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How to make money on the Internet

By BigZaphod in Op-Ed
Fri Jan 12, 2001 at 11:30:51 AM EST
Tags: Internet (all tags)

I think that most people who are running medium-sized web sites these days have probably begun to notice the collapse of the banner ad market. Unfortunately, there has been no such drop in price in the hosting market. Can the modern Internet (mainly the WWW) continue to work this way?

I happen to run a medium-sized web site for BeOS users. Recently, the amount coming in from the banner ad has taken a nasty tumble. I'm now unsure how much longer the site will be able to stick around. I cannot personally afford the cost of hosting it, so if the site's income cannot pay, then there is little I can do. The problem here is not a lack of demand for the site, but the recent lack of demand from advertisers for banner ads.

The dotcom hype is finally coming to a close. Frankly, I'm happy for that. Unfortunately, it is also bringing a major reduction in the amount of money being spent on banner advertising. It also doesn't help that new studies keep showing up that prove people don't really look at them anyway. So what is a medium-sized site to do? Without the income from the banner ad there is no money to pay for hosting and without hosting there is no site regardless of how much of an audience there may be.

Sure, there are other options such as forming strategic partnerships and other such marketing speak. But most of that never really amounts to anything unless you are the size of Yahoo. It seems that there should be another way. Currently the web mostly funds itself using the same methods as TV and radio. Why does it need to be that way?

Awhile back I was thinking about this very topic and came up with a rough plan for a new revenue structure on the web and Internet in general. It's based on bandwidth usage. After all, bandwidth is really the biggest cost for a small to medium web site. Usually they have very little paid staff and very little need for one. Right now there is almost a sense of being penalized for wanting to provide a free service out of the goodness of your heart. I think that can change, though. Unfortunately, the chances of it happening are pretty slim, but it's fun to think about.

The basic idea is that the entire model for paying for bandwidth is nearly reversed. Instead of forcing the content providers to pay for hosting, let the consumers pay for it. After all, this is how most of the rest of the world works. If you use something, you usually need to pay for it in some way. There are almost no exceptions (even libraries, for example, are usually funded through taxes).

The way I see this working is that content providers are actually paid based on the amount of bandwidth they use. This is exactly opposite of the way things are now. Don't panic yet, though, I'm not just spouting off wishful thinking with no basis in reality. On the consumer's end of the connection, they would continue to pay for bandwidth in much the same way as now. The biggest difference would be that it would be based on actual bandwidth used. Now before you go crazy about that, think about how this could work. If the price per MB was set correctly, it might turn out to be no different than what you pay now for your "unlimited" connection. Here's how it would work.. Each network that the data flows through would pay each other in a very similar way. Each company along the way would obviously want to increase the cut they make, so the ISP charges the end user a certain rate, but buys bandwidth from their providers for a slightly lower rate (this is no different than in the retail market). Each network on up to the actual destination in question would be getting little cuts of the total amount the end user is spending.

Now obviously that seems terribly complex and would be a nightmare to keep track of (not to mention the privacy concerns). But there is no reason to track individual connections--only the total bandwidth used. The idea here is that the ISP hosting the web site is being paid by other providers for using their network. In return, the hosting ISP pays the content provider (the web site) for giving people a reason to even come to their network. That makes sense to me, because why bother investing in a large network with many nice big pipes if no one is going to use it?

Obviously there is room for abuse in this system. For example, a web site could simply start streaming a huge file in the background just to make more money (since they would be paid based on bandwidth usage). Of course the person really getting screwed in this situation would be the end user who wouldn't have a clue what was going on. The best way I can see to stop it would be to simply place a cost counter in each browser window that tracks how much viewing the current page is costing. The rate tallied up in that counter would be based on what the user is paying his/her ISP for service. It would have nothing to do with how much the end web site is actually making (since there would be no way to know anyway). The basic purpose of the counter would be for the customer (end user) to know exactly how much a particular visit is costing so they can make a judgement call about how much they feel the site itself is worth. There are other advantages to this method as well. One is that it would finally create a good reason for web site designers to watch how big their pages are getting. Since customers could simply stop coming to sites that are costing them a lot of bandwidth (and therefore money) it would basically be the free market in action. As it is now, there is no reason not to use the latest browser plugin along with huge graphics since everyone pays flat rates.

Anyway, the plan is probably not perfect, (which is why I'm posting it here for discussion) but I think it might be more on track with how things should go and how they may eventually need to go. With a system like this in place, even a small text-only page with useful information would have a much better chance of staying around awhile--and it could even make a little money for the person who maintains it.


Voxel dot net
o Managed Hosting
o VoxCAST Content Delivery
o Raw Infrastructure


Related Links
o Yahoo
o medium-siz ed web site
o Also by BigZaphod

Display: Sort:
How to make money on the Internet | 49 comments (41 topical, 8 editorial, 0 hidden)
Payment schemes (4.42 / 7) (#3)
by Beorn on Fri Jan 12, 2001 at 07:42:05 AM EST

I think it's obvious by now that advertising, (like music merchandising and free software support), only works for the Big Guys. To help out a bit I clicked on your banner today, and that is the first time I've followed (or even looked at) an ad for at least six months. I'm as much a freebie today as I was in my warez leeching days, and if selling ads has been able to finance web sites up to now, it's only because advertisers haven't yet realized they are wasting their money.

TV ads have the advantage that you can watch the ad today, and buy the product next time you pass it in a store. Web ads must convince you to click, - click now! - and that's much more difficult.

I don't think your solution is a good alternative, though. It's complex, requires a fundamental change in the structure of the net, and as you point out it's too open to abuse. It also assumes that all bytes should cost the same, whether they come from my homepage or Bach's mass in B Minor. (Obviously my homepage is worth much more.)

There are two problems preventing payment for web content to work today: 1. It's too complex, and 2. Users expect everything to be free. The first should be solved with some third party scheme, such as a subscription service that gives you access to, say, 30% of BeOS news sites, or a micropayment system that allows you to pay $.2 for reading todays edition of the site - more than they are earning today, anyway. Following the porn industry, news sites should learn how to attract eyeballs with free content and teasers, then quickly and painlessly make a grab for their e-wallet.

The second problem, that users haven't actually seen the problem yet, must be solved the hard way. In a way, I'm hoping many popular websites go out of business this year, which would prove to everyone that the advertisement model doesn't work. Perhaps Salon going falco would be the real wake-up call.

Massive charging for web content will of course lead to more information piracy, but I think it's more important to have a simple system than an absolutely piracy-proof system. The threat of piracy has always been over-estimated, and I trust humanity enough to believe that most adults would rather pay a small sum for an article than look it up for free on freenet - and I trust capitalism enough to believe that the quality of web sites would benefit from more money.

- Beorn

[ Threepwood '01 ]

banner ads.. (3.75 / 4) (#6)
by driph on Fri Jan 12, 2001 at 08:05:40 AM EST

TV ads have the advantage that you can watch the ad today, and buy the product next time you pass it in a store. Web ads must convince you to click, - click now! - and that's much more difficult.

That's actually not so true.. aside from attracting users to click on the banner and purchase their wares, advertisers often use banner ads for branding purposes.. Hmm, I say, I have a sudden desire to purchase obscenely caffienated beverages. I go to ThinkGeek. Why? Because I've seen enough ThinkGeek banners pitching such products that they are the first that comes to mind.

In that respect, banner advertising is still effective. However, an advertiser should select their audience carefully, and prepare their ads for that audience.

That said, I still believe more can be done with hyperlink advertising(just as we've trained ourselves to ignore banner ads, we've also trained ourselves to focus on hyperlinks), but that's another discussion..

Vegas isn't a liberal stronghold. It's the place where the rich and powerful gamble away their company's pension fund and strangle call girls in their hotel rooms. - Psycho Dave
[ Parent ]
Ads for websites (3.25 / 4) (#10)
by Beorn on Fri Jan 12, 2001 at 08:51:27 AM EST

That's actually not so true.. aside from attracting users to click on the banner and purchase their wares, advertisers often use banner ads for branding purposes..

Yes, but it's more difficult, because you don't accidentally pass by a commercial website like you pass a shampoo at the super market. And if you haven't memorized the URL, you might end up somewhere else while searching for it. It's easier if you're selling a physical product, but relying on users to look up a website is imho risky.

- Beorn

[ Threepwood '01 ]
[ Parent ]

Banner ads are evil! (3.00 / 6) (#7)
by pallex on Fri Jan 12, 2001 at 08:18:36 AM EST

I hate them. They slow down my net access, and i`ve had broswers crash on me before, if you get a large animated ad and you are working on several programs at the same time.

I use the junkbusters proxy at www.junkbusters.com, and the blocklist at www.waldherr.org to remove them, and afford myself a modicom of privacy too.

Re: Banner ads are evil! (2.66 / 6) (#8)
by garethwi on Fri Jan 12, 2001 at 08:21:34 AM EST

Well, that's a nice, simplistic way of thinking, but without the ads, a lot of site could not afford to provide you with all that free information you've been getting.

[ Parent ]
2 + 2 = 5? (2.75 / 8) (#12)
by Beorn on Fri Jan 12, 2001 at 09:04:04 AM EST

Adblockers are evil. Period. They are a childish response to a (currently) necessary annoyance. If you want "privacy", disable cookies. If you want stability, use Opera for Windows. Ads keeps websites free - tomorrow it might cost you.

- Beorn

[ Threepwood '01 ]
[ Parent ]

Annoyances (3.80 / 5) (#20)
by J'raxis on Fri Jan 12, 2001 at 10:23:43 AM EST

I actually never used to block the ads, I just let them be; ignoring them. Then they became animated. Then they started using Flash and Java which crashes browsers on a regular basis. Even if it doesn't, it's an incredible waste of bandwidth.

If they want to annoy me, they get blocked. Simple as that. I'd never click them anyway, so why waste my time letting them load?

-- The Ad-Free Raxis

[ J’raxis·Com | Liberty in your lifetime ]
[ Parent ]

Exactly (none / 0) (#49)
by pallex on Thu Jan 25, 2001 at 01:05:27 PM EST

I dont go for this `ads keep the net free` argument. Sounds like the sort of thing a web designer/company would say. How about videoing tv shows and skipping through the ads? Is that bad? Who`s going to pay for tv shows? Not my problem, someone else can deal with that.

[ Parent ]
Hosts file (3.50 / 2) (#19)
by J'raxis on Fri Jan 12, 2001 at 10:18:50 AM EST

I use the hosts file technique, which blocks about 80 - 90% of the banner ad servers (most websites host their ads on a different server than their content).

Biggest hosts file resource I've found is at http://www.smartin-designs.com/.

-- The Ad-free Raxis

[ J’raxis·Com | Liberty in your lifetime ]
[ Parent ]

The death of banner ads? (3.14 / 7) (#9)
by kaboom on Fri Jan 12, 2001 at 08:32:28 AM EST

You seem to attribute the drop in banner ad revenues to the dot-com collapse. I suspect it's rather that advertisers have finally realized that banner ads don't work. Hang in there a couple more months for the next generation of advertising technology -- click-through ads, redirect ads on close, etc. -- (assuming you don't have the moral qualms about using them that I would ;-) and your revenues should go back up....

Bandwidth != Content (3.62 / 8) (#11)
by JackStraw on Fri Jan 12, 2001 at 09:00:22 AM EST

I agree that we need some incentive to produce quality content, and a means to pay for bandwidth.

In your plan, they guy that mirrors a huge ftp archive or gives away mp3's or even shorten files (hey, why not, the bandwidth is better than free!) will be making show knows how many thousands of times more than the guy that produces a sleek, informative mostly-text site.

I'd say that, if anything, a better alternative would be this:

  • Your site joins a network, where only members of that network can view your page. They pay a low monthly fee.
  • They choose their 5 favorite sites on the network, and it also tells which 5 sites they visit most.
  • Their fee (or at least most of it) gets split up among those sites.
Then, you would be paid according to how useful and popular your page is, not how big its files are.
-The bus came by, I got on... that's when it all began.
This May Be Broader Than The Internet (4.00 / 9) (#13)
by Crawling Chaos on Fri Jan 12, 2001 at 09:07:50 AM EST

Advertising is in trouble, period. Some other examples:
  • George magazine has folded due to lack of ad revenue.
  • We're getting more "reality" TV like Millionaire and Survivor because they are cheaper to produce, so even if the show tanks in hte ratings, low ad revenue can recoup the modest production costs.
  • Advertisers are up in arms about the low viewership of the Olympics vs. the high cost of the ads

My personal opinion is that most adults in modern western society has been so innudated with marketing and advertising that it's become part of the background. It just isn't seen anymore.

Can't post, clowns will eat me...
Can't post, clowns will eat me...

Nice idea (3.00 / 3) (#14)
by dancingblue on Fri Jan 12, 2001 at 09:31:05 AM EST

the possibility that as advertising becomes more and more prevalent people will see it less and less as it becomes a standard part of their world. would advertising collapse though or become unintentionally subliminal?
if it collapses, good, though it would collapse back to a tolerable level as people would suddenly become aware of there being no advertising, then become aware of it again as the surving ad companies revive.
if it becomes subliminal, what then?

[ Parent ]
How little you know (4.25 / 4) (#23)
by GreenCrackBaby on Fri Jan 12, 2001 at 11:23:15 AM EST

Advertising isn't in trouble. Advertising won't go away.

George magazine folded due to lack of add revenue. What does this prove? That george magazine didn't have a readership base large enough to warrant big spending by advertisers.

Reality TV is not cheap to produce. Do you think it would be cheaper to produce a tv show in a warehouse studio, or on a remote tropical island? Simple fact is that reality TV is popular -- that's why we're getting more of it.

Your comment about the Olympics makes no sense. Viewership was very very low because NBC did a hack job presenting the Olympics. When you have Americans tuning into Canadian tv coverage because it's better, you know you've got a problem. What does this have to do with advertisers? They aren't going to go away because they lost money.

My personal opinion is that most adults in modern western society has been so innudated with marketing and advertising that it's become part of the background. It just isn't seen anymore.

Actually, this is mostly false. This is true for a small segment of adults (ie. the intelligent ones). For the most part, there is so much advertising because it works.

[ Parent ]

The Costs of Reality TV (none / 0) (#28)
by Crawling Chaos on Fri Jan 12, 2001 at 03:30:46 PM EST

Actually, you could probably afford to produce "Survivor" or "Big Brother" in orbit for less than the salary budget of "Friends" or "Seinfeld". Big stars demand big salaries, whereas the schleps who appear in reality TV are cheap.

Actually, this is mostly false. This is true for a small segment of adults (ie. the intelligent ones). For the most part, there is so much advertising because it works.

That may be right. And it scares me.

Can't post, clowns will eat me...
Can't post, clowns will eat me...
[ Parent ]

Nit-picking (none / 0) (#32)
by GreenCrackBaby on Sat Jan 13, 2001 at 12:28:19 AM EST

And "Destination Mir" was set to cost $43 million.

The price of actors is so tiny compared to overall budgets. The salary "Friends" crew is pulling in is an anomaly, but I bet 99% of the rest can be produced for well under what "Survivor" cost CBS.

[ Parent ]

Ads are annoying (3.62 / 8) (#15)
by Refrag on Fri Jan 12, 2001 at 09:40:19 AM EST

I'm not going to pay any attention to a pop-up ad (which a lot of sites are now forced to use). I'm simply going to focus on the X in the top right-hand corner of the window and click it.

However, banner ads that constantly display the company's name work very well. I don't think it's effective to have 1 out of 5 frames of you animation to have your logo on it. The logo should be visible most of the time. Because very few ads are going to catch someone's attention long enough to sit through the animation to find out who the ad is for.

I also feel that ad placement is stupid. It's always up at the top. It should be intersperced with the text. And, the ads should be tasteful, otherwise they will drive readership down. I don't want to read an article and then be asked to punch the monkey halfway through. (I still have no idea who this ad is for) Plus, since the ads are going to be intersperced with the text, they should always target a new window when clicked.


Kuro5hin: ...and culture, from the trenches

My problem with this idea. (3.33 / 6) (#16)
by rednecktek on Fri Jan 12, 2001 at 09:44:56 AM EST

I am planning on (initially) providing a website from my DSL connection at home. If the plan you propose were in place, I severly doubt I could afford the amount of hits I would require before I want to move it to a dedicated pipe. In your scenerio, I would never build the site at all.

Although I'm sure some people will see that as a Good Thing(tm), I don't because: IMHO, it would limit the sites with new ideas brought to the internet.

Just remember, if the world didn't suck, we'd all fall off.

You're not seeing the whole picture.. (none / 0) (#38)
by BigZaphod on Sat Jan 13, 2001 at 04:49:43 AM EST

Under the system I propose, there would be no need to start a site on your DSL connection. Since there would be no cost associated with hosting a web site, there's no reason not to just host it at a hosting provider in the first place. The main reason you are wanting to start on your DSL is likely the hosting costs. Well, as I've said, there would be none under this system because the end user (you on your DSL) pays for the traffic used on the remote web site, so why not just start off right with a real hosting account someplace? Obviously that is not how you would do it with the way things are now, but that's how you would if things worked the way I have in mind. As you pointed out, it wouldn't make sense hosting it at home.

"We're all patients, there are no doctors, our meds ran out a long time ago and nobody loves us." - skyknight
[ Parent ]
RE: ^You're^ not seeing the whole picture (none / 0) (#48)
by rednecktek on Wed Jan 17, 2001 at 03:14:40 PM EST

Where exactly is the initial traffic for my website going to come from? I would bet that most sites start with little or no traffic. The owner/webmaster tells people he knows, who tell people they know, etc. Eventually, some (not all) of those people continue to visit and/or contribute to the site (at least I hope so).

If web hosting were "free" as you propose, how would the hosting service earn money while the site attracts a following? Will they just give you the time to get it rolling? Not likely.

I will run my site from my DSL connection to get it on-line (out of my pocket). If/When it takes more bandwidth, I'll upgrade my connection (out of my pocket). If it gets so large I need commercial bandwidth, I'll probably be praying somebody sends me the server, pays for the line, etc., but I'm never going to count on it (i.e., out of my pocket). I'm doing this because it's something I enjoy, not because I'm looking to make money from it. Not everyone is greedy.

Just remember, if the world didn't suck, we'd all fall off.
[ Parent ]

An age old issue (4.60 / 5) (#17)
by Anonymous 242 on Fri Jan 12, 2001 at 09:56:13 AM EST

This is really the same issue people have faced for all of recorded history in a relatively new medium. The real question is: how does a producer of a service stay in business? How to keep a high profile web site running isn't much different of question than the playwrites of ancient Greece faced of how to continue to stage these monstrous productions.

The traditional answer for informational/entertainment producers is to either find a patron (which is essentially what happened to k5, vhosting and valinux stepped in to finance the bandwidth and web server) or charge for admission. Both of these are not very easy to do on the web in the information age. Very few sites have been able to make the subscription model cover costs. Patrons (especially ones that stay in business) are few and far between.

I would think that if the site in question is popular enough and attracts a community with motivated self interest, then accepting donations through pay pal or some like service would do much to defray the cost. One might also consider "selling out" by approaching an established company such as tucows or andover to acquire the site.

There are other models (3.80 / 5) (#18)
by job on Fri Jan 12, 2001 at 10:18:42 AM EST

Your proposal is flawed due to the following reason: It favors sites with bad content and large files available for download (MP3s, ISOs anyone?). I am sorry, but it will never work.

The reverse-cost model of the web is part of what makes it very interesting. I believe the powered-by-ads model sucks big time, and I too am one of them (evil persons) who filter them. (By the way, the part about radio and TV being financed by advertisements is very US-centric. That's not the case everywhere.)

There are other models. Two really simple ones I can think of straight away:

  • Run the service on your own or a friends computer hosted at someones work or school. As long as the service is purely non-commercial there are several places where you can get away with this. (I do.)
  • If/when your customer base is large enough, make it a pay service. I know, this is very difficult to get away with in reality, but in the long run this is the only thing that can work.

As more and more things try to get their revenue from advertisements (magazines, broadcast media, telecommunications, buses, subway etc.) the money stream gets thinner. An ad among a thousand others is not worth anything. That's why ads are no the catch-all answer.

We will soon se a migration on the www to other revenue models.

It *could* work.. (none / 0) (#37)
by BigZaphod on Sat Jan 13, 2001 at 04:45:36 AM EST

"It favors sites with bad content and large files available for download (MP3s, ISOs anyone?). I am sorry, but it will never work."

No no.. I mentioned that in my story posting. The solution is very simple: provide a way for end users to know how much the site they are visiting is costing them. That would be very easy. They leave the site, then the site in question gets no payments because no one is using it. Very simple and very elegant.

If you want to download a hundred megs of illegal MP3s, then go right ahead--but you'll pay for it in bandwidth fees. And since the person hosting them would be getting paid it suddenly makes illegal song trading just that much more illegal since they are now making a profit off of other's IP. But, you could also take this a step farther.. And that is if the band itself posted the MP3s, then the simple act of a person downloading the song from the band's site would constitute paying for that song. Simple and easy and no need for the record companies. But that's a whole other argument.. (And a huge + for this idea, I think)

"We're all patients, there are no doctors, our meds ran out a long time ago and nobody loves us." - skyknight
[ Parent ]
I'm sorry, but I doubt it (none / 0) (#44)
by job on Mon Jan 15, 2001 at 08:58:09 AM EST

It does not matter how you manage the payment -- the result will always be that you gain money from wasting bandwidth. There is also the need to earn your living from managing a web site, but perhaps you did not want to cover that with your model. (Which I thought you did but perhaps misunderstood.)

[ Parent ]
Charge to host (3.20 / 5) (#22)
by sugarman on Fri Jan 12, 2001 at 11:22:43 AM EST

Admittedly, your site is a little different than most, as your content is mostly provided by others. Since you are basically serving as a host for these people to get their product to market, could you not charge the programmer's to "host" their product for them. I'm not talking a lot here. But a small set fee, based on ( your costs / number of files hosted ) could likely make up some of the difference.

I'm not sure how viable this would be, and how much this would conflict with your goals of providing the software. Just something to ponder.


The Microsoft FrontPage Bonus (3.20 / 5) (#25)
by iainl on Fri Jan 12, 2001 at 11:48:03 AM EST

I can see it now - FrontPage isn't a bad web design program that makes sloppy HTML code; its a brilliant way to boost your site revenue! Why write efficient pages, with well compressed JPEG images and no massive tags that don't do anything or animated GIFs that take ages to load when every byte removed is less revenue for your site? As has been mentioned, bandwidth doesn't equal information; a 17Mb Quake patch shouldn't end up costing you a month's worth of reading K5 as a user either.

Ads are not a good revenue stream (4.50 / 2) (#26)
by Maniac on Fri Jan 12, 2001 at 01:38:55 PM EST

To me, this issue "isn't news". Jacob Nielsen posted an Ads dont' work article on Alertbox back in 1997. From my personal use, I doubt I've clicked on an Advertisement in years. I don't want to get my work done "that way". Its more frequent that I...
  • start with a search phrase with AltaVista
  • look up a URL in a printed advertisement
  • go to places I've bookmarked
  • follow links from another site (such as Kuro5hin)
Perhaps it is time to review your business model. Who are your stake holders? What will they do if you "go away" tomorrow? What are you "selling" and who wants to "buy" it? How can you get paid? and so on. Perhaps you need to change to a model like Nielsen where he uses Alertbox as a "client attractor" for his consulting firm. [BTW - he made the "big jump" from Sun a few years ago]

It sounds like your web site is about (or has) to change from an asset (net income) to a liability (net losses). If you can't come up with a good idea, its time to fold the tent and do something else. Sorry.

Not what I mean... (none / 0) (#36)
by BigZaphod on Sat Jan 13, 2001 at 04:39:19 AM EST

"Perhaps it is time to review your business model."

That is not what I was writting about here. So you are saying that even though my site might be a terribly useful thing to a small segment of people it is just too bad that it's not really sale-able and it should go away?

My idea was brought on by my discovery (on my own and through my own experience) that banner ads no longer work unless you are the size of Yahoo. Not only does my idea suggest a way around it, but it points the way to a web with less ads since they wouldn't be needed much anymore. Small to medium sites like mine don't like the ads because unlike the huge corporate machines, we're users too. And most of us are not really in it for the money. Instead we just want to provide a nice service to people--but we want it to be worth our time. Having to pay the hosting fees as well as spend hours upon hours of time to do this becomes a financial and emotional drain very quickly. The system as it is now is very unfriendly to any site that has a good idea but has the misfortune of getting popular. That's what happened to us and it's happening to lots of other smaller sites. Kuro5hin itself isn't a bad example. Where would they be without some form of sponsership? Why does everything need to be corporatized/branded like that? There's simply no other way as things are now and I am proposing an alternative way that would avoid that sort of thing.

"We're all patients, there are no doctors, our meds ran out a long time ago and nobody loves us." - skyknight
[ Parent ]
No clear solutions (none / 0) (#47)
by Maniac on Tue Jan 16, 2001 at 12:50:15 PM EST

Your first comment pretty much hits it on the nose. It may be terribly useful (and thus worth something to those users) but if you can't make the sale, it should go away. I put it in business terms because you are essentially doing a business task (providing a service).

From what I can tell, you can't spend the time and money to keep it up without external support. Without any changes, I expect you to stop providing the support and the site dies. You don't want that to happen. OK, then - what will you do about it? How can it succeed?

Corporate sponsorship is one way. There's nothing wrong with that. I look at TidBITS and Alertbox, and other sites as having gone that way and done well. You will have to get comfortable with "selling" or you're back on your own resources which isn't enough. Make the choice - continue with support [from a company or your users], or continue [shut down?] without it.

[ Parent ]

Personal experience (none / 0) (#29)
by danny on Fri Jan 12, 2001 at 06:43:44 PM EST

My own web "labour of love" is totally image-free (it's a collection of 500 book reviews), so I can't say I'd be enthused by any valuation scheme that measured bandwidth used. (As others have pointed out, that would just encourage gratuitous images.)

As I see it, you've only got a few real options

  • pay for it yourself or find a sponsor
  • make your users pay (though you may have to wait for a working micropayment system)
  • syndicate the content (I managed a deal doing this quite out of the blue, and that should cover the cost of running my site)
Advertising doesn't seem to work - and to be working less well as time goes by. But I'm interested to see how Google's micro-advertising scheme works - Google's ad setup is among the few that don't annoy the hell out of me.

[900 book reviews and other stuff]

Why would you have a problem with this? (none / 0) (#35)
by BigZaphod on Sat Jan 13, 2001 at 04:28:04 AM EST

In my system you would pay nothing to host your site and you might even make a tiny bit when people use it. Why would that be bad? Right now you probably pay to host it and make no money from your casual visitors.

There is also no reason at all you couldn't have advertising or make other deals just like you are doing now. I don't see how my idea would change your situation at all. Your site would not only be useful for it's information, but it would also be VERY cheap to visit since there's no graphics or anything bandwidth intensive. Those things cost the end users money since they would be paying for the bandwidth they use. Your site would be even more attractive under this system, not less.

"We're all patients, there are no doctors, our meds ran out a long time ago and nobody loves us." - skyknight
[ Parent ]
bandwidth is not content (none / 0) (#41)
by danny on Sat Jan 13, 2001 at 07:12:57 PM EST

If traffic is to be charged for on a per-byte basis (and it already is in most cases in Australia), then the ISP bill should reflect the transmission costs. Confusing this with charging for content is bad - that will get us back to the closed systems of AOL and Compuserve where the same entity is ISP and content-provider (or content-bundler).

I'd prefer to see a micropayment system that doesn't involve bandwidths (it might require some sort of centralisation, but that would be done by banks, separately from either bandwidth or content provision).

[900 book reviews and other stuff]
[ Parent ]

What I'm Doing. (none / 0) (#31)
by Seumas on Fri Jan 12, 2001 at 10:09:37 PM EST

My site has been around for almost two years and has a little over 8,000 members. It's a specialized auction site that I started simply as a way to learn Perl. Within about a week after putting the site up, word had someone leaked and it began gaining users. While I was originally going to take the site down when I was through playing with the code, I decided to keep it up.

Here I am, eighteen months later with about 8,000 members, a couple million page-views per month and about 15gb of bandwidth used each month.

The site is completely free. I've never charged anyone a dime to do anything. I've never put up any type of advertising and, since advertising is pretty much a sham on the internet, I don't plan to.

I pay for the cost of hosting out of my pocket. I do all the coding and trouble-shooting and handling hundreds of user-complaints (each week) for free. I deal with the crashes, the system screw-ups and all the other miscellanious crap.

It would be really nice if I could at least bring in enough revenue to enhance the site to pay for some staff (to handle customer service and some coding). I'm not even interested in making money from the site for myself. I make enough in my career that I can live alright. I mean, I'm not typing this message from a card-board box at any rate.

If I could charge users a yearly subscription (something cheap), it would also help with multiple fake accounts and problem users who just create an account, cause trouble and leave. At least, I think it would.

The reason I have never considered charging people to use my site (or figured out any other bizarre revenue stream) is that I'm worried people will leave the site. People on the internet are finicky. If they can get something for free, they love you. But even though these people are spending hundreds of dollars on auctions at my site, I doubt they'd be interested in paying $10 a year to use the site for their hundreds of dollars of transactions.

So I guess I'm sort of held-hostage, aren't I?

I don't know what to do and it's burning me out.

I just read K5 for the articles.

Do like eBay.. (3.00 / 1) (#34)
by BigZaphod on Sat Jan 13, 2001 at 04:23:35 AM EST

Why not take a small percentage of the winning bid as a payment? It's simple and if the item doesn't sell then the seller doesn't have to pay. Seems easy enough. It might scare off a couple people, but perhaps if you explained the situation they would rather that the site stayed around than went away and give up a couple percent of their income. And maybe it would at least pay for some of your invested time. Don't sell yourself short.

"We're all patients, there are no doctors, our meds ran out a long time ago and nobody loves us." - skyknight
[ Parent ]
The problem with a percentage cut. (none / 0) (#39)
by Seumas on Sat Jan 13, 2001 at 11:08:03 AM EST

[Hey, just a quick request -- if anybody things this would be something that would be okay to submit as an article to K5, let me know? I would really love the wise advice of the sages here, but not at the expense of making enemies for submitting something "so dumb".]

I had considered that idea some time ago, but only briefly.

There are several problems with taking a cut from each sale (there are several problems with revenue raising idea so far though). First, a lot of people have completely left eBay to use my site not only because of the niche it serves, but specifically because I don't charge that listing/percentage fee that eBay does. Even if I did charge a percentage, it means that people would have to send money to me ahead of time to have their account credited. Then I'm suddenly caught in the middle every time someone's auction doesn't go through. What if Suzy doesn't send Maggie the item she won and keeps Suzy's money? What if Suzy sells to the second-highest bidder? It's so impossible to keep everyone at auction sites honest that the best way I've found to deal with it is to just stay totally impartial and removed from those situations (after all, there are enough ways to protect yourself, such as cheap escrow services).

Now, the good thing about a percentage fee is that it would mean that people who sell more pay more and people who sell less pay less. Considering the type of member at my site ranges from sixteen year old highschool kids to twenty or even forty year old self-employed people effectively running their entire business through my site, that would be a somewhat fair method of gaining revenue.

A long time ago (perhaps eight months or more), I ran a poll on the site to see what ideas people supported the most. Now, the idea at the time was not regarding revenue specifically -- but rather a way to be sure people couldn't create multiple accounts and continue to be dead-beats. My theory was that if someone had to pay money to use the site they would be less likely to be deadbeats and they would be less likely to waste money on creating fake accounts to shill auctions or harass users.

The ideas I had were:

Send in a copy of valid photo ID for an account.
A hand full of people liked this idea. Free, but still helps solve the problem of multiple accounts and accountability.

The biggest problem I had with this one is that I do not want to keep records of people's private data. I already have to keep their names and email/mailing addresses and I feel having their photo ID is just too much and there are too many potential problems with people having trouble at some point in the future and then blaming me because "Hey, I sent him a copy of my drivers license!". Besides, I'm a big privacy proponent.

Pay a percentage of each item (or alternatively, a straight-forward listing fee).
A handful of people liked this idea, too -- but not anywhere near a majority or plurality.

As already mentioned, there are pros and cons to this. I like the idea, but I don't like the idea (I'm a gemini -- go figger).

Send in a small payment (5 or 10 bucks) and, if you do not cause trouble for six months, have it refunded.
People liked this one and the 'pay a flat fee' idea about the same. I think they liked the idea that they would get their money back after proving themselves. Of course, this doesn't help solve the problem of funding the site -- just helps with multiple accounts. Then I have the added trouble of sending their money back to them every six months. Kind of a pain in the ass.

Pay a flat fee (subscription) to access the site.
This one had the most votes.

These helps fund the site and allows people to use the site as much or as little as they want with no more trouble than sending in a money order or check once or twice a year. It also makes it easier to 'guage' annual funding, because it's more static than percentage fees.

Then there were a few people (maybe 10% or 20%) who flat-out preferred not to pay at all.

I think there were some others, but hey -- it's been a long time.

Some friends have been suggesting that I setup a tiered system. I kind of like that idea. Something like this:

Fee-For-Service: User send in some money, which is credited to their account. Doing stuff (buying, selling, etc) costs a little bit each time and that cost is deducted from the bank-roll/account. When the account is empty, they no longer have access to services until they send more money.

General Subscription: Users send in a payment of perhaps $10, which entitles them to a one year subscription. This allows them to post as many auctions and sell/buy as many items as they like in that time.

Advanced Subscription: Users send in a payment of maybe $20 for a one year subscription. They get everythign the general subscription offers, but some neat tools to allow them to track their sales and auctions they're interested in. Maybe they'll get a tee-shirt or a button or something with the subscription.

Business Subscription: Save as the Advanced Subscription. Maybe charge $50 bucks for a one year membership. The advantage would be that they would get to have little 'min-advertisements' or 'featured auctions' on the site, to promote what their business is auctioning on the site. Anyone would be able to use this service if they want to pay the business subscription fee, of course.

So, I don't know about this. I know this is long and a little off topic, but hopefully someone wiser than I will offer me some advice. My concern is that I'll start charging (whatever method I decide on) and half the members will leave. If half the members leave, that limits the audience that sellers have and they will get tired of low sales-prices on their items and leave, too. So i feel like I am damned if I do and damned if I don't.
I just read K5 for the articles.
[ Parent ]

I think some of you are missing the point.. (none / 0) (#33)
by BigZaphod on Sat Jan 13, 2001 at 04:18:30 AM EST

Many of you are assuming that I'm just complaing about ads not working anymore. I'm not. I'm trying to formulate a different way of making money that does not depend on the whims of advertisers.

Also, several of you are suggesting that micropayments may be the way to go. Well, my idea basically *is* a micropayment plan. Instead of tracking each individual visit to the site and then actually tracking tiny amounts of money around like that I decided it would be more practical to simply use bandwidth as a general measure since you can deal with it in larger chunks. The break down of that large payment the user makes to the ISP would result in a micropayment eventually anyway. This is hard to explain (mostly because I'm terribly tired :-). Think about it this way.. If we have a working micropayment system and you paid me each time you came to my website, the end result is I get a certain total amount of money (say, X) that would be equal to the total amount of micropayments made, right? This is a simple logical "well duh". In a system like that, that means the end user would be paying their ISP for the bandwidth (exactly like now) as well as having to pay my site (in micropayments) on top of that. From the web site's point of view, the amount of money comes in as X dollars per month (since that's how businesses look at things). What would be the difference if instead of all these tiny micropayments all over the place the ISP that hosts the web site cuts one check each month for X dollars? There would be no difference from the web site's point of view. Now, take that idea and apply it all the way down to the end user. Now the end user simply pays one large sum of Y dollars each month for the amount of micropayments he/she would have made over that time. All the network providers between the end user and the web site do the same thing which eventually results in everyone getting smaller and smaller cuts of the end user's payment all the way until the web site finally gets the amount of X. I'm not sure this makes any sense. Anyway, the idea was to take the micropayment model and spread it out and simplify it so that it could work NOW without having to totaly reinvent how we browse and how we spend money. And as a nice added bonus, each network on the path to the web site gets some cut of the profits which means they can continue to pay for maintaince on their systems (since lots of companies only do communications and never deal with end users like web sites or dial up customers). If micropayments were made directly to the web sites, then the middle networks are ignored which means we would still have to be paying monthly access fees to help support them as well. Why not support the entire network all at once by simply paying for what really costs money--the bandwidth!

Maybe that will clear up what I mean a little. Then again, it might confuse the issue more. Oh well.

Also, for the people who think this would be a good excuse to bloat web pages, please take a closer look.. I specfically mentioned that this could be a possible problem but the solution is very simple. As long as the end user knows how much the current web site is costing them, that will help drive competition. If everything is being paid for in terms of bandwidth and sites are wasting lots of it by using huge graphics, people would be able to see that it costs them more to go to those sites and they would steer away from them. That solves the problem all by itself.

There are of course still problems, but I just wanted to try to clear some things up here. Almost all of the major "problems" the comments so far have tried to point out or attack are not problems if this plan would be implemented as I had stated. The problem of sites sucking up bandwidth wouldn't be an issue if end users were always aware of just how much a site was costing them. The issue of micropayments as a solution isn't even relevant because that is almost exactly what this is (only more distributed and without the "micro" part). And this story was not a plea for people to come a click on banner ads on my site or suggest alternative methods of funding it. The issue here is that there is still no really good way for small to medium-sized sites to make money (and by this I mean pay hosting fees) on the net. The "pay out of your own pocket, then" answer is also totaly off base since you don't expect that of any other form of information medium (books for example.. you wouldn't expect me to publish, print, distribute my own books all out of pocket, would you? Generally a small author makes very little to nothing, but the book will usually pay for itself anyway).

Anyway, it is late here and I'm very tired. So if any of this makes sense I'll be very happy. If not, flame away. :-)

"We're all patients, there are no doctors, our meds ran out a long time ago and nobody loves us." - skyknight
Workable Micropayment System Exists Now? (none / 0) (#40)
by Morn on Sat Jan 13, 2001 at 02:02:06 PM EST

Have you thought of using something like paypal to allow users to pay a small subscription charge? You could let non-subscribers see the front page, but actual users would have to pay a small fee to actually use the site (it could work on a Kuro5hin-like login system).

The user would pay $1 for a month's access to BeBits (it's a small cost, and one I'd somehow be more likely to pay than $12 a year), of which you'd get 70 cents (paypal keep 30 cent per transaction for business accounts).

I'd certainly pay - I'm sure other BeOS users would too.

You could optionally offer year-subscriptions at a discount (say, $10), on which you'd actually make more money than if the user payed every month.

[ Parent ]

Hardly (none / 0) (#42)
by ritesh on Sat Jan 13, 2001 at 10:17:22 PM EST

Unfortunately, the chances of it happening are pretty slim, but it's fun to think about.
Hardly. I think this is a very logical way to make niche websites work. I have always believed that the power of the Web lies in being a vertical symmetric medium as opposed to it being a souped up version of existing (mostly) asymetric mediums aimed at mass horizontal audiences (like cable/radio/print). Having done prior research in this space, there is an urgent need to figure out new revenue sources. Some points of note:
  • There are other working analogs to your plan. In completing long distance and local calls, the long distance carrier pays the telco where the call originates and where the call terminates. This is why long distance on cell phones is cheaper. On incoming calls, the cell carrier gets a subsidy and on outgoing calls its has to earn more than it pays the callee's local telco. Similary when I make a local call within my local calling area and the call crosses carriers; the caller's carrier pays the callee's carrier. CLEC love to host ISPs and as all calls to ISPs are incoming.
  • Your plan neatly sidesteps the problem of calculating micropayments by using bandwidth based ISp payments. However, the problem to be solved is that the top tier ISPs do not charge each other for bandwidth. So if I go
    mylocalisp->mega carrier1-->mega-carrier2->hosting co/yourisp
    megacarrier1 and megacarrier 2 do not charge each other for exchanging traffic.
  • Broadband carriers like cable companies and DSL providers are seriously in the hock for their infrastructure buildouts. It will be tough convincing them to fork over some of the cash.
  • Finally another data point: This is similar to what AOL does albiet by bundling content in a proprietary network rather than on the "open" Web. The success of AOL lies in understanding the power of bundling very specialized content for hundreds of categories. AOL can strike deals with say a small specialiezd magazine for a few millions or less; which is often a significant source of revenue for them. However than all of AOL's 20 odd million subscribers can see that content.
Assuming you rely on bandwith access payments alone; can you do back of the envelope calculations for the revenue yield for each subscriber and a revenue yield per page to take you to breakeven?

One way to kick off, is to offer this on a voluntary basis. Given sufficently detailed access logs, you can display the cost incurred by their usage of your website. You can suggest that they use paypal or similar means to pay you the full amount or a partial amount. This is similar to what public radio stations do except that your approach is quantified. If you have other revenue streams (advertising, affiliate marketing sponsorships) and they go up in response to user particpation, the cost to users goes down. This method incentivizes them to use your site as the conduit for purchases and visit sponsors. I would be interested in knowing what you think?

Slightly vile idea. (none / 0) (#43)
by Holloway on Mon Jan 15, 2001 at 08:15:35 AM EST

Um, forgetting alternate payment schemes altogether, if you can't afford the bandwidth have you considered trying to temporarily minimise it?

When a friends site was in trouble due to bandwidth costs he asked users to each host an image. It sounds like a little thing but distributing the costs over many people does help. You could just be serving HTML/CSS.

The front page of Bebits is about 37k, the images are 30k. I realise that further pages would reuse cached images but it'd be a little saving - what do your logs say?

Hell.. host the images on Geocities.

== Human's wear pants, if they don't wear pants they stand out in a crowd. But if a monkey didn't wear pants it would be anonymous

An editorial on Something Awful. (none / 0) (#45)
by Holloway on Mon Jan 15, 2001 at 09:38:23 AM EST

If anyone's been following the troubles of SomethingAwful.com they'll know it's having problems dealing with the popularity; their banner network not paying them; and LowTax has written an editorial on how to save the banner ad.

Something Awful is a lovely wee site. It'd be a pity to see it go.

== Human's wear pants, if they don't wear pants they stand out in a crowd. But if a monkey didn't wear pants it would be anonymous

[ Parent ]

Adopt An Image (none / 0) (#46)
by Holloway on Mon Jan 15, 2001 at 10:17:25 PM EST

He did an "adopt an image" program.

It worked as people don't mind donating bandwidth or server space so much as they do money.

== Human's wear pants, if they don't wear pants they stand out in a crowd. But if a monkey didn't wear pants it would be anonymous

[ Parent ]

How to make money on the Internet | 49 comments (41 topical, 8 editorial, 0 hidden)
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