I’m going to be going to see John Battelle this afternoon (he runs the blogging advertising network, Federated Media) and I’m going to ask him about the challenges of making an Internet content business work.
Here’s the trouble. Most people I know are getting advertising revenues of between $10 and $40 CPM. That means that for every 1,000 people who visit a Web site, an advertiser is paying somewhere around $10 usually (often less, and in some cases, far less — Jeremy Wright told me he was only getting about $.50 CPM when he runs Google’s ad bar).
Now, that sounds great, particularly if you can get a big audience and when you write a blog that has minimum creation costs (yeah, some posts take hours, but others can be done in minutes and you don’t need anything but a computer to do this). That low cost of production is why Jason Calacanis was able to create $25 million in value by lashing together 100 bloggers. But, let’s look deeper at video.
First, the videos I’m putting up are around 200MB a piece. The bandwidth distributors I know are charging $.14 or more PER GIGABYTE to distribute those videos. So, that comes to $28, or more for 1,000 downloads (if my math is right).
Wait a second here. We’re going to collect $10 in advertising to pay $28 in bandwidth? Who said video is a great business? We’re losing money, but I’m sure we’ll make it up in quantity. Heheh.
But we haven’t even covered our labor costs. Heck, yesterday’s lunch session had three of us working on it for an hour, then Eddie encoded it, edited it, and published it. That took him four more hours. Let’s assume you can get smart people to work for you for $30 an hour to do video. That right there is $90 just to shoot for an hour, plus another $120 for editing and publishing. $210 in fixed costs just to start, then the bandwidth. And you haven’t even started paying for my camera, my new Mac.
So, what’s the answer? Well, something has to give here. You’ve gotta change some of the numbers.
That’s what I’m working on. It’s also why I appreciate Seagate so much. They sponsored my show for several months and gave me some time to figure this all out.
Speaking of which, yesterday Herschel Horton asked “Are you getting paid by any of these companies for doing these interviews?”
No. The only company who has paid me money is Seagate. Anytime I run a show that an advertiser is paying me to do I’ll disclose that.
Oh, and do I think I’m going to be able to change these numbers? Yes. But it will be a challenge to putting together a network of videoblogs. Jason Calacanis didn’t have these types of distribution and content creation costs to deal with.
If Google and other advertisers can change the revenue numbers for video too, to be higher than the costs, we’ll see interesting new content created. If not, you’ll be stuck with watching kids dance.
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