Barrett’s Briefing: Eyeballs Or Money?
by Richard Barrett
Back in the late 20th century the business model for dot-com businesses was “Attract the eyeballs (website visitors), and the business will follow.”
Many businesses executed that model, such as AOL, FlyFishing and an embarrassing host of others, almost all gone by now.
Over time the model of attracting eyeballs simplified to Google—just Google.
Since then Google has created an effective advertising model for websites that attract eyeballs. It’s called AdSense, and the model is very simple.
Attract a large number of visitors (eyeballs) and Google will monetize those visitors through its AdSense advertising program. Google selects ads that match the profile of visitors to your website, posts the ads on your site and shares a portion of the ad revenue with you.
Google keeps all the control and can limit your revenue.
Social networks and blogs are perhaps the poster children for this Adsense business. Social networks such as LinkedIn, Facebook, and MySpace generate revenue primarily from advertising.
The community creates the content that attracts the eyeballs, and the eyeballs attract the advertisers.
Blogs are only a little different. For a blog the author creates the content, rather than the community. But after this, the model is the same. The content attracts the eyeballs, and the eyeballs attract the advertisers.
Write a compelling blog and the eyeballs/advertisers will come.
Unfortunately this is a model for a lifestyle business, not a long-term business. Over time the competition increases and Google lowers the payout, so the revenue decreases.
Is there an alternative to the model of ever-declining revenue from Google Adsense?
Yes, create some old-fashioned value from the data itself.
The Data is the Business
Last week I discussed the concept of creating business value by collecting and selling data. That is a good alternative to the Adsense advertising model:
Create value in the data.
The benefits of a data sales business model are compelling:
- Low start-up costs. Use the cloud for your computing and storage. Google and others offer free access for applications with small bandwidth demand.
- Easily scalable. Add storage as the database grows. Add bandwidth as customer demand grows.
- No delivery cost – the user shops and selects and takes delivery online.
- Minimal cost of goods sold (COGS). This really depends upon your data collection model.
- Immediate global access and delivery.
- Captures the value of the “long tail.”
- Relatively easy to protect. Compared with code, a database is easy to protect.
- Even the meta-data (data about the data in the database, e.g. statistics) has value. Think of the top 10 lists, such as the “most popular search phrases” that Google publishes.
But if this business model is so good, why isn’t everyone starting a data sales business? Maybe they are…
Join me next week when we discuss what type of data sells.
See you all then.
March 31st, 2009 at 1:15 pm
interesting! the “data is the business” article was definitely compelling, on a number of levels, and i see how most established companies could use it to complement their existing revenue models. what would the data be for a blog, though? (apart from the content itself, which is a somewhat different thing than data.)
April 7th, 2009 at 5:31 am
[…] the two previous posts we explored how “the data is the business.” For many information age businesses, the […]
April 7th, 2009 at 3:53 pm
Very provocative question, Ryan. As a blogger myself, I wonder about the data in a blog. I’m rambling here, so allow me some freedom to explore. A database contains thousands / millions of individual data points. One value of a database is the ability to extract the trends hidden in its data points. One process might be:
Mine data to produce information (trends). “What’s happening.”
Mine information to produce wisdom. “Why is it happening?”
Data -> Information -> Wisdom
Data can be distilled into information, which can be further distilled into wisdom.
A database contains only data. That data “ore” must be mined and refined to produce information and wisdom.
Blogs are supposed to contain information and wisdom, so maybe they do not fit into a database, at least not directly. But maybe someone wiser than me will have a better answer.