To develop revenues for a business plan you have to have a clear idea of the value proposition. Or, to put it simply: Who will pay for what? This is the meat of the plan – the beef in the bun.
To develop sponsorship revenue estimates for Food+Tech Connect I started by looking for what other sites have done. Many bloggers write about advertising, sponsorship and affiliate relationships, but no one really examines it in detail, at least not publically. Thus, I’ve spent a somewhat frustrating week looking for wise and helpful (ie, specific and detailed) sources of information about building an online media business. Luckily for you, I have found a few pearls along the way.
First I want to thank TechTarget for their mercifully brief dictionary of all terms related to online advertising. Here’s how they define sponsorship:
Sponsorship: An association with a Web site in some way that gives an advertiser some particular visibility and advantage above that of run-of-site advertising. When associated with specific content, sponsorship can provide a more targeted audience than run-of-site ad buys. Sponsorship also implies a “synergy and resonance” between the Web site and the advertiser. Some sponsorships are available as value-added opportunities for advertisers who buy a certain minimum amount of advertising.
This definition clearly shows that while sponsors may share a degree of “synergy and resonance” with a web site, sponsorship is primarily a form of advertising. Which means that sponsors pay to get their message in front of a targeted (interested) consumer via page views or impressions. To accurately estimate sponsorship revenue, the business model has to first define and quantify its user community in terms of actual and potential numbers, market segment, and numbers of page views and then estimate pricing that reflects the value of the sites readership over time to a small group of interested advertisers.
Fortunately, Jeff Jarvis at CUNY’s Graduate School of Journalism has been working on a project called New Business Models for News which has produced several very detailed financial models for estimating revenue for a variety of online media models. Click around on the New Business Models site and you will find a treasure trove of information about the business of online news. The spreadsheets and business summaries on this site detail assumptions about hyperlocal media and a “New News Organization” which effectively acts as a consolidator of hyper-local site news. Click here to explore these models.
One problem I had in adapting these models to Food+Tech Cnnect is the level of complexity already embedded in the model. In the end, Food+Tech will have this rich level of detail. However, for a first draft we need to start with something simpler and scaled to the current level of information we have about the Food+Tech community and our likely sponsors. We’re looking forward to scaling-up the plans, as we grow the business! But for now, we have more questions than answers.
What companies or organizations are most likely to become sponsors of Food+Tech Connect? What are the advertising rates for direct sales on comparable sites? What are reasonable assumptions for growth in 2011 as Food+Tech develops more content, reaches new readers, and begins to add additional services to our mix?
If you have any answers, ideas or even more questions, please comment to share them with us, and the Food + Tech readers.
Christine Rico is the Founder and President of Waste to Wealth. Christine has worked with organizations and companies in all stages: start-ups, turnarounds, rapid expansion/replication and executive transitions.<