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Majestic Internet Conference
I am at the Majestic Internet Conference today.
Majestic is a wall street research company that uses proprietary data to project the performance of companies and their stocks.
We got a preview of some data that includes holiday shopping data through yesterday from Gian Fulgoni, Chairman of Comscore, one of my portfolio companies.
We also got a history lesson from our friend Howard Morgan, of Idealab. Howard showed us the basic economic equation for online commerce, which is:
RPC - CPC = Profit
RPC is revenue per click
CPC is cost per click
The Comscore data seems to indicate that this formula may no longer hold because two big things are happening this holiday season that portend big changes in ecommerce and search.
Trend 1 is the emergence (finally) of the multi-channel retailer (retail, catalog, online, etc) as a major player in online commerce. Walmart, Target, BestBuy, and others are having huge holiday seasons this year. They finally got the web right!
Trend 2 is the latency of online searches (the searcher often buys as long as 30-60 days after doing the search) and the fact that over 90% of searchers actually make the purchase offline.
If revenue per click is recognized in the Best Buy store in the mall three weeks later, then cost per click is going to go up and may go way past immediate online revenue per click.
This portends well for Google, Yahoo!, etc and very well for the multi-channel retailers. It's going to be a challenge for the single channel online retailers.
December 13, 2004 in Venture Capital and Technology | Permalink
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» Is The Formula For Success Changing? from The Pre-Commerce Blog
Fred Wilson points out some interesting comments from Howard Morgan, and adds some of his own insight: Howard showed us the basic economic equation for online commerce, which is: RPC - CPC = Profit RPC is revenue per click CPC is cost per click The Com... [Read More]
Tracked on Dec 18, 2004 7:42:14 PM
Comments
I think the formula RPC>CPC = profits will still hold. But the measurement of RPC may have to be an integral over time of the revenue. In fact, as the Comscore data showed, we may beed to integrate both revenue and costs over an identifiable user for 90 days to get a true measure of RPC and CPC.
Posted by: Howard | Dec 13, 2004 3:46:55 PM
Clicks are sales leads. What you are paying for is a chance to initiate a customer relationship. The clicks will eventually be allocated by the market to those businesses which can convert and monetize those customer relationships most effectively.
This is about much more than just immediate revenues, even over 90 days, and much more than revenues associated with the one product being referenced.
You are correct that all of this is extremely favorable for the 'click producers'.
Posted by: Neville | Dec 16, 2004 10:03:29 PM
We're HOPING, that RPC will have an ever increasing role (amount) on our site. As a "reviewing" site, we're anticipating that at LEAST, we're able to review a variety of products that hopefully some will have better CPC's than other.
Of course, getting the word out and finding visitors to come to our site poses as the second challange. And without marketing dollars to leverage, we're doing it all by hand.
We'll see.
Interesting blog!
Regards,
B.A.R. Editor
www.badassreviews.com
Posted by: Bad Ass Reviews | Dec 28, 2004 2:19:42 PM
