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Perfect Market
What Is A Brand Worth (Online)?
By Stephen Walker, Managing Director, Perfect Market Analytics
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Many pundits denigrate major media companies as slow-moving entities that do not understand the web and have missed an opportunity to capitalize on their brands online. I disagree with this assertion. In fact, if you look at the web properties of major media brands, you can clearly see how incredibly valuable these brands are online. If my numbers are to be believed (and they always should be), then websites that start with an offline brand generate more than 50 times more revenue than websites that do not have this head start.

Methodology

So how did I come to this conclusion? To analyze the value of a brand online, you need to compare the metrics of a population of websites that started with an offline brand with a population of websites that did not. To accomplish this comparison, I used data provided by Compete.com and compared two sets of websites based on Compete.com categories: the top 100 most trafficked "News and Media" sites and the top 100 "Blogging" sites. My assumption was that, generally speaking, blogs started their lives online without a major brand to provide a head start, while the top news and media sites all had a valuable brand before moving online. I further refined the data by eliminating sites that did not fit this assumption. For instance, I removed scout.com from the list of news and media sites because it did not start with an offline brand. I then compared the performance of these two populations of sites, both in terms of page views (estimated by Compete.com) and revenue (estimated based upon Perfect Market's knowledge of both populations). The difference in performance was dramatic.

In the Battle for Eyeballs, Brands Matter

The average top 100 News and Media website has approximately 150 million monthly page views, according to Compete.com, while the average top 100 blogging website has approximately 25 million monthly page views. Page view chartEverything else being equal, it would seem that the brands of these major media companies help them drive six times more traffic than a blog that had to build its brand entirely online. Of course, everything else was not exactly equal. For instance, many of these major media companies have significant resources beyond just their brands. Regardless of whether you believe that the key factor in driving high traffic to these web properties was the brand itself or some other asset, without the brand, all of these other advantages would quickly evaporate. One need look no further than the success ESPN has had in building its traffic online to see that a major brand and an offline platform that can be used for promotion helps dramatically accelerate the growth of the website.

When Converting Eyeballs Into Revenue, Brands Matter Even More

RPM chartInterestingly, it seems that companies with major brands have an even greater advantage when it comes to monetizing traffic online than they do in driving traffic. Most blogs monetize at remnant ad rates, which are generally less than $1.00 RPM (revenue per thousand page impressions). Let's assume for the sake of argument that the top 100 blogs monetize at an average of a $2.00 RPM, a rate that is better than straight remnant. (If you believe this is overly negative, please see comments from Eric Hippeau, CEO of The Huffington Post, regarding ad rates from ad networks.) On the other hand, major media companies have sales forces dedicated to selling ads online. These sales forces generally allow them to monetize at a rate much higher than remnant rates. Again for the sake of argument, let's assume that these media companies average an RPM of $10.00 across their inventory.

This means they make an average of five times more per page view than an average blogger. Interestingly, though, most major media companies also have other sources of revenue that are often comparable in size to these ad sales.

Newspaper companies, for instance, have classified advertising and paid verticals such as auto and recruiting referral sections. Based on discussions with former insiders and other experts on these companies, for media companies with larger web presences online (in this case, the top 100 sites), these additional revenue streams are generally comparable to their ad sales.

Total revenue chartSo let's assume that these revenue streams are equal in size to the advertising sales, which effectively doubles the RPM to $20. This would imply that a site with a major brand, as well as the scale that comes with that brand, is able to command 10 times the revenue per page view than a site without such a brand. Part of the higher monetization at sites with brands is derived from the scale that comes with being a major brand online (see the discussion on traffic above). However, part of the value is derived from the brand itself. Advertisers and potential partners are much more likely to want to associate their products and services with the LA Times or BusinessWeek than they are to want a similar association with stevewalkerknowsall.com – even if each site has exactly the same level of page views.

Conclusion – The Brands Have It

Bottom line, in terms of total revenue the "News and Media" sites that are my proxy for sites that arrived on the web with a significant brand likely have over 50 times the average revenue of "Blogging" sites, which have built their brands strictly online. This advantage in revenue is driven both by eyeballs (six times as much traffic) and monetization (ten times higher RPMs). Other than being an interesting factoid, though, what does this really mean? In short, it means that having a well known brand online is a significant advantage and that major media companies fortunate enough to have this head start should be careful to nurture and protect their advantage.

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