[Foundation-l] Left on the Table

[Michael Snow]

On 11/6/2010 4:19 PM, Robert Rohde wrote:
> On Fri, Nov 5, 2010 at 4:53 PM, Marcus Buck<me at marcusbuck.org>  wrote:
>> An'n 05.11.2010 23:44, hett Fred Bauder schreven:
>>> How many billions in potential advertising revenue do we leave on the
>>> table each year?
>>>
>>> Fred
>> According to alexa.com Facebook has a 3-month global pageview share of
>> 4.74010%. Wikipedia has 0.52984%. That's about 1/9th. According to
>> Wikipedia Facebook made US$800 million in revenue in 2009. 1/9th is
>> US$89 million. Of course that's not a realistic number. Just an
>> extremely vague approximation of an theoretically possible value.
>> Wikipedia has the advantage that our content has very defined topics and
>> ads matching the article's topic should be much more relevant and
>> interesting to the user than Facebook's ads. But on the other hand
>> Wikipedia is much more limited and cannot use prominent and intrusive
>> ads, which will limit the possible revenue. And of course Facebook has
>> (again according to Wikipedia) 1700+ employees while Wikimedia has just
>> a small fraction of that. It's hardly possible to create similar revenue
>> as Facebook without additional employees.
> Facebook isn't the greatest analog.  One of the limitations is that
> Facebook isn't really an information site.  Content rich sites tend to
> do better at generating advertising dollars because ads can be
> targeted to things that people are already searching for.
>
> Let's consider a different rough approximation.
>
> About.com
>
> About.com is part of the About Group, a wholly owned subsidiary of the
> NY Times.  According to their annual report [1], the About Group unit
> of the NYTimes had an annual revenues of $121 million in 2009.  The
> About Group includes About.com, ConsumerSearch.com,
> UCompareHealthCare.com, Caloriecount.com and various minor sites (but
> it appears that more than 90% of their traffic goes through
> About.com).
>
> According to Alexa, these sites collectively accounted for 0.043% of
> global pageviews.  (Compare to 0.53% for Wikipedia, 4.7% for Facebook,
> and 5.2% for Google).
>
> So scaling About.com's revenue to Wikipedia's traffic share would
> estimate $1.5 billion / year.
>
> Like the Facebook estimate, this is also a very rough approximation.
> An astute observer would note there is a very large range between the
> $90 M suggested by Marcus's look at Facebook and $1500 M suggested by
> this look at About.com.  Personally, I believe the truth would
> probably be closer to the high end than the low end, largely because
> About would seem to be a better analog of what we do than Facebook is.
I agree that About.com is a better comparison, and one I touched on in 
the Signpost a few years ago 
(http://en.wikipedia.org/wiki/Wikipedia:Wikipedia_Signpost/2005-02-28/Vertical_search). 
And it's interesting to see that maybe the site's revenues could begin 
to justify the price the Times paid for it after all. But in our 
context, I think it's worth mentioning reasons why scaling the revenues 
proportionally would likely produce erroneous estimates.

By working toward a particular market niche, About.com can draw a 
decently reliable if unspectacular audience. It will never be the 
destination of first choice, but most of what's there has enough value 
in advertising terms that it can be monetized. In fact, it is easier to 
monetize than Wikipedia, which would be much less efficient to sell ads 
for, both on the high end and the low end.

At the bottom of the scale (from an advertising buyer's perspective), 
Wikipedia has a huge swath of low-value inventory consisting of 
little-trafficked pages and material of extremely marginal commercial 
interest. This is almost inevitable for sites with a massive scope, 
which is why there's still some appeal to Facebook as a point of 
comparison, and the problem is trying to package or even give away 
remnant inventory.

You get a different problem at the top of the scale. For the stuff that 
really draws massive attention, topics where Wikipedia really shines - a 
tsunami, a new pope, a pop star dying - efforts to monetize such traffic 
spikes elsewhere have proven largely ineffective. Trying to market that 
inventory to advertisers is like chasing a pot of gold at the end of a 
rainbow: you can't recognize the right inventory, connect with the right 
potential buyers, or do an effective job of selling it fast enough 
before the traffic has passed you by.

Considering the problems at both the top and the bottom, part of the 
reason that About.com has survived this long may be by occupying the 
middle. In terms of selling ads, Wikipedia might be able to command a 
premium for its prominence, in the same way that advertising in the New 
York Times carries a premium because it's a "paper of record" to so many 
people. But in many other ways, Wikipedia is not a great proposition 
against which to sell advertising. Perhaps it should be no surprise that 
this is so, considering that Wikipedia was not designed or built for the 
purpose of being a great proposition against which to sell advertising.

--Michael Snow