The NYTimes recently brought up the notorious Web2.0 question — should we ever start an online business with the intention to make money? They pitted Twitter vs. Yammy, a new micro-blogging platform, that unlike Twitter is aimed exclusively at corporations and is charging for its use from the onset. Twitter currently makes no money at all, and is kept afloat by legion of really rich venture capital firms.
The argument for the Twitter’s strategy is rooted in the idea of “network effects”, where the real value of the company is reaped once the whole world is onboard, and anyone who isn’t might as well be on Mars. Twitter wants it to be a necessity for everyone to be part of its matrix; like finally getting internet for the home to send and receive emails, or getting a telephone line to have phone conversations, or joining facebook just to use it as the modern day Yellow Pages. With that kind of power, viable business models would stream in very quickly — monetizing would not be difficult. Hence, Twitter is focused on growth and is not even tempted to enable advertising on their blogs.
Should new online publications think this way too? Should web magazines focus on growth first and sell ads later?
Well, yes and no. The “stickiness” of an online publication like Huffington Post, Techcrunch, or even the NYTimes is a lot less than a blogging platform, although the comments section and community based approach that a lot of these websites are moving into helps create loyalty. The stickiness matters because if people can leave (i.e. stop going back) to the website too fast and easily, then there is less reason to focus on purely growth initially.
The second question is whether creating a “critical mass” helps a publication. Advertising dollars, espacially for Google ads, is rather linear and scalable. This means if 10 views gets you 1 cent, you might as well put up the ad in the first place even with such a low readership. Having a higher tranche of readers do mean that you can sell to higher paying advertisers, and can negotiate for better rates. Having a larger regular group of readers also help in profiling, hence helping to sell ads.
It also boils down to whether advertisers prefer quality or quantity of hits. Do advertisers prefer a good returning group of readers, or would rather sacrifice repeated hits for a higher volume of hits. A preference for quality–which would also mean more accurate profiling of each impression–means there is more of a case for publications to build a critical mass upfront. Hmm…does this matter at all?
The Daily Beast just launched with no advertising. I think they are definitely working towards a respectable readership before a publication of their weight (Tina Brown, no less) would want to approach advertisers.
How different is a blogging platform, where readers come in aily to be updated, different from a web newspaper? What are the business implications?
For one, with blogs, one has the luxury of asking more questions than answering them.
