Digital Velocity roundtable debates online revenue models

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After years of double-digit growth in online advertising revenue, b-to-b media companies are seeing that growth rate decline, raising concerns about the long-term viability of an advertiser-dependent business model for digital media.

This topic dominated a roundtable discussion among members of American Business Media’s Digital Media Council during the Digital Velocity event held at ABM’s offices in New York last week.

“Now, more than ever, you can’t depend on advertising alone,” said Toni Nevitt, president of eMedia Advantage, an online media consultancy. “You have to create a mix of revenues. I try to work with my clients to get one-third of their revenue from traditional run-of-site advertising, one-third from licensing and one-third from the audience.”

Jack Berkowitz, senior VP of Incisive Media, said, “To me, it’s a death knell to depend on the advertisers.” He noted that Incisive’s legal division, which includes the American Lawyer brand, derives revenue from subscriptions as well as advertising.

“I prefer to get paid by the users for content no one else has,” Berkowitz said. “We’re watching advertising go in a lot of different directions—not only because of the recession but also because there are so many free blogs and Web sites about the law that advertisers can go to.”

Karthik Krishnan, director of interactive media and sales management for Reed Business Information US, said b-to-b media can learn from the troubled newspaper industry, which is being rocked by layoffs, closings and poor stock market performance.

Krishnan referred to the Feb. 16 cover story of Time, “How to Save Your Newspaper,” by Walter Isaacson. Noting that “it’s very difficult for a news-based site to get people to pay for content,” Krishnan said, “this author talked about some interesting monetization models.”

One is the idea of collecting micropayments for content, similar to the Apple’s iTunes Store, where iPod users pay to download songs. “Because people are on the go, they might agree to pay a small amount to read the latest news on a device like [Amazon’s] Kindle,” Krishnan said.

Mitch Rouda, president of Mitch Rouda eMedia Consulting, contended that media companies cannot expect to be paid for content in the long run and asked, “What then are our core assets, and what is their value?”

Rouda said marketers know their cost of customer acquisition. “If you deliver a lead, a marketer can calculate the dollar value of that lead. It’s usually a big number,” he said.

Aneel Tejwaney, director of new media for SourceMedia’s Securities Group, said: “What’s worked in print is an editorial strategy surrounded by circulation and monetizing that circulation. Online is no different. You want to get to know the people who come to your Web site so that you can target them.

Tejwaney said the most important part is tracking and optimizing. “What do you want people to do on your Web site?” he asked. “What stats are you going to look at?

“The beauty of the Web is that you get immediate feedback, but you have to continually make tweaks based on that feedback.”

Digital Velocity was the second ABM conference of the year to be compressed from two days to four hours and streamed live over the Internet. ABM said it changed the format of its events to save its members time and expense while they cope with the struggling economy.

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