But the businesses listed among the five news stories above don't aspire to be mere online lemonade stands. They're trying to build online empires. So the deeper question raised by these five disparate stories is: Can you really build a monster on the slender back of online ads?
Let's start at the top of the list. Yahoo! is a content behemoth, with 300 journalists and 700 million monthly visitors in 30 languages, and a business model that is broadly considered hopeless. "Yahoo has what all media companies want, which is a large audience," David Carr wrote for the New York Times. "The company just doesn't know what to do with it." Speaking of having a large audience without knowing precisely what to do with it, let's move down the list to Twitter, a bonafide attention hog with 140 million active users and $140 million in revenue in 2011. If revenue triples this year and Twitter doesn't add a single active user (both unlikely scenarios), the company will make $3 per active user, which would bring it in line with another company -- Facebook.
Facebook's quarter-over-quarter revenue growth going back a year and a half looks like this: 13%, 0%, 14%, negative-10%, 12%. As a result, the company has struggled to push ARPU (average revenue per user) beyond the $2.50-$3.50 band. How cheap is that? It means that if each Facebook user agreed to pay a quarter each month for the next three months, the company's quarterly revenue would nearly double to $2 billion. That is a remarkable statement of both Facebook's utter domination in the attention economy and how thinly that domination has paid off. Zuckerberg's invention is still a monster, and every start-up company in America would
give various limbs to have the kind of "failure" Facebook is
experiencing today. But the bloom is officially off the rose. "Before they were a public company, Facebook was judged by growth in
users," Colin Sebastian, an analyst at Robert W. Baird & Company,
told the Times
yesterday. "Now that they are so well penetrated in most Western
markets, growth has to translate into monetization."
LinkedIn is a different story, and a relatively successful story, in no small part because the core of its business is in premium subscriptions, paid job postings, and paid data-driven searches for hires -- not in online advertising. Almost all of the growth in LinkedIn's revenue has come outside of online advertising in the last three years. Meanwhile, in the lower-margin news business, we're learning the same lessons dawning on the tech industry: If the ads won't pay, find something that will. Paid subscriptions to theTimes' website continue to rise, and the paper now makes more money from circulation revenue than from ads, Dashiell Bennett reports. Meanwhile, at the Financial Times, more people than ever are paying for FT content, "with digital subscriptions exceeding daily print circulation for the first time," the company announced today.