To E or Not to E

www.cio.com |  Business

IN THE BEGINNING, website owners convinced themselves that it was just fine to give products away for free. As long as they lured eyeballs with compelling content or sticky apps, the theory went, they'd rake in the dough with ad revenue. Now, five years later, when having a website is no longer a novelty and venture capital money is no longer flowing freely, the give-it-away business model has been called into question.

And while many industries' webmasters have long ago accepted that advertising won't keep their sites in the black, the publishing industry still relies on it. The problem is, only those publications with big money readers and legions of sales staffs are winning. The rest are either scaling down their operations or creating sites that expand on (and stray from) their publications' editorial missions. Cincinnati Magazine is one example of a publication that must decide how it will enter an arena that will likely produce very little monetary returns and present a product that is probably quite unlike its print version. Should the magazine ignore the Web and save the cash, or hop on and reach a new audience while better serving its loyal readers?

Cincinnati Weighs Its Options

Cincinnati Magazine is the quintessential city guide. Locals read it to stay in tune to seasonal events, changes in the housing market and, of course, the occasional city scandal. But a Cincinnatian looking for a southern Ohio jazz club to hit on Thursday night doesn't scour the publication's calendar of events on www.cincinnatimagazine.com. The website doesn't exist.

Cincinnati's publisher, Dianne Bohmer, says they've simply been too busy to invest time and money in a business plan that seems unlikely to generate much revenue. The monthly publication brings in just under $5 million each year and employs a tight-knit staff of 23 editorial, advertising, finance, clerical and support personnel. Bohmer knows that to establish a Web presence she'll have to add more staff and dig into the magazine's coffers. She also knows there's no pot of gold on the other side of the screen.

"Magazines I know that could once sell banner ads for $700 are now selling them for $140," says Bohmer. "So when you make a business plan based on $700 ads and it's brought down to $140, you have a lot of compensating to do.... It's hard to get excited about a business plan that isn't a moneymaker."

Industry observers are also losing faith in the ad revenue business model. "Rates are coming down for Web advertising, and people are responding less to Web ads," says Dan O'Brien, a senior analyst for Forrester Research in Cambridge, Mass. "Advertising has become a tough model to make work. Everybody wants to be the next Yahoo, but that may be yesterday's success."

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