Financing Growing Websites?

William asks: "I'm currently writing PHP and MySQL code that runs a website that is receiving a modest amount of hits per day. Currently we are able to reasonably pay the montly costs of running this website without a problem, but we are growing larger every month and I could imagine that in the not so far future we will need to start finding ways to finance the cost of running the site. One thing that conserns me is that more and more websites that are being run by average people are on thier way to being down now because they can not afford to pay for the amount of resources being pushed through every month. Up until now banner ads have help displace the cost of running a site, but from what I've been seeing, that is no longer true. I remeber when Slashdot was just Chips&Dips, and figure this would be the place to go when asking how to scale up a website in an affordable manner."

Comments

In my best "Speak & Spell" voice- WRONG!...

[smirkleton]

"Banner ads?"..."WRONG! TRY AGAIN!"

"Co-branding a la Plastic?"..."WRONG! TRY AGAIN!"

"VC funding?"..."THAT IS INCORRECT! THE CORRECT SPELLING OF 'PROFITABILITY' IS..."

Methinks you've been overmoderated. BigTime! Don't tell Yahoo that Banner Ads are the way to go. They're still attempting to find an alternative business model that isn't so completely, utterly, dangerously cyclical and may actually lose money for the first time in several years.

Co-Branding isn't going to work, either. The collective powers of several money-losing BANNER AD driven websites don't amount to much, if anything. Have you visited Plastic lately? No. And neither has anyone else. It has at least two very dire problems.

1) It has mistakenly assumed it could replicate the success of Slashdot simply by repurposing the Slashdot message board system for the purposes of broad-minded subjects mostly related to pop culture, pop technology and pop politics. They have failed to realize that Slashdot's success has come through its specialization. The broader the subject matter, the less compelling the appeal to a broader base of people. The narrower the subject matter, the stronger the potential appeal to a smaller base of people. They are failing because they thought if they focused on broad subjects, that all your base would belong to them. But they ain't CATS. They are on their way to destruction. They have no chance to survive, make their time. HA HA HA HA.

2) It assumes it can create value through the aggregation of the readerships of several specific content sites into one single site. YET MANY OF THE CONTENT SITES CONTRIBUTING PARTICIPANTS ARE LOSING MONEY, SOME AT ASTONISHING RATES. If you're a fan of Poynter, which you should be, you'd already have read articles chronicling the plights of Inside.com, Feed, ModernHumorist, and others participating in Plastic. - It prolly aint gonna be with us much longer.

VC Funding - yeah, that used to be considered a business model, until somebody realized that, well, it just doesn't make sense to loan money to businesses with holes in every pocket of their proverbial pants, at least not if you want to get any money BACK.

VCs got stupid for a while, and wrote some big ass checks to dumb ass people. But those days are over, mate. And if you really want to make a VC pissed, I recommend you approach one and say, "I'd like to borrow $10,000,000. I have an idea for a business. It will make money combining ad banner revenue with co-branding, a la Plastic". You'll be lucky if you escape with your life.

"Okay Mr. Smartypants Smirkleton, then what DOES make money on the net?" Well, I'll tell you one thing. I'm very surprised to see no mention of ThinkGeek in this discourse. I've heard those guys move a boatload of products, a ton, and I'd believe it. What model is that, then? Well, it is specialty retail, targeting the various geek needs of the same community that Slashdot serves to inform (well). (A community that is extremely specialized, hence the obscure subjects considered newsworthy to the readership and authors.)

Yes, I know ThinkGeek is actually owned by VA Linux. But it seems to remain an independent business unit, from outward appearances. I suspect ThinkGeek's financials are one of the few bright spots in the VA Linux annual report. Sadly, they probably aren't broken out from other revenue streams for the public to see, because then we'd know how much more money VA Linux was losing on their core product lines.

Read this recent BusinessWeek story on MiniDots. You'll see that SPECIALIZATION is where it is at.

And no, after all that, I'm not going to also correct your sig file. You'll just have to do that for yourself.

compress them pages!

[xuvetyn]

if you're using apache, get yourself mod_gzip.
i've been using it for awhile now and the saved bandwidth in incredible.

note: i have no ties to this product whatsoever, it's just a kick-ass module.

Banner ads

[L Fitzgerald Sjoberg]

I think we're seeing a banner ad backlash, both financially and rhetorically. Not only are they selling for less, but the voices calling them a sure-fire path to online riches are being replaced by voices declaring them dead and a horrible idea to begin with.

Personally, I think typical ad banner prices will probably even out to about the cost of hosting. This is based on one part basic economics and nine parts bald speculation.

My thought here is there are plenty of people who are willing to put up comic strips, video game reviews, and pages examining the minutiae of Christina Ricci's career as long as they don't have to actively shell out big bucks to do so. When income drops (as it has recently) many of these people will shut down their sites. This reduces the pool of available ad spaces, and makes ad space more valuable, driving prices up.

When ad income goes up beyond hosting costs, then more people are encouraged to put up their own sites, and the pool of ad spaces increases, driving prices down. So you see.

Obviously, there are exceptions to this, such as sites that are funded by companies with deep pockets, and sites that have operating expenses well beyond hosting (you can't run site about travel experiences unless you or your writers can afford to travel), but I think for your typical pro-am started-as-a-hobby site, this will hold true.

Re:It's very difficult

[egjertse]

/. does fine by providing information only via it's banner ads

Now, that is kindof a harsh statement, don't you think? ;)

Re:Well, you WOULD know

[jesser]

Why would Amazon use a micropayment system? Their primary business is selling merchandise.

My guess it that they figured they would have an advantage in the donation market because of their brand recognition and because of their "one-click" patent. When I made a compared various donation services last month, one of the things I noticed was that Amazon was the only one that used persistent login cookies (ie, didn't require the user to enter his/her password on each visit). Several other sites (PayPal and PayDirect) used persistent username cookies but session-only login cookies. I'd be interested to know if some of those other services had full login cookies before Amazon entered the financial market, or if they've always used username-only cookies (for security reasons).

Get bought!

[tycage]

I belive Slashdot solved this problem by being bought. :)

--Ty

Lighten up on graphics (and other suggestions)

[Tim Macinta]

Your main cost is probably bandwidth, right? One very quick way to alleviate bandwidth problems is to drop the graphics on your high bandwidth pages (or if you must use graphics, use fewer of them, higher compression, and smaller sizes). I had a page that was getting 30k hits a day and dropping the graphics on this page cut my bandwidth usage for my entire site in half.

Another related trick which I use is to put the graphics which are necessary for my site in the web space that came with with Earthlink account. I figure I'm paying $20 a month for nothing right now (Earthlink is my backup account in case my DSL goes down, but my Speakeasy DSL has been absolutely rock solid so far) so I don't feel very guilty about offloading my traffic to Earthlink. If you have an ISP account that includes web space, consider putting your graphics there. This could save you considerable bandwidth.

Along those same lines, try to split up high traffic pages with a lot of content into multiple pages.

All of these changes also have the nice side effect of making your site easier to read and navigate. Not only is your site more accessible to the vision impared and users of text browsers like Lynx, but things tend to be more concise and consistent when you aren't focusing on form over function.

What I would recommend is using a web log analyzer such as Wusage or Analog to determine what pages draw the most bandwidth and focus all your energy on the top pages. As with software profiling where most resources are generally used by a very small portion of the code, you will probably find that a very small portion of your content is contributing to the majority of your bandwidth usage. On my site, it was a single page contributing to over half of my bandwidth usage and optimizing that page solved my bandwidth problems.

It's very difficult

[revscat]

One of the things that the recent dot-com bust has shown is the difficulty of making money off of a website, especially in the so-called B2C arena. Generally speaking, those sites have done the best that offer tangible goods, such as eBay and Amazon. /. does fine by providing information only via it's banner ads, but /. is an exception because of the huge amount of traffic it receives.

To answer your question, you have few options:

Banner ads

Co-branding a la Plastic

VC funding

Goodwill of others

Subscriptions

None of these are ideal, and none (with the exception of VB funding) will bring huge amounts of cash to your bank account. If you are simply seeking to recoup costs, you will probably want to go the banner ad/goodwill route. If you're trying to make a profit, however, you'll need a business plan on some solid relationships.

Good luck.

- Rev.