"You Would Have Thought That Would Be True": Lessons Learned on the Front lines of Online Profitability

Posted on March 4, 2008 by Tony Uphoff

At two recent gatherings of senior B2B media execs I was struck by how many of them told me privately that online wasn't yet really profitable. All had made "significant investments in online" and most had been making investments for the better part of a decade. These comments brought back a conversation I had at the dawning of the commercial web. In the mid 1990's my family and I lived in Manhasset New York. Great place to live. Very family oriented with some impressive business leaders, Wall Street masters of the universe, influential Doctors and Hospital administrators, even a couple of professional athletes living there. Then there was me...The B2B Media guy. "Tell me about your work" was not a request I got at the average party. That was of course until this thing called " The World Wide Web" hit. Suddenly I found myself at the center of cocktail party chatter.

At one such party one of my Wall Street pals made a beeline for me

saying “You must be thrilled about this whole internet thing. This will revolutionize your business. You will be able to bypass the post office, printers, paper suppliers, your M&D costs are going to plunge and your profits will be obscene". Well As a friend of mine Byron Elton, long time online sales exec who curently runs sales for Univision Online, likes to say "you would have thought that would be true". 10 plus years later the internet is now finally (or should be in your company) a profitable growth platform. But the year of commercial profits online for many media companies became the decade of commercial profits online.

The reality is web technology and infrastructure has been more costly than people originally thought. Web development, ad operations, SEO, traffic and online audience development have turned out to be far trickier and more complex than the early days of web 1.0 led many to believe. And the lack of clear standards in web currency for the buying and selling of online media has slowed profitable scale for many web businesses. These conversations and memories got me thinking about the lessons learned in the decade of web profitability. Trust me when I tell you these were lessons learned by experience not any unique vision. Like the birthing of all substantial markets it hasn't always been pretty either.

1.) Balance patience, impatience and tenacity . The brands and companies that have balanced these attributes are now running profitable, growing online businesses. You can’t spend your way to (profitable) greatness nor can you save your way there. You cannot stay the course however. You must be willing to push into the future yet balance the risk. You must be willing to break glass and really change your model in the effort to build a truly scalable online media business.

2.) Make it profitable . There comes a moment with most every businesses where you simply have to force profitability. You need to see if you really have a sustainable, scalable business or not. Yes there are some exceptions. They are just that however, exceptions. Don’t manage to the exception. Manage to your business and push it to profitability. Just make sure it’s the right time.

3.) Beware of Financial Optics . Online extensions of print or live event brands can be deceiving. Allocating costs can allow you to show a level of “profitability" that simply isn’t real. As someone who regularly looks at acquisitions I can tell you that the level financial engineering in this area is wide spread and sometimes shocking. Should you look at a brand level P&L? You bet. However if the combination of brand revenue and profits doesn't outrun any decreases in any individual platform area (IE a decline in print) you are kidding yourself. Or you are playing financial optics.

4.) Your Content Managers Should Be Aware of Online Profitability . For some reason many media execs don’t treat content folks like business people...until it's too late. Don't get me on a rant about the daily newspaper business again. Many content leaders are only given cost budgets but not profitability targets. Share profitability targets with your content leaders and better yet compensate them on online profitability. Just make sure that you pay attention to point # 3 as you do so. You will be pleasantly surprised in sharing online profitability with your content managers. If you aren’t you need to evaluate whether you have the right content leadership.,

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