MediaMedia BuyingThe Advertising-Based Business Model That Works

The Advertising-Based Business Model That Works

Here's how to create a successful ad sponsored site, not! A hot new start-up has a great idea for a new web product or service that appeals to a wide range of users. It knows that users won't pay but that's OK - they'll make money selling advertising and then figure out some e-commerce plays. Forget to gather good audience data for advertisers, and the strong CPMs won't materialize.

In our last column, we promised a series to address the types of things that ad supported sites can do to provide its advertisers with deeper insights into site visitors and members.

We’re going to start at the very beginning by asking the first question that any ad supported site should address before spending a penny on product development: How can we create a site that will ultimately enable us to create a compelling audience for advertisers?

First, let’s take a look at how it’s too often done. A hot new start-up has a great idea for a new web product or service that will appeal to a wide range of users. They know their users won’t pay for the basic service but that’s OK – they’ll make their money selling advertising and then figure out some e-commerce plays that make sense.

Since it’s a great idea, our team gets its first round of funding and builds a great looking site. They cut a bunch of traffic deals, invest some serious marketing dollars and before you know it, page views are growing by leaps and bounds, the buzz is high, and everyone is feeling good.

Now it’s time to monetize those eyeballs and prove the model to the investors. Time to hire the sales team and let them do their stuff. Just one problem. Our founders, in their quest to build the best end user experience possible, forgot to design their site in a way that allows them to gather information about their audience that translates into meaningful insights for their real customer (e.g., the one who actually pays) – the advertiser. After all, everyone knows that users get turned off if you ask for too much information at registration, so better not to ask and focus on building traffic.

But without this information, we’re left with a great product and lots of traffic, but little useable information that points to a natural advertiser base, or defines targeted categories of users, or creates a compelling sales story for advertisers. Hmmm millions of generic page views a month in a market that is already glutted with undifferentiated inventory. Not a good scenario for high sell-through rates or strong CPMs.

Contrast this scenario with these examples of advertising-focused sites: A new calendaring site offers users the ability to opt into a range of programming that automatically populates their calendar with events of interest to them. A community site allows users to define their own communities or join existing communities within pre-selected categories. A news site offers users opt-in daily newsletters on the breaking news within selected categories.

In each situation, the site has engineered in the ability to create targeted inventory that is the basis for an attractive story for advertisers and high sell-through rates and CPMs. The moral? You can’t treat advertising considerations as afterthoughts if you expect to create a successful ad sponsored site.

More on this next week when we look at advertiser segmentation and how types of advertisers can be grouped for more effective selling.

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