Some Recent Startups Are Going Back to the Drawing Board
Technology makes the launch easier, but not the revenue grind.
The publishing industry has seen a flood of ideas for new companies over the last two years, some driven by former publishing executives who want to leave the corporate grind behind and try to make it on their own, while others came from people forced into an entrepreneurial role due to downsizing.
Many of these startups are tapping into a new approach, leveraging community and technology for an economical launch. However, some are finding that while technology makes launching easier, that doesn't necessarily make fulfilling the business plan any easier.
Technonomy, a new media business launched earlier this year by a trio of former Fortune writers that included a "hybrid" of original reporting, opinion, aggregated content and contributed long form journalism, and which held its inagural event in August (featuring speakers such as Bill Gates, Google CEO Eric Schmidt and LinkedIn founder Reid Hoffman) is currently in the midst of "reconsidering its business model," according to partner Michael Christman.
Former CMP/UBM editorial director Scott Raynovich developed a Web business-The Rayno Report-that includes ad-supported blogs and paid research, as well as message boards and e-commerce. As noted by DeusM managing director and FOLIO: contributer Stephen Saunders, The Rayno Report cost $600 for two years of hosting on godaddy.com, plus $2,000 in programming work (that worked out to $3.56 per day). However, while The Rayno Report is profitable on a total investment of less than $10,000, Raynovich is looking to other options going forward.
"It's not exactly going to allow me to buy an NFL team, but it made money," he says. "If you want to keep it small, bootstrap it, and grow it organically, you can hustle your way out there but it will take time, focus, and a lot of hard work. I looked for funding to accelerate the process but it was hard to find a match. What I found is that most investors are looking for the big consumer Internet play that can scale to hundreds of millions of dollars--they all want the next Facebook."
The point of this post isn't to knock people who had the guts to strike out on their own during one of the worst recessions ever and blaze the trail for new publishing models. The point is that while technology makes launching much easier and more affordable, it doesn't necessarily make driving revenue month-after-month any easier. Entrepreneurs need to be prepared to change their original vision, sometimes drastically.
Richard Wallace, another former UBM exec, launched The Next Silicon Valley last January as a one-man show with a Web site and a Twitter strategy that filters posts from journalists all around the world. In the past year, the site was accepted as a GoogleNews provider and changed the editorial focus to the investment aspects of global innovation.
However, the revenue model has changed since the site launched. "The expectation at that time was to tap into budgets for tech-based and regional advertising and sponsorships, much along the lines of b-to-b ad-based Web sites," according to Wallace. "That model, however, has come under severe pressure in the current ad recession."
The Next Silicon Valley has now adopted a revenue model based on Google Adsense. "While this revenue stream is currently small, trials and experience have shown returns to be highly scalable, based on site traffic," says Wallace. "The plan for 2011 is to scale up the volume of content by increasing content throughout, and possibly adding additional news content sources. The idea is to grow the Adsense revenue and to build out new ad channels that reflect the four primary content areas: regions, countries, tech sectors and investors. Just with Google Adsense revenue, however, we are at break even for the year."
Wallace says the biggest challenge since launch has been the re-set on advertising and sponsor expectations and the realization that generating and growing online advertising revenue would require a re-think of the original ad model. "This in turn has required study and exploration of Adsense's auction-based online ad model and a slight re-working of the site's architecture, keyword structure and code base to maximize the number of and value of third-party ads," Wallace says. "Early returns here are very promising. It is risky to predict revenue targets or growth potential at this stage but I would expect that by this time next year we should be at or above a $5,000 to $7,000/month revenue target."
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