Making Money with the Click of a Mouse.

MAKING MONEY WITH THE CLICK OF A MOUSE

Ads remain the main model of making money from the Net. But, now the advertiser is demanding more tangible benefits from the site owner

IN THE heady days of the dotcom bubble, when the flow of venture capital burst the plumbing, online businesses started in every street corner with the idea of deriving revenues from advertisements. To say that ads will bring in the money was easier than designing a cash flow model for the raw business. Though the ensuing bust thankfully put an end to such websites, Internet businesses and online advertising have continued to evolve. Today, at least half a dozen portals and websites in India have demonstrated that successful business models can be built around advertisement revenues. And some estimate online promotional spending has grown 100 times in the last seven years. Good time to toe the line? Yes... well, may be.

Industry players say the Internet industry in India as well as the advertisers who patronise it have matured, leaving room for only serious players to succeed. It will be a hard and tortuous path to build a sustainable revenue flow and it takes more than a mere IP address to get advertisements. While there are ventures that offer a unique value to customers and thus justify the ad spend on them, there are many who are in the bandwagon just for the heck of it and run the risk of failure.

From bloggers leveraging Google AdSense to techies running YouTube clones to entrepreneurs innovating ever newer online business models, a lot of people are starting web ventures depending on advertisement spending as their principal revenue source. Take Bloozler, for instance. It is a tool that puts blog posts into an e-paper form, story placements prioritised on the basis of user ratings. Or, consider Vakow, a web and mobile-based service dedicated to forwarded text messages. Bloggers and SMS forwarding users are not likely to be vigorously interested in paying subscription fees and these unique ideas must depend on online advertising to have a chance at becoming big businesses.

Yet, go online and you would find several me-too websites that are also tapping the ad world. There are at least 20 ‘Indian’ YouTubes — dekhona, meravideo, videochutney, videocurry, merovideo, punjabitube and so on. Most seem to be driven by dreams high valuations like the $1.6 billion Google dished out for the video sharing service it bought.

In India as in many places else, advertising is the most popular revenue model for Internet businesses. Subscriptions and commissions on transactions are difficult to enforce or represent a much smaller potential market. The new rules of the game require the website owner to present a tangible benefit to the advertiser and be accountable for results. Industry experts list a few of the rules as most crucial:

DEFINE AUDIENCE

Too many online businesses try to capture as many visitors as possible and end up diluting the appeal. A successful website clearly defines its audience and is able to sub-divide its visitors into packages for advertisers. These subgroups are redirected to pages that suit both sides. “The entrepreneur needs to know clearly who his audience is, what is it that he is providing and how is he going to source it… Service the audience right and everything else is a byproduct,” says Dinesh Wadhawan, MD and CEO of Times Internet.

Sometimes, the solutions purportedly offered by online businesses is fuzzy and advertisers don't see a point in communicating through them. “People are trying to fix problems that the consumers don’t even know about,” says Suvir Sajan of Nexus India Capital. “They first come out with a solution and then try to educate people about the problem. For instance, we were once presented with the idea of a start-up that came up with a single page to manage their whole lives. My question to them was ‘why would anyone want to use that?’ After all it isn’t so difficult to check your mail on one site and news on another.”

KEEP ADVERTISER IN MIND

Websites often create content that cannot be matched with relevant advertisements within a page and presented to the reader. Often, they do not have content that go along with the advertisements in hand. The online property must be designed not only with the readers in mind, but also factor in the interests of advertisers, experts say. Advertisers can be fastidious. “They want to see that the content, the look and feel of the pages goes with their brand. For instance, the page which suits an Asian Paints ad, will be very different from one that suits Goldman Sachs,” says Pratap Bose, CEO of Ogilvy and Mather. In websites offering a rainbow of content, classification and clear separation of modules will be crucial to attract advertisers.
Sulekha.com, which began during the dotcom years and survived to tell the tale, suggests a modular approach. “For instance, if you clearly categorise the film section, or the book section or the classified section, this would be beneficial for the advertiser,” says its founder Satya Prabhakar. This will be particularly useful for small businesses, because it is cost-effective for them to advertise online than in conventional media. Leverage this advantage.

BE ACCOUNTABLE

At the end of the day, advertisers want their ad spend to convert into business transactions. An online business owner must actively engage to lead this conversion. Gone are the times when advertisers went by the number of visits, or eyeballs as they called it. Now, they insist on measuring the time spent on each page and the number of unique users. “The industry has gotten more systematic. Advertisers now have the ability to track clicks, clickthrough leads, clickthrough conversions and transactions. this has made the industry more accountable,” Mr Prabhakar says.

BUILD TRAFFIC

The raw material for an online business trying to attract advertisers is the traffic. Content business is not about selling content to readers, but selling audiences to advertisers. “Worry about advertising after building the traffic. But the first rule there is to create a solution that solves a lot of people’s problems,” Rajesh Jain, who started Netcore, says.
Traffic won’t come if visitors don’t see value in coming back. Many entrepreneurs have tried to ape models that worked abroad and build copycat sites for Indians. These have now fallen by the way side. Venture capitalists, too, don't touch these clones any more. Advertisers won’t come where even investors fear to tread. One key trick to build good traffic is to let the website be simply organised and easy to navigate. There are many content-rich websites that are a surfer’s nightmare and it shows in their poor advertisement appeal.

INNOVATE

TV show hosting site, Nautanki.TV, has let its platform by used by content creators who, in turn, can make some money too. “People who wish to use our site as a platform for their content, will have to pay us a basic platform fee. Whatever they earn from the advertisers they bring, they can keep,” says Nautanki’s founder Sunil Nair. Look for going beyond the pricing-per-click model and innovate to give better value to advertisers, content creators and visitors.

At an annual spend to just Rs 450 crore, the Indian online advertisement market is still a tiny, nascent segment. But the bitter after-effects of the dotcom bust has forced the industry to grow up quickly. As the economy grows at a scorching pace, the need for web-based solutions and online advertising is headed only skywards. Time was when the bubbly first mover into a web business idea walked away with rich valuations, but the online world has come a long way since. It is now a place only for steady, long-term players with a cool business sense.

Article Resource:
Author: Jacob Cherian is the Chief Editor in the The Economic Times, Mumbai and the article appeared in one of their successful columns on Entrepreneurship/Start-ups called "Starship Enterprise".