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Winners and Losers of the Internet

By John Disque

Winning with an Internet presence is not what many have been told.

People honestly thought they could get an Internet domain, spend a few hours building a website, stick it on the net, people would find them and they could create or increase sales.

What's worse is that the fly-by-night, get rich scammers took advantage of people's lack of knowledge of the Internet, sold them web packages and left them with amateur websites that resemble an unread children's book. The result has been a decrease in sales.

The reality is that most people do not have what it takes to be a successful entrepreneur. If you find yourself wanting to be self-employed so you can work less, you're in for a rude awakening. No matter what type of business you want to start you can expect to work twice as long and twice as hard for less money with no immediate monetary benefits. At some point you're going to hit crossroads and begin to wonder if it was a mistake to leave the comfort of that 9-5 job.

There are two main ways to make money on the net: You're either selling your own product or service or you're helping someone sell theirs. Either way, the name of the game is getting the right people to your website. Knowing how to do that is more than just a business. It's an art and, again, it's not for everyone.

Being I don't know what your product or service is, there's no way to write an article that would cover all the ways to sell it; therefore, this article will focus on the art of selling someone else's product.

If you have a portal website you will have space to place advertisements. If, after many months of hard work, you suddenly find yourself with an extraordinary amount of visitors you will capture the attention of people who want to advertise on your website. The first thing they'll look at is your numbers. The second crucial thing they will consider is where your traffic comes from.

If 90% of your visitors are young adults and your advertisers are selling retirement packages for the elderly, you are useless to them and they'll pass. Your job now is now to find companies who cater to the young adult market. That is only part of the game.

Most companies willing to spend advertisement dollars on the net are very careful about who is associated with their ads. If you're getting your traffic through some sort of shock value or controversy, you will have a lot of potential advertisers passing you by as no one wants their product or service to be associated with anything shady.

Who is making the money on the Internet?

By far the search engines profit the most from big advertising. Search Engines (Google, Yahoo, Alta Vista, etc.) themselves are a perfect of example of getting "the right" traffic to their websites.

While you would think that social networks (Twitter, Facebook and Myspace) are doing quite well, there's still a lot of room for improvement and they only capture 5% of the available advertisement dollars on the net.

The question becomes: If Facebook is getting more traffic than Google why is Google making all the money?

Most people who surf the search engines are already looking for some sort of product or service and they expect advertisements. Most people who go to Facebook are expecting to communicate with their friends, neighbors and family and want nothing to do with advertisement no matter how well it targets them.

Google also does a much better job at targeting the markets. They're more professional, and they're more clever. Facebook's business is making people smile. Google's business is selling more Pepsi.

The question then becomes: Why are the social sites valued at 100's of billions of dollars? The short answer is: They're over-valued and they're gambling on future markets. Facebook's largest market is young people (high school – college) and the fact is: their users don't have a lot of money. Their entire game becomes keeping their people happy and keeping them involved on their site as they age.

Direct Media (TV, radio & print):
As businesses prepared their taxes they were forced to see the truth behind all the numbers. The expected or projected numbers were no longer relevant, and their net income gave them a strong dose of reality. Many were forced to make cuts or find smarter ways to spend their marketing dollars.

With the exception of the Internet all forms of advertising sales are down. It's proving to be one area where the big advertisers tightened their belt during the downturned economy.

Media outlets that did not evolve with the high tech communication age are being left behind. Overall the big advertisers have tightened their wallets in their entire advertisement budgets, but print media (magazines and newspapers) advertising is down a staggering 25% and the experts see an absolute desert of 0 possibilities.

There's no way to make it up. It's not going to get better. Many of these media companies thought they were being affected by the economy. While that's partially true, the big spenders in the advertisement didn't suffer one bit. The following figures are for 2009-2010:

TV: -10%
Magazine: -20%
Newspapers: -25%
Internet: +9%
Radio: -25%
Outdoor: -16%

During 2011 market spending is expected to increase on the Internet and decrease on all other forms of advertising.

Radio:
If you ever thought how cool it would be to own your own radio station you might want to think again. The overall ad budget for the big dogs was never that great at 2%. Today experts are saying at this time next year it will be less than 1%.

People in the industry are losing their jobs and radio stations are folding up like newspapers. Some have tried to take it to the net, but they're discovering it didn't work and it proved to be an expensive waste of money.

Some have attempted to stream live showing their DJ standing in a small room with a set of earphones. While it fascinated the public, it had no "holding power" at all. A surfer will stumble onto a radio station's live stream, visit for five minutes and they're soon off to continue to surf for their favorite movie. What's more is they don't return.

The fact is: After the first 5 minutes it's boring ... and there's nothing coming up after the commercial that's going to hold their interest.

Small Newspapers:
The problem with the Internet is that small advertisers are being left out. If you just opened a new neighborhood restaurant you need to target your ad dollars within a 5 mile radius of your location. Anything else is wasted dollars, but there's still no reasonable way to do it on the net. The fact is, it is these advertisers that keeps the ma & pa local newspaper in business.

One of the answers has been the local paper that decided expand to the Internet. The problem here is that the papers were reluctant to spend any additional money outsourcing to the experts. Many thought it would be easy and attempted to build their websites and market their paper themselves. The fact is: most had no clue of what they were doing, thought it was free, failed, or are in the process of failing miserably.

Let's say you own a small neighborhood newspaper with a target market of a mere 4,000 people. Over the years you worked hard and managed to capture 25% of the market or you have 1,000 daily readers. In attempts to expand, the papers went to the Internet to capture the other 3,000 people. The only problem is: they advertised their expansion to their own 1,000 readers.

Of those 1,000 hardcopy readers 100 of them found you on the net, canceled their hardcopy subscription and now Joe's Hardware store is only reaching 900 people. Naturally, Joe is getting ready to cancel his advertising.

At that, some of the papers decided to play games with their own customers by excluding some of their top headlines from their websites. Therefore, if you want the whole story (or all the news) you have to go back to hardcopy. The result was a disaster as readers abandoned them altogether.

Online advertising now accounts for more advertising dollars than TV. Below is a list of industries spending the big bucks:

Automotive
Food (mostly fast-food) & Alcohol
Business & Consumer Services
Retail Food
Entertainment
Cosmetics
Pharmaceuticals
Communications & Technology

Below is a list of the big players in the big money industries:

Proctor & Gamble
Verizon
AT&T
Johnson & Johnson
General Motors
News Corp
Sprint Nextel
Time Warner
GE
Walt Disney
McDonalds - (overall ad budget = $1.5 billion per year)
Pepsi
Hershey

The big mistakes and the sad facts:

You're in an outdated business.
You didn't have the money or weren't willing to spend it.
You didn't take the time to learn how the Internet works.
You spent your money on hustlers and fly by night get rich scammers.
You thought it was going to be free.
You thought it was going to be easy.
You're thinking the same way you did in 1990
You're taking too long. By the time you're caught up with 2011 it will be 2020.

So now you know the secret that was never a secret. If you're starting a new business or expanding an existing one, expect to spend some money. If you're careful and do your homework, your money will be properly spent when investing in the Internet. You'll make money but it won't be easy.


This article is the first in a series. My next article will deal with how to find the right resources to help you have the Internet presence you need and want.

Published April 3, 2011

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