Scott Gray Officially change the name of

Scott Gray

Officially change the name of this talk: “Adding enough value to digital content to actually make money. ” to “Here’s what I’m thinking”

“It’s easy to make money if all you want to do is make money” – Citizen Kane “I want my movies to make a lot of money because I want to make more movies” – Steven Spielberg

In this talk: • Argument for getting high (high price = high returns) • Suggestions for increasing returns. • Example: O’Reilly School of Technology

O’Reilly is at the Forefront of publishing • Walking the walk on digital publishing. • Experiments in every facet • Trying many different business models • Measure everything

Analogy: B to C Online market = Serengeti plain Different body types evolved to take advantage of different opportunities

Review of Publishing Business

Sales curves for individual books Not such a bad thing: Shows Market saturation

Google (free) is forcing publishers hand to digital content

Google is a herd of Wildebeest

Arguments for digital content • It’s what users want. • Users consume smaller chunks. • Higher profit margin (no printing and shipping) • Faster to market. • Remix and mash up inventory. • Compete with Google

Big numbers online!

O’Reilly has been out exploring the Serengeti with different species (different kinds of business Models)

O’REILLY statistics via. Hitbox ROI, conversion ratios, revenue, and traffic analysis.

Online Business Models (ways to collect revenue) • Advertising • E-Commerce (pay per view) • Subscriptions (all you can eat)

Advertising (lifted from Tim) Building a $10 million dollar division. – At the $5 CPM level achieved by demographically targeted sites, you need 166 million page views/month. (2 billion/yr. ) – At the $1 CPM level achieved by most general sites, you need 4 billion page views/month. – At the $20 CPM level achieved by highly targeted sites, you still need 40 million page views/month. (480, 000 pg views/yr)

Video Ads (lifted from Nat’s Radar post) • 15 cents per video • 15 cent cost • 67, 000 downloads per year to get $10 M

E-Commerce Revenue = P*C*N P = Price C = Conversion Rate N = Number of Visitors C = is virtually the same, and independent of P N = is less for High P

Higher Returns Revenue = P*C*N Lower Returns

The short head Vs. the long tail for digital content. These graphs Don’t intersect!

Let’s do some Math ( Goal $10 M) Suppose you’re conversion rate on your own site is 1% • $4. 00 @ 1% needs 250 million visits/yr • $10 @ 1% needs 100, 000 visits/yr • $30 @ 1% needs 34, 000 visits/yr

Let’s do some math (Goal $10 M) suppose it’s half (. 5%) for higher priced products • $400 @. 5% needs 5 million visits/yr • $750 @. 5% needs 2. 7 million visits/yr • $1250 @. 5% needs 1. 6 visits/yr (our conferences do about 1% actually) $10, 000 @. 1% needs only needs 1, 000 Visitors to make $100, 000 (online accredited schools)

Subscription Model (raises P) • Periodical (Make magazine) • Physical units • lifestyle support • All you can eat (Safari) • Digital • Bigger the better • Community

Can we go from free to subscription? Sports sites for example

Other Advantages of premium online • Increases customer acquisition power • Marketing Power – – Adwords (90% bid between. 05 and $1. 00) Advertizing in general Affiliate programs Higher ROI

Most of the nutrient rich food for B to C publishers is up high in the trees.

Ways to increase P (premium business) • Charge More (IDC, O’Reilly Reports) • Add a combination of other products and services (Conferences, OST) • Subscriptions (Safari, Make) P*C*N

Be Patient, it takes a while to grow premium business

Online School offering courses and certificate programs in Information Technology and Systems. In partnership with

E-Learning Market Training • Courseware • Subscription • Commodity • Canned Instructor or helpdesk • HR chooses Higher ed (b to b) Schools • Courses • 3 rd party Courseware • Certificate and Degree programs • Premium • Personal Instructor • Students chooses • Restricted Pedagogically • Instructors choose

Some examples of how different the business models are: Skillsoft – 6, 000 users @ $40/user (hr managers choose) Capella – 16, 000 users @ $16, 000/user. (end users choose)

Good Value @ $5000!

How we add value

OST is different • Constructivism • Merging content and tools • Focused on Process • Restricted to skills that involve building models (Programming, Mathematics, etc. )

Growth of a online course series Lack of saturation, and inefficient market

Go online, but don’t forget about the giraffes