Chapter 11 Summary - HBR\'s 10 Must Reads on Leadership PDF

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Chapter 11 - Media Site...

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The chapter I decided to review is Chapter 11 Model Four: Media Site. This chapter talks about the fourth business model which is media sites and how many of them use advertising as a main source of income “to pay the bills”. Most media sites are content-focused and attempt to bring in repeat visitors who will spend a lot of time on the site looking at many different pages. Some examples it uses of media sites are Google’s search engine, CNET’s home page, and CNN’s website. “For media sites, ad revenue is everything” and the type of advertising could be clickthroughs or displays which is what media sites care most of all about, pay-per-view, pay-perclick, and affiliate models, which are the most complex. Affiliate models involve developing an affiliate relationship, for example, with Amazon, and strategically placing ads or links to merchants with products that visitors seek or are interested in, enabling firms to generate revenue on items without carrying inventories, managing orders, processing payments, or handling packaging and shipping. In this arrangement, the firm doesn’t make money when someone clicks on the link, but it does make money when someone buys that product. In order to make money off of all these advertisements, media sites need to maximize the amount of time visitors spend on the site, number of pages they see and differentiate new visitors from returning visitors so they can see the growing reach of new people. Media sites deal with a lot of math and calculations. The top 5 things media sites care about and pay the most attention to is:     

Audience and churn – How many people visit the site and how loyal they are. Ad inventory – The number of impressions that can be monetized. Ad rates – How much a site can make from impressions based on the content it covers and people who visit. (measured in cost per engagement) Click-through rates – How many of the impressions actually turn to money. Content/advertising balance – The balance of ad inventory rates and content that maximizes overall performance.

Question: Given the following information, what is the total affiliate contribution?      

Ads per page – 2 Page views – 5,367,000 Affiliate ad click percentage – 1.74% Conversion rate – 4.50% Average sale value – $37.25 Affiliate percentage – 10%

Answer: $31,307.60...