Jeremy’s position was simply this: The cost of building and maintaining an online media business today is negligible. So it is relatively easy to break even: He estimated the break even revenues to be $2.8 Million. The problem is you need to be big to go public (i.e. Revenues in excess of $100 Million) and that, in web terms at least, is extremely difficult to achieve for a media company.
TechCrunch’s revenues fall well short of the $50 Million mark of Jeremy’s 2007 model. A recent article published by Inc. Magazine pegged them at $10 million. That’s just 4 times Jeremy’s estimated break even point and 1/10th of the VC’s IPO target value. All of which means any VC who invested in Michael’s blog in 2005 would have fallen well short on the deal announced this week.
As Jeremy pointed out back 2007 web media is a great small to medium business enterprise but it just doesn’t scale into the big IPO that the valley’s bankers are looking for.
In his presentation Jeremy points out that Plan A can’t be “Get bought by Google”. Perhaps for media companies at least Plan A is now to “Get bought by AOL”.
The reason for this is quiet simple. Online media is just not sticky enough. People come. Some may stay. But mostly they go.
TechCrunch boasts 9.2 Million uniques and 30 Million page views each month. That’s an average Page View per Month per Unique of just over 3 pages. This then is TechCrunch’s problem. Like all online media outlets based on the traditional content publishing model it just isn’t sticky enough. As I have said before the majority of web traffic is event drive and one visit per month is the best you can expect from most visitors to your site. Even with the most popular sites the majority of people are just passing through.
As the chart below demonstrates online content is the least sticky of all web media. Content sites perform very poorly compared to Applications, Social Networks and Trading Sites. Indeed there appears to be an inverse correlation between investment (i.e. Effort to Build and Maintain) and Stickiness. After all creating and managing content is a time-consuming and expensive business
Based on my 2007 research on the stickiness of web properties TechCrunch’s published average Page View per Month per Unique of just over 3 pages appears to make it one of the least sticky properties on the web.
The challenge then, at least now for AOL, it to make TechCrunch more sticky.
If you take a look at the Quantcast data for TechCrunch ( unfortunately much of the data has been blocked by TechCrunch) you will see that 76% of TechCrunch’s traffic (i.e. Monthly Uniques) are passers-by. The Addicts – the sticky ones – represent less than 1%. The AOL challenge is to migrate the other 99% into daily addicts who view at least 10 pages per day.
Can they do this? The data I generated back in 2007 on AOL and the other Web Portals suggests not and simply pumping out more content isn’t the answer.
As I have said before it is a lot more cost-effective to employ a programmer to build a web site that a lot people can use to create their own low value content (e.g a blog) than it is to hire a team of professional journalists to pump out high value content. That’s what makes Facebook special and TechCrunch – at the end of the day – just noise on the MobCon radar.
So is TechCrunch a good investment for AOL? I guess the simple answer is AOL’s problem continues to be its strategic focus on fighting yesterday’s battles. In this context TechCrunch isn’t the answer to this problem it’s real just adding another dimension to the problem.
After all hasn’t Twitter become the defacto “real-time” news feed for the movers and shakers of the Tech Industry?
AOL continues to reshape and redefine itself as old media rebranded as new. In many ways it is becoming an online retirement village for old media and it will continue to make any number of SME online media owners happy with the acquisition prices it continues to pay for old media dress up as new.
AOL needs to discover that putting ads on the menu won’t pay for lunch and start investing in properties that diversify its MobCon radar. It needs start thinking about investing in the emerging mobile media convergence platforms like Mobile Payment Startups, Bar Code readers, eInvoicing, Banking and Trading Apps. In many ways purchasing Mint before Intuit moved on it would have been a far more strategic move than investing in TechCrunch.
After all it already has the content. What it needs is new platforms that are sticky enough to keep the traffic interested in sticking around to consume more.
- What’s on AOL’s Radar?
Further Reading
- How TechCrunch could have achieved a higher valuation from AOL
- What Google can teach the newspapers about innovation
- What’s on the MobCon Radar for the Web’s Wal-Marts?
- Do the Web’s Wal-Marts have a future?
- Why newspapers need to get sticky
Background Reading
- Michael Arrington’s Road to Millions – GigaOm
- Blogging for Dollars – CNN 2006
- Tim Armstrong: AOL is Brands & Platforms – GigaOM
- Why AOL Bought TechCrunch – Ad Age
[Update 11-10-2010]
The following three categories of consumer Internet startups and the representative underlying thirteen business models should give you a more than basic understanding of the main drivers of 95 percent of the consumer Internet startups you hear and read about on TechCrunch. The best consumer investors are intimately familiar with these metrics, so make sure you know which business you are in and how you can get to $10 million before meeting with them - TC Teardown: 13 Ways To Get To $10 Million In Revenues (Part I) – TechCrunch
Posted on September 30, 2010
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