posted on May 19, 2000 03:38:25 PM new
After all the brouhaha about Paypal, I got to wondering...can AW actually survive solely on its ads? I'm assuming Appraisals just about pays for itself. Every service appears to be free. So where's the money coming from?
posted on May 19, 2000 03:46:25 PM new
I'll speculate..
They don't {make any money}.
They're like a lot of web sites who have a model of building traffic first, building hang time second, and building profits third.
The good news for AW is that they're succeeding well in the first category, they're succeeding in the second, and the site doesn't cost them much to keep around, particularly when compared to sites which lose money on every user interaction, such as PayPal or CDNow.
posted on May 19, 2000 04:04:48 PM new
Many .coms do not make money. In fact amongst the publicly traded ones, the stock price jumps higher when they lose less than the analysts predict. The future is what AW and the others are counting on.
buyhigh
posted on May 19, 2000 04:37:52 PM new
My guess: they will sell it out some big name company and then retire in Montana. Don't ask me how that big name company will make money from AW.
posted on May 19, 2000 05:19:57 PM new
The poster was correct that the first task is to build an audience. AW has done so.
If there is an error it is the presumption that one can't make money with an advertising model. That is not necessarily true.
Compare this with a traditional niche publisher such as a magazine. Sure they get $5.95 for their rag but compared to a web site, they've got tremendous costs for printing and distribution. It takes a lot of "energy" to move 100,000 magazines from coast to coast.
Also, don't kid yourself. The cost of having "Auctionwatch" on your computer is far from "free." First, there's the cost of the computer and then the monthly ISP cost.
Add to that the cost of your time to find AW and download and consume its content. Their costs, in comparison, are controllable and largely fixed. They've got salaries and servers and commissions to pay agencies and their ad sales staff.
Let me be clear. I do not know AW's current metrics so I'll just pull a figure out of the air that is comparatively reasonable. Lets say that they have potential inventory of 10,000,000 ads per month. I'll say they've got some bang-up salesmen who can make sales at $20 a thousand which is actually a little bit below the average CPM for online media. Given those metrics, AW could generate $200,000 a month in cash flow.
I'll then only assume they can generate this cash flow with the efforts of 30 employees who earn an AVERAGE of $5,000/mo. each, ($150,000). Severs may be another $10,000 a month and office space, electricity, telephones, FedEX, outside services, etc. may another $20,000 a month.
If they'd are able to attain those metrics, they'd have a net profit of $20,000 a month or about a 10 percent profit margin on sales of $2.4 million ... which is not bad.
I present this not in an effort to describe what AW is doing, but rather to simply show that an advertising model is not an automatically a losing proposition.
How are they doing? I have no idea. They could be doing far better; or worse than this.
Although the "going rate" for 1000 page views is touted to be $30, I've read that the ad agencies themselves admit that most of their clients are only charged $10 per 1,000 page views on which their banner is located.
If you click on this link, and scroll down, you'll find that John C. Dvorak's interview contains remarks which substantiate your contentions; however, the 1.5 million page views would be substantially higher, nowadays, I presume.
John C. Dvorak |
RealComputing | Archives
"DVORAK: Right. And how much does that cost?
SALES: It's actually a free service.
DVORAK: Okay. And you expect to make money how?
SALES: Off the image hosting? Not at all. The image hosting to us is really a marketing tool, in that each image that's hosted by us has our banner immediately below the image.
DVORAK: Okay. So you're getting free advertising with this.
SALES: Exactly. We get about 1.5 million impressions of our banner each day on various on-line auction sites on the web."
posted on June 11, 2000 01:56:31 PM new
Also, last I read AW had either 60 or 63 employees, although I should mention that its majority owner was recently reported to have laid off staff. I don't know if CMGI's own employees ever staffed any positions at AW; for whereas Alta Vista, owned by CMGI, also laid off workers, and was mentioned in the news article, AW was not.
posted on June 11, 2000 02:35:00 PM new
Didn't everyone send in the $250 we were supposed to pay AW by March 31 of this year?
Remember? The phone call that came in February telling AW users to send the money to corporate headquarters in Tallahassee? Didn't anyone else get that call? Hmmmmm...
I did send in my contribution to Tallahassee but it came back "addressee unknown." I declined to invest another 32 cents for the San Jose address
Radh:
In the above post, I didn't mean to suggest that the model presented was accurate in terms of AW but rather was just a general description of how a pub could be advertising supported.
I think your observation that AW is getting a lot of "free advertising" via their image hosting is valid. That simply suggests that those efforts have a dollar value in terms of monies not expended.
Also consider AW's efforts to find new revenue streams such as appraisals in the process. Also figure that they offer items such as the "next card" banners that pay "affliates" running those ads, $20 for each signup.
I also suspect they are looking for other ways to leverage the franchise they've developed. Indeed, I wouldn't be surprised to see other premium (pay per use) services to be introduced.
Again, let me emphasize I have no inside knowledge and my observations are pure conjecture.
posted on June 11, 2000 06:48:48 PM new
Pat -- that wasn't my observation about the free advertising; that was Rodrigo Sales answer to a question posed by interviewer Dvorak, "And you expect to make money how?"
posted on September 11, 2000 09:49:57 AM new CMGI pulls horns, drops plans for global fund (Reuters Securities)
"CMGI Inc., until recently the star among Internet investment firms, Thursday pulled the plug on a highly touted $1.5 billion deal to form an international Web venture fund and said it would whittle its small army of operating units down to half a dozen or so."
