Screw uniques and pageviews; New metric: Revenue per month
marcgayle.com
marcgayle.com
Think of it like a blog trying to get big. You don't slap ad-sense on the blog right away. First you grow your audience, get your fans first, then focus on revenue. Focusing on revenue right from the start will likely make you unable to ever grow.
If you are, indeed, starting a digital publishing house then I think you need to come up with a viable/more sustainable business model more quickly than just relying on advertising at some point in the future.
Hacker Monthly is a perfect example of this. They released a few editions, then quickly put up a pay wall.
A blog, in the most generic sense, I think is better served being a 'free' marketing tool. The main focus should be, as 37Signals so eloquently put it, to teach your users and subsequently build an audience.
Edit: I would also like to point out that I don't disagree that there are some businesses that make sense for pageviews/uniques - my main point is that we (the industry) are still suffering from the bad branding caused by the 90s boom & bust. i.e. start a company and figure out revenue later. I am suggesting such a drastic shift, in an attempt to drastically change that mindset. Once that mindset is changed, then we can loosen a bit - and 'encourage' some models that require pageviews first (but perhaps by that time we won't need to, because more platforms like http://www.flattr.com will be mainstream and bloggers can get paid for each article, than relying on advertising).
Focusing on revenue is awesome. Throwing in the extra "and profit" feels like the safe thing to do, but in reality your execution will be completely different with profit in the equation.
The reality is that web apps and sites that generate monthly recurring revenue come in many forms. Either the microprenuer variety (i.e. one man shop) or the larger VC-backed startup (ala dropbox, etc.).
Depending on your situation it really is up to you to decide to swing the pendulum whichever way you want to go. For example, Dropbox would likely focus on growing revenues as fast as possible, sacrificing profits in the short term - and that's a perfectly respectable decision because they have tons of VC cash in the bank and makes total sense.
So that was just shorthand for me saying that once you make that mental shift from advertising/eyeballs/uniques to monthly recurring revenues, you can then decide how you want to tackle the profit question (more now or later).
In conclusion: great post and great topic, keep writing about stuff like this.
Below the line is anything that directly contributes to sales, and above the line is the less measurable stuff, like brand awareness (usually television ads, billboards, etc.).
I can think of a lot of cases where a web site should be measured by its reach rather than its immediate profit.
For example, a web site for a movie would measure its success in terms of trailers watched, time spent playing with interactive features, etc.
Web sites for cars measure success by the number of people who use the configurator, download brochures, or similar activities. It's very hard to tie monthly sales to monthly web visits, because the customer's consideration time is often much longer than a month.
Even a pure e-commerce site can't go on sales alone. Huge numbers of people use Amazon for product research, wish-list building, reading reviews, getting recommendations, etc. Just because they don't buy something every time doesn't mean it's not measurable. It's that kind of activity that cements Amazon's central role in many people's online shopping behavior. The lifetime value of a customer doesn't show up on a monthly sales report.
Determining the value of each touchpoint in a customer journey is an inexact and difficult science. There's an entire industry evolving to try and do that, called Attribution Management. One quite I've heard repeatedly from people in that field is "if you only count the places where money changes hands, you'd dismantle everything and just keep the cash registers."
The idea of a "revenue per month" metric sounds good on the surface, but it misses the entire value chain.
Websites for movie trailers = promo material...not a startup.
Web sites for cars = promo material...not a startup.
An e-commerce site has to go primarily off of revenues and profits. Once they focus on revenues and profits, they can then invest in advertising (both above-the-line and below-the-line).
Amazon ran in the red for many years, because it invested heavily in the infrastructure. It raised equity financing, reinvested all revenues and profits and when it went public it raised huge debt.
Over the subsequent years, it paid down that debt slowly but surely with the profits thrown off of operations. Until the point that it has been profitable for the last few years. However, this point illustrates what I was talking about...they focussed on revenues first and then went to profitability shortly after.
The ones you need to track wind up being a mix of the following:
1. Page views: Track overall growth
2. Page views per user: Track engagement
3. Visits: Track overall growth.
4. Unique visitors: largely useless metric since every tool out there disagrees with each other on the number.
5. Revenue per user: Track user segmentation.
6. Revenue per page view: Track infrastructure costs.
7. Active users: Finer measure of engagement and churn.
8. User acquisition/retention cost: Track cost of marketing/outreach.
(1) is important if you are selling inventory on CPM.
(2) is needed to get the mix of organic growth with existing users to increase, while keeping a different focus on acquiring new users.
(3) mostly needed for the ad sales pitch. No point getting a million visitors if you can't retain them, but sales needs inventory.
(4) has always been ~10% off between different tools. Can be an indicative measure of engagement.
(5) helps you keep ceilings in place for acceptable cost per user
(6) can help you make decisions on infrastructure where you need more than what you can buy.
(7) possibly the only user-related metric that should matter internally.
(8) can help you understand why bidding on that $5 CPC keyword does not make sense when what you make per user is $3.
if you charge $50 a month, you only need 200 subscribers to hit $10,000/mo, $120,000/yr. And since it's recurring, once you hit that number, you'll continue growing with time.
So sure, it might take you a year to hit 200 paying customers, but with recurring, every month after that you add more people...so at year 5, you'll get to 1000 subscribers, paying $50,000 a month or $600,000/yr...and with most web apps you can support that just by yourself.
And even if you can't, $50K a month, will allow you to recruit about 5 people, so you can scale your workforce as you grow too
Web apps happen to be the best option to generate recurring revenue with the highest margins. Another option is selling infrastructure services (hosting, etc.) but those net margins are much lower because the cost of revenues are higher.
Hoping to launch in the next few weeks. We'll see though.
The problem I am addressing is that many people, when they think about creating a web app/site, the first biz model they think of is advertising.
What I would love to see is a complete evolution of this mindset.
It is the equivalent of wanting to start a restaurant or any business in the 'real world' with the model of getting a great location and charging advertising from the foot traffic. That's kinda ridiculous.
If we start treating web businesses like real businesses, I think we will see some more very interesting companies develop.
From there you can split test your landing page, try to up your conversion rate etc...
Revenue per month is great, wonderful, "le raison d'etre" - but - those other metrics are useful for a number of business functions.