Product Sales Beat Ads Sales for Web Revenues
Most entrepreneurs who launch a Web site are seeking product
sales revenue or advertising revenue. Even corporate brochure
sites frequently sell advertising. As you click through sites
while you’re online, the proliferation of advertising gives the
impression that Web ad sales could be a logical (and potentially
profitable) way to offset the expenses of building, maintaining
and promoting your site.
But before you make the call to Monster.com to ask who places
their advertising, you may want to consider these statistics
from Jupiter Media Metrix, and premier online advertising
tracking company:
Online advertising accounts for under 2 percent of total
advertising. If all goes well (and right now online advertising
is not going well at all), the research company predicts that
will rise to 5.2 percent in five years.
Online advertising rose an impressive 69 percent last year,
but this year online ad revenue is only expected to rise 12
percent, and over the next five years, the growth will hover
below 15 or 20 percent each year. This means online advertising
will have to fight hard to rise to the level of billboard
advertising.
Jupiter also reported that advertisers have their doubts about
online advertising. Advertisers believe Internet ads do not
reach enough people and are too expensive.
More bad news for those who want to sell ads is Jupiter’s
finding that the cost of Internet advertising has fallen 30
percent over the past year and these costs are expected to keep
falling into the fall of 2001.
Online advertising is one of the casualties of the dot com
crash. “Online advertising was built on false expectations set
up in the Internet bubble when everyone believed the Net was
magical and didn’t need to be measured,” said Carla Hendra,
president of OgilvyOne North America, a major online advertising
firm. “For the first few years, if someone looked at a Web site
and said ‘cool,’ that was enough. Now clients are becoming more
conservative.”
This translates into “Forget about it” for those who believe
they can attract advertising dollars to their Web site. Product
sales at Web sites, however, present a completely different
story. Even with the dot com crash, Americans are spending more
money than ever online. The Web continues to be the
fastest-growing retail channel. According to Boston Consulting
Group, online retail revenues grew 65 percent in 2000, hitting
$44.5 billion. The research company expects revenues to reach 66
billion this year, up 45 percent from last year.
In May of this year, visits to ecommerce sites were up 35
percent over May of last year, according to Goldman Sachs.
Jupiter Media Metrix reported that Amazon’s traffic was up 34
percent this May over last May, reaching 20 million visitors.
Walmart.com visits were up 126 percent this May over last May.
So I received an email this week from Manuel Morales, owner of
Sign3.com, a site that allows NFL fans to vote for their
favorite team. He receives 1,000 visitors each day, which gives
his site total page views of 4000 per day. And he’s asking how
to profit from this traffic. The simple answer is “Don’t bother
trying to sell adverting.”
With his type of targeted audience, Manuel probably stands a
better chance of selling official team products to create
profits. He can likely obtain the products through affiliation
or direct inventory purchases. He can tie an individual team
product page to votes for a particular team so the fan sees only
the page for the team selected. He can outsource the product
shipping to the manufacturer or distributor.
The strategy of selling products to visitors is not foolproof,
but given the advertising statistics versus the retail sales
statistics, product sales are certainly the strategy most likely
to succeed. And given the ability to use affiliation with
product distributors as an alternative to actually buying
inventory and filling the garage with stock, the product route
may come with little risk.