For the last few weeks I’ve been hoping this meme would die. I saw some commentary on some blog by Jeremy Liew (not surprised he turned it into a post). Now, Jeremy’s a wickedly smart guy and definitely knows his numbers. He’s also a VC at one of the VC firms I have nothing but respect for: Lightspeed Ventures.

Which is one of the reasons I wanted this to die. I basically hate disagreeing with wickedly smart, incredibly successful people who I have a huge amount of respect for (including Scoble, PageRankWhore, Screenwerk, Ross Dawson and Hillel).

But, now’s the time.

First, let’s summarize Jeremy’s point (see his original post, as well as followup 1 and followup 2):

  1. Building a media business to scale is hard.
  2. “Scale” is defined in 50M$/year in revenue.
  3. Getting to 50M$/year in revenue is basically impossible.

Okay, Jeremy didn’t say impossible ;-) What he did say is:

  1. General audience stuff won’t get more than 1$RPM (revenue per thousand pages, including all display advertising). This would require 4 billion pages per month.
  2. Demographically specific stuff won’t get more than $5RPM. This would require 800 million pages per month.
  3. Huge, in-demand stuff won’t get more than 20$RPM. This would require 200 million pages per month.

First off, if you own a media company or site that isn’t able to break 2-3RPM on even the most general audience stuff, give me a shout. At b5media, we currently average between 2-5RPM on general audience traffic and far more on specific demo or high-mand content.

Which really brings up the issue. Jeremy’s figures are only true if you rely either entirely on Google AdSense or on generic deals from the big few ad networks. They don’t hold true if:

  1. You do more than 25M AdSense impressions per month (you get a better cut, exclusive deals, etc).
  2. You work with a boutique ad network (like Federated Media).
  3. Are able to get some remnant inventory providers (which can go from 0.50-2$/unit CPM, giving you an RPM of 1-4$ with just 2 units per page).
  4. You do any non-performance/metric advertising (like sponsorships).
  5. You do text links.
  6. You have any internal sales team at all (which’ll sell those 1$ units for 2-5$, giving you an RPM of 4-10$ on even the most generic traffic).

Basically, Jeremy’s figures won’t apply to any media company that has a serious execution strategy. The core of this is that the numbers Jeremy’s mentioned can very easily be translated to the following numbers, once a company passes about 10M pages/month in “real traffic” (ie: seen by humans):

  1. For generic traffic, expect a 3-5RPM. To get to 50M$/year in revenue would thus require 800 million pages per month.
  2. For demographically specific stuff, expect an RPM of 12-15. You’d need about 300M pages per month.
  3. Huge in-demand areas like cars and sports can net you an RPM of 40-50. You’d thus need about 100 million pages per month.

Now that’s not to say these numbers are easy. But a media company that balances the above 3 properly, does sponsorships, syndication deals, content licensing, text links, feed ads, etc could potentially achieve 50M$/year in revenue on about 200 million pages per month.

Again, not a small number, but neither is it impossible.

In fact, I’d venture to say that it’s not as hard as folk (like, y’know, the New York Times, for goodness sakes) would like to make everyone think.

Again, NOT EASY. But here are some thoughts (I haven’t built a 50M$/year business, so take this wiht a truckload of salt):

  1. If you’re at 10M$/year in revenue, you should be able to acquire a couple of companies per year in order to increase your growth rate by at least 2x.
  2. As you hit certain milestones (10M pages/month, 25M pages/month, 50M pages/month), entirely new advertising opportunities open up. Anyone have any idea what the RPM is for TechCrunch? Somewhere near 750$.
  3. As you build a major media company, you start to build infrastructure that you can license to others or that can be used to rep others. All of a sudden your core traffic doesn’t matter as much.

Anyways, core of this is: if your media business is actually in the ranges Jeremy’s talking about AND you’re generating tens or hundreds of millions of pages per month, give me a shout. There’s a whole hell of a lot more you could be doing.

Hell, if your site is generating 1M pages/month and you’re getting the kinds of numbers Jeremy’s talking about give me a shout. There’s STILL a whole hell of a lot more you could be doing!

Oh, and, Jeremy, if your portfolio companies are hitting these walls, feel free to give me a shout as well ;-)