t overly worried about the public relations aspects of its fight against file-sharers. In one case, according to court papers, five big record companies are suing a Florida man who is largely paralyzed from a stroke (recordingindustryvspeople.blogspot.com). In another, record companies are suing a Georgia family who say they cannot possibly have downloaded any music because they don’t own a computer (vnunet.com).
