A Business Perspective

nostrilshumorousInternet and Web Development

Nov 18, 2013 (3 years and 8 months ago)

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Jeffrey S. Klein


A

Business Perspective

USC Boot Camp

May 20, 2010

Follow The Money




Content is King, right



Wrong



CASH

IS KING


Agenda


Basics of the Business


Strategy


Budgeting


Revenue


Selling advertising


Other ways to generate dollars


Events


Expenses


Sustainability


Profit, or, can I quit

my day job


Raising money and exiting the business



Basics


The old deal:


For consumers, you bring us information for free or
low
-
cost and we’ll look at your advertising


For advertisers, you bring us audience and we’ll pay
you for reaching them


The new deal (still unclear but…)


You bring information
relevant to me
when and where
I need or want it


You bring us eyeballs and we’ll pay you if we get
something from them


Unclear if the economics will work, so new funding
approaches will be necessary


Strategy


Define your market


Define your target audience


Competitive Landscape


Pricing approaches


Set goals and milestones


To partner or not


Exit Strategy

Budgets


Why are they important?


Sets a goal and a pathway


Allows

you to track performance


Helps eliminate surprises


You can only manage it if you measure it


Budgets are for you, not your CPA


Bu
dgeting/Forecasting will help you
understand your business


NUMBERS tell a story. Don’t miss it

Revenue


Where does the money come from


Advertisers or Readers


User Pay


Content must be unique


And have financial value


See the world of B2B niche


Online Training


Advertising


Impressions, clicks, sponsorships


Leads


Webinars, virtual trade shows


Directories


Events (user pay and sponsor

pay)


Affiliate programs (e.g., Amazon books)


Text Links

Sample Revenue Forecast

Source: http://newsinnovation.com/models/

Large Blog P & L

Medium Blog
P & L

Revenues















Year 1

Year 2

Year 3



Year 1

Year 2

Year 3

Advertising Revenues



Banner Advertising


$ 129,730


$ 273,230


$ 338,466




$ 74,844


$ 184,410


$ 250,716

Contextual Advertising


$ 3,538


$ 7,452


$ 9,231




$ 2,041


$ 5,029


$ 6,838

Ecommerce/Affiliate Rev


$ 6,825


$ 22,995


$ 39,570




$ 3,938


$ 13,266


$ 22,829

Events


$ 2,400


$ 7,200


$ 8,400




$ 1,800


$ 4,800


$ 7,200



Revenue before Operating Expenses


$ 142,493


$ 310,877


$ 395,667

#


$ 82,623


$ 207,506


$ 287,582



Metrics Drive Projections



Year 1

Year 2

Year 3

Overall Metrowide Market

Total # of Adults 18+ (Metrowide)


5,000,000


5,000,000


5,000,000

% of these who are online users

80%

80%

80%

Total # of Adults 18+/Online (Metrowide)


4,000,000


4,000,000


4,000,000

Submarkets

Coverage Area
-

Large Blog (Population = 60K)

% of Total Living in Large (Population = 60K)

54%

54%

54%

Total # of People living in Large Submarkets


2,700,000


2,700,000


2,700,000

# of areas with Given Population


45


45


45

Unique Visitors & Page Views

% of these who are Large Blog users

35%

49%

60%

Beginning UV


-


Ending UV


945,000


1,323,000


1,620,000

UV/Blog


21,000


29,400


36,000

Page Views/User/Mo.

12

12

12

Total Monthly PVs
-
Hyperlocal Blog (All Blogs in each mkt. size)


11,340,000


15,876,000


19,440,000

Total Monthly PVs/Blog


252,000


317,520


388,800

# of Ad Positions/Page

Avails Per Page


Av. STR

# of Sold Units/Pg

Large Hyperlocal/Vertical Blog

12

55%


7

Contextual Ads (Google, e.g.)

# of Ads per Page

3

3

3

CPC


$ 0.20


$ 0.20


$ 0.20

CTR

0.36%

0.36%

0.36%

Average Effective CPM


$ 12.00


$ 12.00


$ 12.00

Ecommerce

Monthly $ per Converted User


$ 10.00


$ 15.00


$ 20.00


User Conversion rate

0.50%

0.50%

0.50%


Events


# of Events/Year


12


24


24


# of Tickets Sold/Event


20


30


35


Price per Ticket


$ 10.00


$ 10.00


$ 10.00


Total Annual Event Revenue Per Blog


$ 2,400.00


$ 7,200.00


$ 8,400.00

Additional Assumptions

Capex per Employee


$ 1,000


$ 1,000


$ 1,000

Rent

Square footage/person


100


100


100

Cost/Sq. Ft.


$ 8


$ 8


$ 8

Advertisers are your FRIENDS


In
-
house or Out
-
house sales structure


Sales compensation


“Commission only” does not usually work well


Heavily incent success


Self Serve options


Marketing support and materials


Data, Measurability, Performance


Ad networks (e.g., Google
Adsense
)


You can’t make a sale unless you ask for it

Advertising Sales TIPS


Training and Education are key


For

your sales people and your customers


Be your customer’s marketing partner and consultant


An “internet marketing seminar”


Teach the value and effectiveness of advertising


Small/Medium business folk often don’t have time for you


Expect churn


Of customers and sales people


Customers and sales people are high maintenance


Out of pocket cost is more important to most than CPM


Advertisers want you to do the work for them


Telephone sales can work effectively


Simple is best but complicated packages can drive $$$


Ad Pricing & Strategy


Pricing is important


CPM

cost

per one thousand impressions


CPC

cost per click


CPA

cost per acquisition (lead or activity)


Sell real estate and exclusivity


Create “markets” (e.g., tires in Sports)


Everything is negotiable


You are not selling a product

or a service


You are selling a relationship with an audience


You can be their digital marketing consultant


But are you willing to “share” in your “partner’s” success?

Budgeting Expenses


Staffing


Technology


Equipment

and Facilities


Outsourcing


Cost of sales


Marketing


Office Expenses (utilities, supplies, etc.)


Accounting/Tax preparation


Legal


Reserves

Sample Expense Forecast

Source: http://newsinnovation.com/models/

Expenses















Year 1

Year 2

Year 3



Year 1

Year 2

Year 3

SG & A



Salaries (Including Owner/Operator)


$ 96,860


$ 184,382


$ 219,104




$ 42,920


$ 91,800


$ 114,314

Marketing & Promotion


$ 7,500


$ 5,000


$ 5,000




$ 2,000


$ 2,500


$ 3,000

Events


$ 1,200


$ 3,600


$ 4,200

#


$ 900


$ 2,400


$ 3,600

Technology Costs


$ 10,000


$ 5,000


$ 5,000




$ 4,000


$ 1,500


$ 1,500

Legal Fees


$ 3,000


$ 1,000


$ 1,000




$ 1,000


$ 1,000


$ 1,000

Accounting Costs


$ 5,000


$ 5,000


$ 5,000




$ 3,000


$ 3,000


$ 3,000

Rent & Utilities


$ 1,600


$ 2,800


$ 3,200




$
-



$ 1,500


$ 1,688

Travel/Misc


$ 2,500


$ 5,000


$ 7,500




$ 1,000


$ 2,500


$ 2,500

Total Expenses


$ 127,660


$ 211,782


$ 250,004




$ 54,820


$ 106,200


$ 130,602

Expense/Revenue Margin

90%

68%

63%



66%

51%

45%



Operating Income


$ 14,833


$ 99,095


$ 145,663




$ 27,803


$ 101,306


$ 156,981

Operating Income Margin


10.4%


31.9%


36.8%




33.7%


48.8%


54.6%



Earnings Before Taxes


$ 14,833


$ 99,095


$ 145,663

#


$ 27,803


$ 101,306


$ 156,981



Income Taxes @40%


$ 5,933


$ 39,638


$ 58,265




$ 11,121


$ 40,522


$ 62,792



Earnings (Accrue to Owner/Operator)


$ 8,900


$ 59,457


$ 87,398




$ 16,682


$ 60,784


$ 94,188

Net Margin

6%

19%

22%



20%

29%

33%



Attracting

and Retaining
Consumers


Link Economy : “Do what you do best and link to the
rest”

Jeff Jarvis


Search Engine

Optimization


Search Engine Marketing


Social Media


Word of Mouth


Email Newsletters drive traffic


Registration


Measure, Measure, Measure


Engagement, where do consumers

come from/go to


Any pay for content possibilities?


Archives?


Data



Event Business


Builds your community


Promotes/reinforces your brand


Can generate significant revenues/profits


Exploits your “convening” role


Users can pay, Sponsors can

pay, or both


Ask yourself: what are the niche topics where
information is valuable or certification is
needed (e.g., real estate)

Tracking Performance


What are the key drivers of your success?


Develop a performance dashboard


Key metrics measured/reported regularly


Spot trends


Test hypotheses


Dispel anecdotal evidence


Helps assess priorities/investments, for example


What is “lifetime” value of a customer?


Does traffic translate into revenues?


Return on sales efforts

relationship between cost of
sales and sales performance?

Legal Structure


Proprietorship


Personal Liability


General Partnership


C
-
Corp


Corporate Veil limits personal liability


Double tax issues


S
-
Corp


Flow
-
through of tax losses and gains (taxed like a proprietorship
or partnership)


Regulations/requirements


LLC


Limited liability of corporate structure and tax advantages of S
Corp


Costs of upkeep


Funding your Enterprise


Sweat Equity


Leverage (e.g., a second mortgage)


Friends and Family


“Angels”


Venture Firms (requires an exit strategy
with a high rate of projected return)


Investors will want to see
your business
plan

Exit Strategy


Pay the bills and retire


Build a multi
-
generation family business


Partner with other like businesses


Sell to a strategic buyer


Sell to a financial buyer


IPO


Go to the beach!