In the Forbes issue of Dec 22, 2008 page 66 an article titled Mixed Messages provides some chilling news for those thinking they can make money on the web with a pure ad model. Forbes shows a chart comparing major Internet companies on an annual sales per unique visitors basis. No surprise, the leader is Google at $1.85. What is a surprise is how little the revenue per visitor number is. Yahoo is at $.91 and MSN at $.41. Here's what this means. Rule of thumb when planning a traffic acquisition program is to use 3X the annual revenue and be willing to spend 25% of that number. In Google's case, that would say they can spend $1.39 per unique visitor. In Yahoo's case, that number is $.68.
If you are starting up a new site with an ad driven model, let's see what the cost might be to use banners to drive traffic. Assuming you can buy banners at $3.00/M and you have a click rate of .04%, your cost per visitor would be $.75. Then you need to ask yourself how long will it take you to achieve anything close to the Yahoo ad sales revenue per visitor...if ever.
Perhaps you can come up with fantastic idea that grows virally on the web and brings millions of uniques for practically nothing...the next Facebook. But even these folks are having a hard time trying to build serious ad revenues.
The models that seem to work these days are still ecommerce and subscriptions. Unless I missed something.
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