As some of you may know I worked for an online advertising company - Bravenet Web Services and its affiliate Bravenet Media Network (which has since dropped the redundant Network).

My job at the outset was centered around maintaining spreadsheets which monitored the revenue and profitability of what amounted to a proof of concept that was put into full-time service with three dedicated staffers including the senior-most employee.

Reading the O’Reilly radar reminded me of the simple, and bleak, economic reality that seemed to be either ignored or denied - generating serious revenue is damned hard exclusively in online marketing.

Tim O’Reilly references a blog maintained by a successful VC called Lightspeed Venture Capitals regarding the economics of online marketing and furthers it with his own comments regarding some basic Web economics phenomena.

The premise of Jeremy Liew’s article is answering the question, “What kind of resources does it take to generate serious cash in online marketing?” Serious cash to Jeremy Liew is $50 million USD in annual revenue.

Okay - that is serious cash, no argument here. But most businesses of say 45 - 65 employees in the tech sector would be glad to take home $4 or $5 million in profit. So either Mr. Liew has very VERY high operating costs or just expects very serious revenue.

$50 million, however, is the magic number for IPO and for corporate acquisition (assuming they don’t want your assets.) As any student of Benjamin Graham would know
In any case - Liew realisitically asserts that a company generating a whopping $1 RPM (that’s revenue per thousand views, through whatever mechanism you like - Cost Per Action (CPA), Cost Per View (CPV), Cost Per Impression (CPM) etc.) Which are usually general interest, general community sites (MySpaceMonster, etc) communications tools (UndeadMail, and JiggaMail) with no real demographic focus would need just over 4 billion page views a month - which is a stretch even for Godgle. Getting $1 CPM average on general traffic is tough. Getting above a quarter was tough a year ago and I imagine it’s just gotten worse from there.

So, next rung we have the slightly more premium but still consumer focused site - the vertically organized portal or *cringe*… vortal(”vortal” & “incentivise” are two non-words that should be stricken from humanity - does incent not have enough syllables?) These topical sites can usually get in the neighbourhood of $5 RPM. Making for 800 million page views a month your minimum at that rate.

The next rung up are the premium sites, these are usually either highly concentrated (read: captive or known-professional) audience or more commonly sites about topics with deep marketing pockets (movies, cars, travel, wangs and plastic surgery) and can get into the $20 RPM territory especially if they can launch parallel campaigns or about 200 thousand page views.

Mr. Liew leaves it at that to make us consternated as contemporary Venture Capitalists and to reassess the interlogistics of our current vision to leverage our millions on some upstart interpipe web media network .com

The reality is that although it is hard to make serious cash it’s not as hard as Mr. Liew describes it.

Firstly he cites those RPMs, those are accurate as far as total revenue an average page view retains. A good chunk of my and others’ jobs at Bravenet was figuring out whether 1 ad was twice as effective of each of 2 parallel ads, and so on. So keeping up on optimizing that might garner you an extra 8 - 13%

So let’s focus on the second tier, as in actuality this is the easier of the tiers to develop. The first usually requires a) expensive hardware to handle those kinds of traffic volumes and b) development of some sort of tool system for people to use to generate your content (a profile system, dating system, webmaster tools etc). These are costly, cumbersome and further delay your time to market. Not to mention your profit centre (traffic) also becomes your primary cost driver (server load and tool expansion).

The third tier is difficult for a number of reasons. Firstly, the market is reasonably saturated. There’s a tonne of movie sites already out there (though I haven’t seem my MovieMatchMaker idea yet) there’s buckets of travelling sites and others. Secondly, such sites are usually difficult to develop because they are complicated by things like entangling copyright laws, content generation costs, and often require domain expertise your average Mum-and-Pop-Webmaster lacks. Third tier sites are usually the products of established corporate developers with the resources and manpower to invest in what is essentially a moneysink. Tier one sites are usually the product of reclusive teenagers who spend far too much time tinkering with Coldfusion and desperately need to get laid so they develop software to help them meet chicks.

So, $5 RPM - 800 thousand page views a month. That’s a challenge for a single site, but not a challenge for say, 12 sites. Assuming a 8% reduction in time-to-market per iteration, with say a 15% inefficiency each iteration and an initial development time of 5 months. You could have your 800 thousand page views in 4 and a quarter years, and you’d be making revenue in 4 months.

Now, I could whip out the calculus regarding acceleration of web development, release of each site, acceleration of site traffic - adjust for probability of random site failure or downage etc (all of those figures are easily and accurately obtained) but the reality is, assuming you start on Jan 1st of the year, and your first site is up and running June 1st, you can expect to be getting that 66 000 pages view (1/12th of 800 thousand) within the calendar year assuming you’ve picked your demographic properly and don’t offer garbage (and even then, you might succeed despite yourself).

So the numbers aren’t as scary as Mr. Liew points out. What he fails to acknowledge, which O’Reilly points is that the long-tail effect is a good thing for publishers and a pain in the ass for marketers and Venture Capitalists.

2nd tier sites don’t require massive infusions of cash (read: shares handed over to VCs) to get started because their staffing is minimal (5 webmonkeys, 3 content developers, 1 manager/owner, 1 sys-admin, 1 sales person and a KPMG agent walk into a bar and someone says “Hey, there goes a demographically targeted web site development crew!”)

However, 2nd tier sites fail very VERY frequently. One must treat them much like books (Gawker media does that by buying into established bloggers and fostering new ones, hoping the law of averages will give them more hits than misses while their revenue drivers keep up the bottom-line) and they’re always a gamble - but they’re a SMALL gamble.

So, if you’re interested in starting an online media co. it’s not rocket surgery but don’t quit your day job yet.

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In part to just alert people who aren’t huge nerds and to add to the Google pile against Mr. Thompson.

Here is a man that has made his living being a jackass that everyone detests - even people who he apparently supports. Jack Thompson is the spokesman against big-video game. That’s right folks, he fancies himself the champion of a morally (perhaps divinely) inspired cause against the greedy and corrupt “old boys club” that is video games.

The hilarity of this is beyond pathetic - this is like taking up a cause against Hollywood, not just an issue or perhaps public disrespect, but straight-up crusading against an entire industry. Thompson, in his pathetically simple reasoning sees video game publishers as analogous to the Phillip-Morris company - filling our media with lies about the effects and consequences of their product. In this case we’re not talking an addictive, cancer-causing imbibed stick of dried plants - in which, I might note, we are still free to partake.

No, my gentle reader(s) Thompson wants to dismantle the edifice of the massive and utterly despicable world of computer entertainment. Thompson, in some fantastic inspiration (likely brought about at some born-again Christian rally, but I shan’t disparage the born-agains by association with this particularly loathsome man) has decided that America’s, nay the WORLD’s ills are brought about by video games.

Thompson believes that these “simulations” (last I checked there’s a exceedingly TINY market for simulations) are teaching children to become homicidal, fornicating, drug-using lunatics hell-bent on amassing huge quantities of material wealth and destroying his proud nation through moral decay (or some other hysterically romanticized version of what has already been happening for nearly a century in the US.)

To mention that Thompson is a lawyer would be discrediting to the profession (so much so that Jack had to sue the Bar Association of Florida - and of course lost). Come to think, of any suit which he is solely responsible I am unaware of even a MARGINAL victory for this man - any history I’ve read usually amounts to the judge treating his docket entry like the Sunday funnies and turfing his broke-ass on the curb.

Thompson is suing Take-Two interactive in some vain attempt to teach video gamers a lesson. Really what it is is that Take-Two stood up to Thompson, openly mocking him and summarily suing him for what is blatantly abusive use of the legal system. Unfortunately he cannot be disbarred for idiocy, but one would hope that some vigilant and inscrutable justice would cast Mr. Thompson into insurmountable debt so as to rid the courts of his inane nonsense.

The issue, as people of reason and intelligence have pointed out is that the gaming industry does have some moral obligation (by way of their ability) to lead young people in a way that is constructive and helpful to society. So far, job done. I dare anyone to find the smartest, say 10% of kids in a school and find that a majority of them DO NOT play video games. Now, take the bottom 10% of performers and do the same. This is not a CAUSE relationship, this is a corrolation. It has as much to do with income levels as anything else, but the reality is that video games hold little effect on the vast majority of kids by way of it being A) a solitary activity by and large for a group of people who learn their lessons almost entirely in a social context B) being so common place that discussion of the subject matter is common place, giving kids the appropriate context for the dynamic-fiction they play.

Thompson has furthered his claims of accusing Mike Krahliuk and Jerry Holkins, two suburban fathers who are avid video gamers and also happen to lead MANY legions of fans by way of the webcoming Penny Arcade, of racketeering and conspiracy to suppress Jack Thompson’s rights (I went to PAX, one forgets it was basically two guys holding a party for themselves - 30,000 people!)

When envisioning Thompson, it is difficult not to conjure images of some chitinous skinned sallow-eyed insectoid man. His lidless stare darting back and forth and his mouth always twitching and moving, his tongue darting feverishly keeping his lips ever moist.

It is worth noting that this was not the first time I’ve watched Jack “Wormtongue” Thompson in his masturbatory efforts in legal process. This was the man who attempted to stifle the career of 2 Live Crew, a rather notorious rap group who established a protective precedent for all rappers everywhere (Mr. Mathers you owe them your thanks). Jello Biafra, himself a corollary to the proceedings was a spokesman for their efforts (Jello Biafra was the lead singer to the Dead Kennedys and is an avid lecturer, political activist and film-maker) and my Biafra fandom introduced me to the situation.

The funniest thing about the whole debacle was that Thompson was under the impression he had “won”. 2 Live Crew’s album sales sagged and bottomed-out. This was the work of Thompson’s efforts to erode the band’s fame and had, of course, nothing to do with the quixotic tastes of the youth fanbase that snatched up the recordings. At least, this is the explanation Thompson provides.

This is also a man who tried to sue JANET RENO! (Yes, the Attorney General of the United States). For what? Here’s the kicker…BATTERY! Yes, Thompson in what amounts to quite possibly the most pathetic “rat out” attempt handed Reno a paper that had check marks asking if she were homosexual, heterosexual or bisexual. She placed her hand on his shoulder and said, “I’m only interested in virile men, that’s why I’m not interested in you.” Thompson replied by crying under his desk for days and concocted a plan to sue Janet Reno for battery.
Douche bag does not begin to describe this man - The Howard should get in on this.

One can sincerely hope that some shrewd judge delves to the very bedrock of this man’s pocket books and he is left homeless - his wife divorcing him after such pathetic stunts fail to pay off and his

Also, the Republican party needs to kick this man out - anyone of reason, even conservative reason, needs to exlude this man from anything that does not involve him shoveling human waste for the remainder of his years.

In case Mr. Thompson is reading this, I fie you. You are a disgrace and a punchline, you will forever be remembered as nothing more than an ineffectual windbag.

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