Scripps Networks, which has primarily been a purveyor of shows such as "Design on a Dime" and "Curb Appeal," is adding a shopping mall to its portfolio. Well, not a real bricks-and-mortar mall, but an online emporium where viewers can find and buy -- in addition to the Jentle Pet bathing vessel -- a $3 dish towel that might normally be found at mass-market discounters or a $30,000 bronze sculpture available nowhere else in the world.
The Scripps venture, which is called Marketplace and is accessible through the HGTV website, is another example of a media company trying to tap an additional revenue source as traditional ad models weaken.
New ways to get into pocketbooks
"We're going from a situation where, in print, and even in TV, you basically had subscriptions and regular ads, and there weren't a lot of versions," said Mike Vorhaus, managing director of Frank N. Magid Associates, who said he spends a fair amount of time with clients trying to conceive new revenue sources. "Now, with the internet, you can do lead generation, straight e-commerce, video ads, static ads, text ads. It's opened up potentially dozens of different ways to get into somebody's pocketbook."
Scripps, in fact, views Marketplace not as a straight e-commerce play but as a new kind of advertising. "When you have impression-based ad models, there's only so much inventory available," said Vikki Neil, VP-online marketing at Scripps. "We were looking for ways to create a large product database that allows users to find products of interest."
Scripps doesn't actually handle the selling and fulfillment process but acts as more of a virtual storefront, charging a slotting fee for product manufacturers and brands that wish to display their wares in the space.
The concept plays off the mass-of-niches theory: Scripps believes there are only so many large, general advertisers that can afford to advertise on-air on HGTV, while a much bigger group of smaller companies would also like to target a home-and-garden-loving audience.
If Scripps can efficiently aggregate those players, it can make real money. Snagging just a portion of the $3 billion electronic-retailing industry could result in millions for the company.
Right now, Scripps charges a minimum of $5,000 a year for a small advertiser to list a product in the HGTV.com storefront. (If the marketer is larger and plans to sell a high volume of products, that cost can be as high as around $200,000 a year.) The storefront already has attracted 800 different vendors.
Though Ms. Neil said Scripps right now is unsure exactly how much incremental revenue this will add, a quick crunch of the numbers reveals that the slotting fees paid by those 800 companies will likely bring around $4 million in revenue to Scripps during the next year -- not a bad bump to the bottom line.
Slotting fee vs. cost per click
"We're still trying to figure out exactly what the business model should be," she said. "Should it be a slotting fee or cost per click? ... We want to provide an opportunity for both a small advertiser and a large advertiser."
HearthFalls, a company that makes fireplace alternatives, is one of those small advertisers. The company's president, Jerry Wheeler, said he hasn't advertised on-air on HGTV due to the high expense of TV commercials, but he calls the exposure he's gotten through Marketplace a "great deal."
He said he was approached at a recent trade show by a couple of executives from Decorative Concepts, a Boise, Idaho, home store, asking about Marketplace. "I said, 'Listen to me: This is such a no-brainer,"' he recalled. "For $2,500 you get access on HGTV -- you'd be out of your mind not to do it."
In its first 30 days, Marketplace attracted 310,000 unique visitors with no marketing. The click-through rate has risen from 6% to 9% -- perhaps a result of more products being added to the site. So far, it has 24,000 products available, and Scripps is considering expanding the idea to other properties, such as FoodNetwork.com.
A magazine model
The idea was born out of HGTV's "I Want That" program, a product-oriented show that directs viewers online afterward to find out where they can buy products. It's a similar premise to the like-it-we'll-tell-you-where-to-buy-it model that's worked for magazines such as InStyle, Real Simple and Domino.
Vorhaus' Mr. Magid said it makes a lot more sense to assume that people watching HGTV might want products related to home and gardening than it would to assume someone watching "Friends" would want to buy Jennifer Aniston's sweater. "There's less intent with a prime-time sitcom," he said.
As part of its corporate policy, HGTV -- like its Food Network sibling -- doesn't accept product placement, but an HGTV staffer screens all the products that show up in Marketplace to make sure they contextually fit (the company doesn't want marketers to use the site to sell products that have nothing to do with the home-and-garden category).
In addition, the site is careful to be sure visitors know they're not buying products from HGTV -- the network is merely pointing consumers in the right direction. The last thing a TV network needs is an angry gardener calling to complain that a set of hedge clippers she found on HGTV.com broke in her backyard.