Archive for the ‘RPM’ Tag

Making Money Through Advertising: Harder Than It Seems…

I seem to be reading a lot of articles recently on why internet services must be free. Everyone from Seth Godin to Fred Wilson makes the argument that free is the internet strategy de jour.

However, when most people think of providing a free service, most people like to fall back on one simple revenue model… sell advertising. However, building a sustainable business around internet advertising is harder than it seems.

According to some reasonable assumptions on page views and RPM (revenue-per-thousand page views), you need to find a pretty big audience before you’ve built yourself a health business. Let’s say you have a well-targeted website with an active base of users. If this is true, than a RPM of $10 is high, but reasonable. In order to build a US$25 million business, you will need over 208M page views per month. To put it in perspective, you need to be close to becoming one of comscore’s top 100 most visited sites… That’s a lot of people viewing a lot of content.

Key lesson – don’t get lazy and fall back on advertising. Get creative… if you’re smart enough to create a product that people find valuable, then your certainly smart enough to turn that value into cash.

P.S. – Lightspeed Venture Partners wrote an good article with some useful assumptions for building an ad-supported online business.

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