Posts tagged with: Internet Advertising

Paid Content vs. Advertising Supported

posted by   Ian Wyatt   |    March 16, 2009

Posted in   New Media   |   Comments

I've been thinking more about Plenty of Fish, entrepreneur Markus Frind and Internet business models as a follow up to my blog post from the weekend, Plenty of Fish: $10 million revenues & 50% profit margins.

In March, 2006, Plenty of Fish founder Markus Frind wrote a blog post titled "How I made a million in 3 months" on WebmasterWorld. The post begins with "Lots of hard work, and a billion+ pageviews." The second point of his post is more insightful: "You have to create sites that will bring in repeat traffic. If you think you will get rich off SEO think again. If you create a Free jobs site you could net 30 million + a year if you got big. Club listings site, free religious personals etc would all be big money makers. Look for established markets and offer a service for free and support it with adsense."

Other sites have done exactly this. Think about Craig's List, which for years has taken market share from newspapers by offering free classifieds to a growing online audience. Do newspapers still have print classifieds? Who pays hundreds of dollars to list a job in the local paper? While Craig's List today charges a nominal fee of $25 for job listings in major markets, much of the site is completely free - and was for years, which allowed Craig's List to steal market share.

Want to be the next Markus Frind? Start by asking, "what do people pay for online?" Music. Games. Porn. Dating. Job ads. Investment advice. All opportunities for free sites to topple the paid sites. Start a simple free site, add Google AdWords, and let the traffic and profits begin.

Will paid content fall by the wayside, with more entreprenuers like Markus launching free sites to undercut the paid content providers? Perhaps in some areas but not in others, such as music and games, where copyrights will keep that from happening. There is definately a trend toward more free content, as users launch free sites and Internet businesses extending the free line, giving away more for less (or free). Nobody pays for online news, gossip, restaurant reviews, recipes, or searching job listings.

The advertising model can work very well online, and my company's growth in recent years has been a direct result of growth in online advertising, and our ability to build a large and captive audience. But ultimately, businesses have to be selling a product or service, and users must be buying. If users never buy, busineses won't advertise.

I continue to believe that paid content is here to stay. Paying for content means that the user views it as being valuable. If it is free, users sense that it is worth little. The paid content barrier establishes a sense of exclusivity that everyone seeks. In a challenging economic environment where advertising rates are declining and media spending is slowing (even in the online channel), I believe Internet companies will continue to add products or services that they can sell to their users to offset declining ad revenues.

Plenty of Fish: $10 million revenues & 50% profit margins

posted by   Ian Wyatt   |    March 14, 2009

Posted in   Entrepreneurship   |   Comments

It's easy is it to build a multi-million dollar web business, right? Buy a domain name. Launch a simple web site. Tell your friends about it. Viral marketing kicks in. And a few months later, you're cashing big checks and rolling in the dough. Sounds easy enough.

However, my personal experience leads me to believe that this is not in fact the case. And other entrepreneurs with +$1 million business whom I've gotten to know, whether they are in the Internet sector or not, share experiences about years of relentless hard work and no pay, before reaping the financial rewards.

While catching up on my pile of old magazines, I came across the Inc. Magazine January / February 2009 issue with a cover story titled And the Money Comes Rolling In: Markus Frind works one hour a day and makes $10 million a year. How does he do it? He keeps things simple.

The title sums up the article pretty well: social recluse Markus Fiend, of Vancouver, British Columbia, is an engineer who held several dead-end jobs before going out on his own. Five years ago he starts a web site called Plenty Of Fish, working less than 20 hours a week on the business. His site grows to one of the top ten most-trafficed sites, generating advertising revenues of $10 million a year, with 50% net profit margins. The company has three full time employees, and Markus works a couple hours a day. As Inc. Magazine's Max Chafkin writes, "It's a 21st Century Fairy Tale."

According to Inc. Magazine, Plenty of Fish is the most trafficed dating site in the world, with 1.6 billion page views a month. The site is largely a free, advertising supported dating web site with four-times the traffic of Match.com ($350 million a year in revenues, primarly through subscription fees). In early March, Plenty of Fish announce a paid membership option for members that "are serious about meeting someone." (click here for Markus's blog, The Paradigm Shift: Adapt or Die)

Inc. Magazine leads the article with the story of little work, lots of profits. And the story does sound much like a fairy tale. Much of the article on Markus and Plenty of Fish is actually interesting. I found the better aspects of the story to be the insights into bootstrapping a new business, and running a lean operation that keeps costs down, isn't constantly re-investing its earnings, and as a result throws off great cash flows. Plenty of Fish is a good example of how Internet entrepreneurs with programming experience and some free time working alone from their apartment, can build highly trafficed web sites. Today budding Internet entrepreneurs can create scalable web sites using free open-source software, previously expensive tools, cloud computing, and an outsourced sales force (Google AdWords). And this can be accomplished for thousands of dollars, compared with millions of dollars a decade ago.

Keeping things simple is key to the success of Plenty of Fish. According to the article, Markus makes few changes or improvements to the site, because he's concerned about the potential negative impact on the business. Every change to a site can impact user actions, either positively or negatively, but it isn't known until after the fact. Instead of making the experience better or trying to achieve incremental improvements, he sticks with what works. Markus says, "I don't listen to the users. The people who suggest things are the vocal minority who have stupid ideas that only apple to their little niches."

I suppose this strategy can work when your site has +1 billion page views per month.