How do websites make money?

frobisher

I don't mean websites like Amazon or eBay where the revenue point is obvious. I mean siites like blogger, myspace, youtube, stumbleupon etc. Sites that must cost an unvelieveble fortune to maintain each day but have no fee for users. I'm guessing it's just advertising, right?

zAbbo

Well youtube is making about 15-20 million a year in revenue, which isn't much considering Google bought it for 1.65 billion.

frobisher

zabbo wrote:

Well youtube is making about 15-20 million a year in revenue, which isn't much considering Google bought it for 1.65 billion.

Presumably through advertising?

H3LLg0d

advertising ,referrals etc

adwords,adsense,clicks and all the like

Serbian

The two main avenues of revenue for sites on the net are either advertising or premium subscriptions. Take Flickr for example. They provide free photo hosting to anyone who wants it, but the bandwidth and features are limited. They do give you the option to buy a 'Pro' subscription account which is how they make their cash.

The Corinthian

frobisher wrote:

I don't mean websites like Amazon or eBay where the revenue point is obvious. I mean siites like blogger, myspace, youtube, stumbleupon etc. Sites that must cost an unvelieveble fortune to maintain each day but have no fee for users. I'm guessing it's just advertising, right?

Websites don’t make money. Businesses that employ Websites make money. It’s an important distinction. The reason I’m pointing this out is because people all too often focus on the Web site and forget what the underlying business is which results in a lot of lemons on the Web.

Many sites are essentially publishers. Where I say publishers I don’t simply mean the traditional model of publication transposed to the Web, such as Ireland.com, but more interactive forms such as Boards.ie or Daft.ie. There the revenue model tends to be based on subscriptions and/or advertising, but other market verticals should not be ignored.

Other sites sell a service. Again the revenue model will often utilise both subscriptions and/or advertising, but brokerage fees and other market verticals will often be a much larger percentage of revenue. Hotel booking portals are a good example of this as are dating sites.

Finally some will sell a product; it may be software, furniture, books, SMS's or porn which they typically will not produce themselves but buy wholesale, sell and ship using the Web site as a store front, adding a mark-up along the way.

What all of these have in common however is that they are all based upon something there is demand for. If you put your blogging site up don’t expect it to make any money no matter what revenue model you choose unless people actually want to read your blog.

DRakE

edit: wrong place :P

smemon

websites are like land; the higher the demand for it, the higher it's value.

buy as much as possible now as cheaply as possible, sit on it, then sell it when you really have to.

we webmasters are essentially modern day farmers - developing land (sites).

The Corinthian

smemon wrote:

websites are like land; the higher the demand for it, the higher it's value.

buy as much as possible now as cheaply as possible, sit on it, then sell it when you really have to.

we webmasters are essentially modern day farmers - developing land (sites).

You're not in the business long, are you?

smemon

The Corinthian wrote:

You're not in the business long, are you?

rhetorical question question i take it


websites are like land; the higher the demand for it, the higher it's value.

i stand by that statement. It's layman's terms for saying exactly what you've said.

if there is a demand for something, there is someone cashing in on it. If there is a great demand for something - say ringtones.. competition increases and the only way you can get your ringtone site making money is by advertising it.

So you buy links from other sites, use adwords, pay people to review it etc...

One websites expense is another's income. Obviously there are exceptions, but as the OP asked a general question, i gave a general answer

The Corinthian

smemon wrote:

websites are like land; the higher the demand for it, the higher it's value.

i stand by that statement. It's layman's terms for saying exactly what you've said.

That’s not a statement; it’s a cliché and had nothing to do with what I wrote.

You’re simply suggesting some simplistic land grabbing strategy that is a waste of time and money more often than not. The only revenue model you seemed to suggest was some form of magical appreciation in value of whatever you’re suggesting people land grab. Certainly the ‘exit strategy’ approach to making money on the Web can work, but if that’s the sole basis of your business plan, then forget it, switch off your PC and go out to play with the kids outside.

One websites expense is another's income. Obviously there are exceptions, but as the OP asked a general question, i gave a general answer

He asked a specific question about revenue points. What were you talking about?

smemon

ok, take the domain digg.com - bought for reg fee (~$8), sold for $4k

why? because demand for catchy, short, brandable names rose. why did they rise? because the internet community grew and one word domain names dried up.

Just like the real world, if i bought a house 10 years ago, i could sell it at double it's value today. The house hasn't changed, but the demand for it's location due to population growth and urban sprawl has.

As the internet will continue to grow, it's a reasonable assumption the value of brandable or semi-brandable domain names will continue to rise in value until the net reaches saturation point.

ok, that's the shell of a website (the domain name), but for some people they flip domain names at a profit. So that's one way of making money off websites; simply by owning brandable domain names and maybe developing them.

Anyway, answering the OP's question. I'll take youtube. Obviously bandwidth and space used on a daily basis is huge. There's no way youtube could make profit without some sort of advertising. For a while, it was run with no attempt to sell ads on it.

But in order to stay afloat or simply recoup some of the costs involved, like any site, they are forced into selling ads and developing new ways to generate cash. Most recently, they've suggested a revenue sharing system like google adsense, which rewards the users (and helps pay for the service).

But youtube, now backed by google of course, will be in no rush to cash in. They have traffic, millions of us log on each day, at the minute youtube is very much in the red if you were to balance the books. With very careful planning, they can slowly begin to turn that traffic into cash. The danger is of course too many ads will result in loss of traffic due to frustration or confusion.

The bottom line is, they have the traffic - globally. They're now established as the no.1 video sharing site. So it's really only now they'll start to earn cash as they slowly slip in more ads and introduce this revenue sharing system.

I suppose youtube is a poor example as they aren't making profit yet, but they WILL as they have got us all hooked. It's very difficult to unhook us, therefore most of us won't mind a few more ads appearing.

pwd

Adsense Arbitrage is one method used by many sites to try to make money.
I think it would generally be fairly ineffective, although it is widely touted as a money-making machine on the web (by people trying to sell you "secrets" usually).
This concept is also what's responsible for all those annoying websites that contain nothing but google ads.
The idea is that you find a few high-paying keywords for adsense, and make a website around these keywords.
Then you find some low-cost keywords that are related to the high-paying ones, and use them to drive traffic to your website.
Eg: I do a search on beauty products (cheap); a link to a laser hair removal report is displayed in the sponsored results; I click this link and read about laser hair removal; I click on a google ad for laser hair removal (expensive).
In order to get this idea to work, and I think it usually would not work, you would need to have a site that really entices people to click through on one of your ads.
The site I am thinking of in the example is an apparently successful implementation of this idea. It takes people who are likely to be interested and tells them stuff to make them more interested. Seems reasonable and apparently it makes ok money (though nothing fantastic and was only successful after a lot of tweaking and failed attempts)

The Corinthian

smemon wrote:

ok, take the domain digg.com - bought for reg fee (~$8), sold for $4k
why? because demand for catchy, short, brandable names rose. why did they rise? because the internet community grew and one word domain names dried up.

That market dried up by 1999. Additionally for every domain that makes a profit you will have hundreds of thousands that are speculative wastes of time and money.

ok, that's the shell of a website (the domain name), but for some people they flip domain names at a profit. So that's one way of making money off websites; simply by owning brandable domain names and maybe developing them.

Certainly cybersquatting is one way of making money on the Web, but then again so is Spam. Additionally it is nowhere near as lucrative a revenue model as it once was.

The bottom line is, they have the traffic - globally. They're now established as the no.1 video sharing site. So it's really only now they'll start to earn cash as they slowly slip in more ads and introduce this revenue sharing system.

Traffic isn't everything. The b2b market often does not require it. There are sites out there (if I remember correctly DC Pro is one, although I could be confusing it with another) that you will never have heard of. Such sites will provide services such as financial clearances, training, workflow and the such to corporations that make tens of millions a year, yet have a tiny fraction of the traffic of the b2c sites you're putting forward.

smemon

The Corinthian wrote:

Traffic isn't everything.

no website will make money without traffic.

obviously those selling services or products which rank well in search engines will have a high conversion. They might get 10 sales every 100 users.

For most sites though, the more traffic the better. Digg uses adsense so let's assume they have a 2% CTR, 2% of 100 is 2 clicks. 2% of 1000 is 20 clicks :cool:

So they need traffic and lots of it in order to make money.

Same with flickr.. (first thing that came into my head). You get a free service which they pay for. In order to turn a profit, they need subscriptions to pro services, which maybe 2 in 100 users subscribe to.

It's that small percentage which pays the bills and turns a profit. So sites like those need plenty of traffic to remain profitable.

Obviously more training based/business to business based sites are going to make more money as they have a small, specific niche which when established, will spread virally amongst businesses.

Most Businesses have cash, most people don't. simple as that. That's why the majority of sites need sheer volume - traffic wise - to succeed.

The Corinthian

smemon wrote:

no website will make money without traffic.

I've already given an example of one that does without traffic and many more exist in the b2b market.

Any more pearls of wisdom?

smemon

The Corinthian wrote:

I've already given an example of one that does without traffic and many more exist in the b2b market.

So how then does that site make money without traffic

ok, it may only need a small amount of traffic or clients, but it still needs them.

No website can make money without traffic. A website with zero visitors is a website running at a loss due to domain name and server expenses, plus time invested in building it. QED.

Real life established businesses which add a website, don't count in my eyes as they haven't built their sales from scratch and already have large client bases which are referred to the site via mailing lists/business cards etc..

Take DunnesStores.ie for example. So it might make money once it sells goods online, but it's an extension of an already successful business in the real world. In comparason to the OP's list of examples, it doesn't count as a successful website making money as it isn't 100% web based like youtube, google, blogger, stumbleupon etc..

They have been built, developed and make money in cyberspace. DunnesStores.ie hasn't been, therefore it can't be listed in the same bracket as the above.

The Corinthian

smemon wrote:

So how then does that site make money without traffic

There are numerous Web-based businesses that don’t look for traffic. They deal in very specialised areas where they can and do approach their clients directly and then sell them a service that is delivered via a Web site. And because it is specialised they can charge a premium. Ranking highly in Google or other search engines is of secondary importance (if even).

The idea that the Internet is nothing more than a way to reach a larger market is a ridiculously simplistic one. It’s certainly an important paradigm, but it is by no means the only one as you’re suggesting.

smemon

The Corinthian wrote:

The idea that the Internet is nothing more than a way to reach a larger market is a ridiculously simplistic one. It’s certainly an important paradigm, but it is by no means the only one as you’re suggesting.

fair enough, point taken.

however as the OP was listing massively popular sites with millions of hits a day, I assumed he was looking for reasons how they manage to turn a profit whilst paying for the bandwidth.