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Monetizing the Web

After years of being an academic and military system, the world wide web started to open up to everyone during the 1990s. Perhaps because of the web's background, the vast majority of material made available in the early days was completely free. Naturally as companies started to build web sites of their own, they sought to promote themselves. And a wide range of products started to be sold via the web.

Indeed there was so much enthusiasm for selling on the web that it powered the now notorious dotcom boom, where large numbers of companies were created with the intention of taking over huge revenues from established “bricks and mortar” companies. Revenue projections were used to justify hypothetical valuations that propelled the dotcoms into vastly inflated initial public offerings. When the boom turned to bust, many investors found that it was harder to create a new revenue stream than the hype had suggested, and huge losses were racked up.

Of course, there were exceptions. Amazon is the shining example of a company that succeeded in growing its revenues from nothing through a pure web strategy. The company started with items that are readily amenable to mail order selling – books and CDs – and has steadily widened the range of its merchandise. It is now so effective a sales outlet that a good many small companies now exist entirely as “Amazon sellers” with their whole output going through the Amazon web operation.

But other sectors found that the web was creating problems that were hard to solve. A notable example is the newspaper business, which is still struggling with the issues. Newspapers found the web irresistible and started to publish some of their output there. But they did not know how to get revenue from the web. A traditional newspaper lives on the combination of money from the cover price and money received from advertisers. It could be argued that web delivery is far cheaper than printing and distribution, and therefore justifies offering articles on the web without payment. This was a tempting route, given that visitors to web sites typically fall off very sharply as soon as any charge is introduced.

Unfortunately for newspapers, advertising also proved to be difficult on the web. Readers seem more able to ignore advertisements on the web, and they can also employ ad blockers to limit the effectiveness of ads. Because of such factors, advertisers were reluctant to pay high prices for placements in online versions of newspapers. And so long as rivals such as the BBC were publishing free material, charging readers looked difficult. Although attempts to charge readers continue, there are believed to be very few paying customers for general news.

Despite the problems of web advertising, one company became an industry leader on the back of pay per click (PPC) advertising. Google built a model where adverts were placed alongside search results and the advertiser paid a fee if the searcher clicked on the advert and was taken to the advertiser's web site. The charge for a single click could be quite small, but the cumulative value of Google advertising has become vast. Google supplemented the search engine model by offering fees to web site owners who published adverts fed to them by Google.

Naturally, anyone who has a web site that attracts a sizeable number of readers may want to consider how to recoup the running costs of the site, or even to make a profit from whatever service it is providing. Making use of Google's advertising scheme is one popular option. The search engine giant uses its data to decide which adverts will appeal to visitors to the site, and feeds appropriate ads. The web site owner is paid only when a reader clicks on an ad.

Although a leader, Google is far from the only channel for PPC advertising. This has meant that advertisers now have a wide range of choices, and before spending large sums of money are well advised to carefully review where to spend it. As with most aspects of marketing, knowledge is gained through careful experimentation and analysis, and applying expertise can considerably improve the value obtained by adverts.

In an ever more complex market, the possibilities web site owners are increasing, but are becoming less straightforward. By one means or another, the web is the channel for ever more expenditure. Although the dotcom boom overdid the hype, the fact remains that the web is the healthiest part of our now somewhat shaky economy. Monetizing web sites therefore remains a goal to be pursued with skill and ingenuity.