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Will consumers pay for online content or should I have an advertising-only based model?

Tuesday, 16 November 2010 | By Nick Crocker

I’ve got an idea for a content-based website but I’m unsure how much I can monetise it. Will consumers be prepared to pay for online content or should I have an advertising-only based model? When can online subscriptions work?


Consumers have shown a reluctance to pay for online content, with the exception of financial analysis and information.


The key to making an ad-supported business work is to identify a high value, clearly defined audience that advertisers want to target.


Say you start a celebrity gossip site, you might build traffic, but your audience is hard to define and easily found elsewhere, so you'll have trouble selling your inventory.


On the other hand, you might start a site for tips on parenting (with a community aspect built into the site). Here you have a specific audience which advertisers want to target. This is the kind of audience on which you can build a successful content-driven business.


A back-of-the-napkin calculation will lay out the task in front of you. Let's say you sell 100% of the inventory on your site for an average CPM (what it costs to show the ad to 1,000 visitors) of $10.


To make $1,000 you'll need to generate 100,000 page views. Let's assume 2.5 pages per unique visitor, and you have your target - 40,000 unique visitors to your website = $1,000 in your pocket.


If that makes financial sense, then maybe the ad-supported model will work.


An alternative might be to swap the CPM model and sell site sponsorship, so that certain advertisers have the run of your inventory for an extended period. Without past success in online publishing, this will be difficult.


As for online subscriptions, this is the question of the moment for many publishers. There's the paywall model, which has had mixed success for established brands, but I can't see this being a viable model for a start-up.


There are iPad apps, to try to bring in new revenue which again, have worked for the likes of Wired, but for a new start-up likely won't.


There's diversification, where a brand, like TechCrunch for example, leverages its audience to hold paid events. And there's the Monocle example, where an offline publication has a paid online element for premium content, as well as a store and Monocle branded products. This is the online publication as part of a portfolio model.


The key element is creating engaged, easily defined, passionate readers. If you can find 20,000 to 50,000 of these who are compelled to come back to you three to four times a week, you can probably build a profitable, online publishing business.


Otherwise, the field is wide open for someone to create a sustainable model for online content.