Can a website generate $1.7billion per year via advertising?

October 19, 2008 4:30 PM

Maximum online ad revenue? -newspapers can not sell an infinite amount of ads in their print newspaper because of a realistic maximum page count and circulation. are websites beholden to any such caveats?

what I'm trying to figure out is what would say, the new york times, have to do to generate $1.7billion revenue with a pure online presence and advertising model?

is it possible? what would the new york time site look like? Just so you know, in 2007 $1.7billion was the the NYT print ad and circ. revenue. Their online ad revenue was ~$350million

Thanks.

posted by Paleoindian to computers & internet (12 comments total)

Apples to oranges in terms of business models. Website traffic is usually calculated on an action basis, where newspaper is valued in a combination of impression/branding. The NYT, as a best in breed brand, commands a high price for print advertising. While there's only so many pages that a newspaper can have, and a website doesn't have the same limit due to its delivery method, there's still a bound on how much content can be purchased, edited, etc... so realistic limits to the page count do exist.

In order for the website to see a five fold multiplication of revenue, all you'd really need is to see an increase in the value of New York Times traffic. Because website traffic is valued by action, if the NYT site was delivering a large number of viewers who were buying, they could increase their billed rate for delivering traffic.
posted by Vantech at 4:41 PM on October 19, 2008 [1 favorite has favorites]

While there's only so many pages that a newspaper can have
Newspapers increase their pages when they have more ads. That's why the Sunday paper is bigger than the Monday paper, and why the summer papers are smaller than the papers the rest of the year. And, yes, because of how the printers work, there's a limit to how many pages a single section can contain. That's why sometimes the New York Times has to split its A section into two sections.

There is a limit as far as how many ads a newspaper can take, based on how many sections it can print and how many pages it can have in each section, but they're not turning down ads because they're out of space (except maybe last-minute addition, but that's a different story). With papers, including the Times combining their metro and A sections and at least some decreasing the number of sections they are able to print, it will be interesting to see whether they actually do start hitting this limit, especially when all the holiday ads start coming in.
posted by Airhen at 5:16 PM on October 19, 2008

Follow up.
Does a website exist that generates $1.7billion in annual revenue? what is the highest grossing website (or family of websites).
posted by Paleoindian at 5:19 PM on October 19, 2008

Google search might generate $1.7e9 in revenue from advertising.
posted by Netzapper at 5:34 PM on October 19, 2008

Google search might generate $1.7e9 in revenue from advertising.
But it's not all on a "website" -- it's across the web
posted by misterbrandt at 6:02 PM on October 19, 2008

Paleoindian : Does a website exist that generates $1.7billion in annual revenue?

You write "annual revenue" but everybody answers "annual ad revenue". If you mean "annual ad revenue", the answer is no, I don't think so.

On the other hand, Vantech already gave an alternative: "Because website traffic is valued by action, if the NYT site was delivering a large number of viewers who were buying, they could increase their billed rate for delivering traffic."
"Delivering traffic of viewers who are buying" is also called "generating sales". This sure is another ball game than the simple advertising model, but it's alive and kicking on the Web: there are several sites that generate $1.7 billion in revenues through sales.

Airhen: no mass media I know has any limit for advertisers: if you have demand for more volume than you can offer, you just hike your prices; everybody does it all the time.
posted by bru at 6:22 PM on October 19, 2008

Well first of all I'd like to point out that you're not talking about ad revenue alone but also circulation revenues. MeFi's revenues look very different, for instance, if you consider ad revenue vs. ads + subscriptions, I would expect.

That said, the limit of revenues for newspapers and online venues is the same: how much can be sold.

The NYT could always toss in another page of ads if there was sufficient demand at a sufficient price-point, but the more pages of ads they put in their paper, the less consumers will ultimately pay attention to, and the poorer advertisers' campaigns will perform, thus reducing the effective cost per thousand an advertiser would be able to pay while still breaking even.

As a media buyer I've seen both websites and magazines try to sell ad space for extortionate $300 CPMs that just don't make sense. Sometimes an unsophisticated marketer or businessman may try to purchase them at those rates, but in general it's not worth nearly that much.

So to answer your question, the NY Times might be able to make that much from online activities alone, but it is unlikely and would probably sales of online subscriptions, affiliate programs, direct sales, increased viewership and a large global ad sales force of much higher caliber than may exist anywhere in the online space today.
posted by MaxK at 6:29 PM on October 19, 2008

Google made $16,412,643,000 in fiscal year 2007 in ad revenues, and it looks like it will break 20 billion this year.
posted by Rhomboid at 7:48 PM on October 19, 2008

Surely the key difference between online ads and newspaper ads is targeting those ads at specific users based on things like geography, and any other kind of information which the advertisers can use based on registration questions, cookies, etc.

Online ads can be far more effective. Any ad for diapers, vegan food, or $300 bottles of wine is going to be wasted on, what, 90, 95% of the people who see it in a newspaper, but online you can serve those ads at the people who are really interested and are likely to buy.
posted by AmbroseChapel at 1:38 AM on October 20, 2008

Airhen: no mass media I know has any limit for advertisers: if you have demand for more volume than you can offer, you just hike your prices; everybody does it all the time.


Sorry if that wasn't clear: I was referring to page limits, because you have to maintain a certain news to ad ration.
posted by Airhen at 8:18 AM on October 20, 2008

Thanks for the responses. It's clear at this point that no site exists with this advertising revenue stream (I wouldn't call Google a site). A website would have to generate $4,657,534.25 dollars every day to achieve $1.7billion in annual revenue.

Perhaps the revenue model to support this level of revenue doesn't even exist yet.
posted by Paleoindian at 10:04 PM on November 19, 2008

Facebook will make $500,000,000 in 2009.
posted by blue_beetle at 1:16 PM on August 11