Startup Internet Publishing Business Models
Internet businesses are finally profitable. In some cases, Internet companies are wildly profitable with operating margins of 35%. It's not just Google that has scaled. 10 years ago, Internet companies went public without revenue. Now, companies such as OpenTable are at 15% + operating margins just a year after IPO. It's not just Internet platform companies that achieve great scale. 24/7 Wall Street believes that Gawker keeps over 50% of its revenue as operating income.
The key to publishing economics is securing a critical mass of size, quality, and engagement of an audience that is built and served affordably. The bottom line: it's easy to start an Internet publishing business, but difficult to scale. Ultimately, those publishers that can surpass a million monthly unqiues have a good opportunity to scale a profitable entity. Below the million audience threshold, you'll need to decide how much capital to commit to growing your blog.
Internet Publishing Economics – Audience
- Large traditional publishers are finally reaching large audiences including the New York Times (32.5 million uniques), The Tribune (24.7 million uniques), USA Today (16.7 million uniques), and The Washington Post (16.7 million uniques) in May 2010 according to ComScore.
- On the smaller side, 1 million unique is typically seen as a critical milestone for aspiring publishers. Even smaller than that, it's difficult to garner any advertiser attention at less than 200,000 to 400,000 monthly unique users.
Internet Publishing Economics – Revenue
- Internet publishers have traditionally received the bulk of their revenue (often 80% of total revenue) from advertising.
- For established Internet publishers, I have generally seen annual revenue per user of $2 to $5. Occasionally, for strong brands and special audiences, that has stretched towards $10. For less established Internet publishers, it might be difficult to get to $2 initially, especially if you rely on ad networks while you ramp up your user base and sales efforts.
- Typical CPMs (price per thousand ad impressions) are in the $8 to $10 range, skewing upwards to $20 for premium, targeted advertising opportunities, and all the way down to $1 to $2 for run-of-site ad network impressions that are un-targeted. There are always outliers, but this should serve as a good reference for typical publishers.
Bootstrapping a Startup
- Let's say that you are leading an Internet publishing startup and your first milestone is to get to 200,000 monthly unique users. At this point, your annual revenue run-rate could be $400,000 if you are able to attract $2 in annual revenue per unique user. As a check, let's assume that you are only able to secure an average CPM of $5 since you are in growth mode. Assuming 2 ads per page, that means that you'd need 40 million page views at 100% sell-out over the course of the full year. That's 3.3 million page views per month or the equivalent of 16.7 page views per unique user. This compares to Gawker, Mashable, and MacRumors which are all closer to 8 – 10 page views per unique user per month.
Internet Publishing Economics – Expenses...
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