Monday, September 22, 2008

Hard to Build Large Advertising Support Business

Found this via Ben Kuo - The math behind Internet advertising businesses

The advertising equivalence principle?
So if we assume that a $1 CPM is about right and figure out what audience is required to build a $100MM annual revenue business, we find out that we need 8.33 billion monthly page views and over 300 million monthly unique visitors creating 25 page views per user.

With these assumptions, we would need a site that ranked fourth globally. Of course we could assume that we get 10x the page views per user, but we’re still at 33 million unique visitors per month. It’s a non-trivial feat to develop a $100MM annual revenue business through online advertising.

Great point that you would have to have massive traffic, highly valued traffic, or some other factor involved in order to build a $100MM business which is normally the hurdle used as part of investment decisions.

1 comment:

David said...

yes, great point. That's why you'll need a highly targeted website so you can bring the cpm to about 3, and a highly engaging site so the ave page view is around 150. Then you put about 2.3 impressions per page, that'll get to about a 8 million unique requirement, which seems much more possible. hmm...I think I know of a site with all that (except for the uniques). ;-)