Wednesday, February 28, 2007

Fastest way to get to $50M?

Jeremy Liew raised a great question on the Lightspeed Ventures blog this morning: What's the fastest way build an online media business to $50M in revenue?

Jeremy points out three strategies towards building enough traffic to reach $50M:

1) The Bebo.com/MySpace.com approach -- broad reach, not a lot of targeting.
2) The Facebook.com/Terra .com approach -- demographic targeting.
3) The Endemic Advertising approach -- create a website about cars that car companies would naturally want to advertise on, an electronics site for consumer electronics companies to advertise on, etc.

Jeremy I agree with Jeremy's ultimate suggestion that #3 is the best way to go of the three scenarios listed, but I think that the best way to get quick cash flow for an online media company is the subscription model.

I know it may be a little Web 1.0 to bring up subscriptions, but I don't know of another way for a media company to get to cash flow positive faster than with a subscription model. Augment your subscription service with a call center, and your conversions go through the roof and you're immediately bringing in cash.

In the long term, its all about automating the process so the call center fades out and margins go up. There's no reason to pay someone a commission on what a website alone can do. But if you want quick cash, subs with call support is where it's at. It also gives entrepreneurs something to help pay the bills while they build traffic and tweak their UI in order to generate more paid sign-ups and pageviews.

I'm not talking about a WSJ subscription model where you basically get no value out of the site unless you pay. I'm talking about a Pogo.com/espn.com/Skype model that gives you good service for free and great service for a monthly rate.

What do you think? Is the 1.0 subscription model broken, or are 2.0 junkies looking past a simple answer that has been under their noses all along?

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2 Comments:

Blogger David M. said...

I think you are correct to say that "2.0 junkies looking past a simple answer that has been under their noses all along". But why? My reasoning for this is simple: The media has tended to focus on Youtube and similar kinds of success (from a purchase price standpoint) and so many entrepreneurs are aspiring to achieve the same thing, using the same models those companies used.

Publicity needs to step up for companies that actually built real cash flow BEFORE big buyouts.

We seem to be moving back towards the web 1.0 days of "build it fast and sell it quick, cash flow be damned".

3:17 PM  
Blogger Jeff said...

Amen David. The reality is that while there is a small handful of companies making big exits, there are hundreds more that have died/are dying because they overlook the fundamental issue of revenue -- in addition to AdSense. It's hard to believe that we - I say we because I've had the same mindset in the past - have forgotten that being in business is about making money, not just raising money.

9:47 AM  

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