Adding Enough Value To Digital Content To Actually Make Money Presentation

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Adding Enough Value To Digital Content To Actually Make Money Presentation

  1. 1. Scott Gray
  2. 2. Officially change the name of this talk: “Adding enough value to digital content to actually make money.” to “Here’s what I’m thinking”
  3. 3. “I want my movies to make a lot of money because I want to make more movies” – Steven Spielberg “ It’s easy to make money if all you want to do is make money” – Citizen Kane
  4. 4. <ul><li>In this talk: </li></ul><ul><li>Argument for getting high (high price = high returns) </li></ul><ul><li>Suggestions for increasing returns. </li></ul><ul><li>Example: O’Reilly School of Technology </li></ul>
  5. 5. O’Reilly is at the Forefront of publishing <ul><li>Walking the walk on digital publishing. </li></ul><ul><li>Experiments in every facet </li></ul><ul><li>Trying many different business models </li></ul><ul><li>Measure everything </li></ul>
  6. 6. Analogy: B to C Online market = Serengeti plain Different body types evolved to take advantage of different opportunities
  7. 7. Review of Publishing Business
  8. 8. Sales curves for individual books Not such a bad thing: Shows Market saturation
  9. 9. Google (free) is forcing publishers hand to digital content
  10. 10. Google is a herd of Wildebeest
  11. 11. Arguments for digital content <ul><li>It’s what users want. </li></ul><ul><li>Users consume smaller chunks. </li></ul><ul><li>Higher profit margin (no printing and shipping) </li></ul><ul><li>Faster to market. </li></ul><ul><li>Remix and mash up inventory. </li></ul><ul><li>Compete with Google </li></ul>
  12. 12. Big numbers online!
  13. 13. O’Reilly has been out exploring the Serengeti with different species (different kinds of business Models)
  14. 14. O’REILLY statistics via Hitbox ROI, conversion ratios, revenue, and traffic analysis.
  15. 15. Online Business Models (ways to collect revenue) <ul><li>Advertising </li></ul><ul><li>E-Commerce (pay per view) </li></ul><ul><li>Subscriptions (all you can eat) </li></ul>
  16. 16. Advertising (lifted from Tim) <ul><ul><li>At the $5 CPM level achieved by demographically targeted sites, you need 166 million page views/month. (2 billion/yr.) </li></ul></ul><ul><ul><li>At the $1 CPM level achieved by most general sites, you need 4 billion page views/month. </li></ul></ul><ul><ul><li>At the $20 CPM level achieved by highly targeted sites, you still need 40 million page views/month. (480,000,000 pg views/yr) </li></ul></ul>Building a $10 million dollar division.
  17. 17. Video Ads (lifted from Nat’s Radar post) <ul><li>15 cents per video </li></ul><ul><li>15 cent cost </li></ul><ul><li>67,000,000 downloads per year to get $10M </li></ul>
  18. 18. Revenue = P*C*N P = Price C = Conversion Rate N = Number of Visitors E-Commerce C = is virtually the same, and independent of P N = is less for High P
  19. 19. Revenue = P*C*N Higher Returns Lower Returns
  20. 20. The short head Vs. the long tail for digital content. These graphs Don’t intersect!
  21. 21. <ul><li>$4.00 @ 1% needs 250 million visits/yr </li></ul><ul><li>$10 @ 1% needs 100,000,000 visits/yr </li></ul><ul><li>$30 @ 1% needs 34,000,000 visits/yr </li></ul>Let’s do some Math ( Goal $10M) Suppose you’re conversion rate on your own site is 1%
  22. 22. <ul><li>$400 @ .5% needs 5 million visits/yr </li></ul><ul><li>$750 @ .5% needs 2.7 million visits/yr </li></ul><ul><li>$1250 @ .5% needs 1.6 visits/yr (our conferences do about 1% actually) </li></ul><ul><li>$10,000 @ .1% needs only needs 1,000,000 </li></ul><ul><li>Visitors to make $100,000,000 (online accredited schools) </li></ul>Let’s do some math (Goal $10M) suppose it’s half (.5%) for higher priced products
  23. 23. Subscription Model (raises P) <ul><li>Periodical (Make magazine) </li></ul><ul><ul><li>Physical units </li></ul></ul><ul><ul><li>lifestyle support </li></ul></ul><ul><li>All you can eat (Safari) </li></ul><ul><ul><li>Digital </li></ul></ul><ul><ul><li>Bigger the better </li></ul></ul><ul><li>Community </li></ul>
  24. 24. Can we go from free to subscription? Sports sites for example
  25. 25. Other Advantages of premium online <ul><li>Increases customer acquisition power </li></ul><ul><li>Marketing Power </li></ul><ul><ul><li>Adwords (90% bid between .05 and $1.00) </li></ul></ul><ul><ul><li>Advertizing in general </li></ul></ul><ul><ul><li>Affiliate programs </li></ul></ul><ul><ul><li>Higher ROI </li></ul></ul>
  26. 26. Most of the nutrient rich food for B to C publishers is up high in the trees.
  27. 27. Ways to increase P (premium business) <ul><li>Charge More (IDC, O’Reilly Reports) </li></ul><ul><li>Add a combination of other products and services (Conferences, OST) </li></ul><ul><li>Subscriptions (Safari, Make) </li></ul><ul><li>P*C*N </li></ul>
  28. 28. Be Patient, it takes a while to grow premium business
  29. 30. Online School offering courses and certificate programs in Information Technology and Systems. In partnership with
  30. 31. E-Learning Market <ul><li>Training </li></ul><ul><li>Courseware </li></ul><ul><li>Subscription </li></ul><ul><li>Commodity </li></ul><ul><li>Canned Instructor or helpdesk </li></ul><ul><li>HR chooses </li></ul><ul><li>Schools </li></ul><ul><li>Courses </li></ul><ul><li>Certificate and Degree programs </li></ul><ul><li>Premium </li></ul><ul><li>Personal Instructor </li></ul><ul><li>Students chooses </li></ul><ul><li>Higher ed (b to b) </li></ul><ul><li>3 rd party Courseware </li></ul><ul><li>Restricted Pedagogically </li></ul><ul><li>Instructors choose </li></ul>
  31. 32. Some examples of how different the business models are: Skillsoft – 6,000,000 users @ $40/user (hr managers choose) Capella – 16,000 users @ $16,000/user. (end users choose)
  32. 34. Good Value @ $5000!
  33. 35. How we add value
  34. 36. OST is different <ul><li>Constructivism </li></ul><ul><li>Merging content and tools </li></ul><ul><li>Focused on Process </li></ul><ul><li>Restricted to skills that involve building models (Programming, Mathematics, etc.) </li></ul>
  35. 37. Growth of a online course series Lack of saturation, and inefficient market
  36. 38. Go online, but don’t forget about the giraffes

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