A Business Perspective

1. A Business Perspective Jeffrey S. Klein USC Boot Camp May 20, 2010

2. Follow The Money • Content is King, right • Wrong • CASH IS KING

3. Agenda • Basics of the Business • Strategy • Budgeting • Revenue • Selling advertising • Other ways to generate dollars • Events • Expenses • Sustainability • Profit, or, can I quit my day job • Raising money and exiting the business

4. Basics • The old deal: • For consumers, you bring us information for free or low-cost and we’ll look at your advertising • For advertisers, you bring us audience and we’ll pay you for reaching them • The new deal (still unclear but…) • You bring information relevant to me when and where I need or want it • You bring us eyeballs and we’ll pay you if we get something from them • Unclear if the economics will work, so new funding approaches will be necessary

5. Strategy • Define your market • Define your target audience • Competitive Landscape • Pricing approaches • Set goals and milestones • To partner or not • Exit Strategy

6. Budgets • Why are they important? • Sets a goal and a pathway • Allows you to track performance • Helps eliminate surprises • You can only manage it if you measure it • Budgets are for you, not your CPA • Budgeting/Forecasting will help you understand your business • NUMBERS tell a story. Don’t miss it

7. Revenue • Where does the money come from • Advertisers or Readers • User Pay • Content must be unique • And have financial value • See the world of B2B niche • Online Training • Advertising • Impressions, clicks, sponsorships • Leads • Webinars, virtual trade shows • Directories • Events (user pay and sponsor pay) • Affiliate programs (e.g., Amazon books) • Text Links

8. Sample Revenue Forecast Source: http://newsinnovation.com/models/

9. Metrics Drive Projections

10. Advertisers are your FRIENDS • In-house or Out-house sales structure • Sales compensation • “Commission only” does not usually work well • Heavily incent success • Self Serve options • Marketing support and materials • Data, Measurability, Performance • Ad networks (e.g., Google Adsense) • You can’t make a sale unless you ask for it

11. Advertising Sales TIPS • Training and Education are key • For your sales people and your customers • Be your customer’s marketing partner and consultant • An “internet marketing seminar” • Teach the value and effectiveness of advertising • Small/Medium business folk often don’t have time for you • Expect churn • Of customers and sales people • Customers and sales people are high maintenance • Out of pocket cost is more important to most than CPM • Advertisers want you to do the work for them • Telephone sales can work effectively • Simple is best but complicated packages can drive $$$

12. Ad Pricing & Strategy • Pricing is important • CPM—cost per one thousand impressions • CPC—cost per click • CPA—cost per acquisition (lead or activity) • Sell real estate and exclusivity • Create “markets” (e.g., tires in Sports) • Everything is negotiable • You are not selling a product or a service • You are selling a relationship with an audience • You can be their digital marketing consultant • But are you willing to “share” in your “partner’s” success?

13. Budgeting Expenses • Staffing • Technology • Equipment and Facilities • Outsourcing • Cost of sales • Marketing • Office Expenses (utilities, supplies, etc.) • Accounting/Tax preparation • Legal • Reserves

14. Sample Expense Forecast Source: http://newsinnovation.com/models/

15. Attracting and Retaining Consumers • Link Economy : “Do what you do best and link to the rest”—Jeff Jarvis • Search Engine Optimization • Search Engine Marketing • Social Media • Word of Mouth • Email Newsletters drive traffic • Registration • Measure, Measure, Measure • Engagement, where do consumers come from/go to • Any pay for content possibilities? • Archives? • Data

16. Event Business • Builds your community • Promotes/reinforces your brand • Can generate significant revenues/profits • Exploits your “convening” role • Users can pay, Sponsors can pay, or both • Ask yourself: what are the niche topics where information is valuable or certification is needed (e.g., real estate)

17. Tracking Performance • What are the key drivers of your success? • Develop a performance dashboard • Key metrics measured/reported regularly • Spot trends • Test hypotheses • Dispel anecdotal evidence • Helps assess priorities/investments, for example • What is “lifetime” value of a customer? • Does traffic translate into revenues? • Return on sales efforts—relationship between cost of sales and sales performance?

18. Legal Structure • Proprietorship • Personal Liability • General Partnership • C-Corp • Corporate Veil limits personal liability • Double tax issues • S-Corp • Flow-through of tax losses and gains (taxed like a proprietorship or partnership) • Regulations/requirements • LLC • Limited liability of corporate structure and tax advantages of S Corp • Costs of upkeep

19. Funding your Enterprise • Sweat Equity • Leverage (e.g., a second mortgage) • Friends and Family • “Angels” • Venture Firms (requires an exit strategy with a high rate of projected return) • Investors will want to see your business plan

20. Exit Strategy • Pay the bills and retire • Build a multi-generation family business • Partner with other like businesses • Sell to a strategic buyer • Sell to a financial buyer • IPO • Go to the beach!