MappingTheWeb //

I know it’s a bold statement that isn’t entirely true, but let me explain. Obviously, a large number of successful companies can call advertising their revenue model, but this is only after siginificant traffic growth. The number of new start-ups that launch with an advertising model in mind, compared with the number that can actually sustain such a model is minimal. I would consider it a generous estimate to say 1% or so can do it.

Let’s do a little math experiment (using some basic assumptions)…

Company XYZ has 3 full-time employees. Let’s also say that they have no other expenses as they run out of a makeshift basement office. Assuming an extremely modest salary of $50,000 a year each, the company needs to generate revenues of $150,000 a year just to break even. Keep in mind that we are assuming no other expenses exist, even though hosting, bandwidth, and other factors should (in theory) play into the equation.

So, in order to break even, the company needs to generate $150,000, or $12,500 a month, or $417 a day. That doesn’t seem too unrealistic. Now, let’s assume that the website can achieve a $5 CPM, which is relatively good for a small company. The company would need to generate 83,000 page views per day just to break even. This is where many begin to realize that monetizing via advertising is much harder than it seems. From a monthly perspective, that’s 2.5 million page views per month. That’s a significant number. Once again, keep in mind that this is assuming no other expenses and doesn’t include a lifestyle of luxury.

[Please feel free to rip apart my math, point out any inaccuracies, or add any relevant commentary.]

On the whole, what I’m trying to say is that an advertising model is possible to sustain, but it’s rare. Other forms of monetization are much more effective and attainable. With such high levels of competition in every area of the Internet, your ability to capitalize on ads has been greatly diminished. 

As we all know though, many of these companies never intended on monetizing via advertising like they say. Their sole intention was to build traffic and sell off to a major player (Google, Yahoo, Microsoft). This is the typical web 2.0 revenue model. This “hope for the best” strategy is risky, but has paid dividends for a small minority. I wouldn’t recommend it though.

Historically, if you’re looking for a mortgage, you head to your local bank to get the best available rate. Next you may visit several other competitor banks to find out their rates. Some people even make use of a mortgage broker. In any case, the purchase of a home is usually the single biggest purchase in a given individual’s life. For that very reason, the research and due diligence leading up to the decision cannot be taken mildly. In many cases, people don’t put enough time and effort toward the cause and end up with an inflated rate that puts a severe damper on their finances for years to come.

SmartHippo wants to change the way we think about and deal with mortgages. The goal of the company is to bring transparency to the financial services industry by providing an unbiased look at mortgage rates. How so? Essentially, the site is powered by users. These individuals post rates depending on their profile and geographic location. Banks and mortgage companies can also post rates (SmartHippo becomes a marketing outlet for them). When a user wants to ‘compare rates’, a snapshot of current conditions is generated based on the user’s geography, credit score, equity, etc…

So how does one know if a rate is accurate? Rates receive votes and comments by the community, akin to Digg submissions. Assuming a community-controlled system works, the bad rates will be weeded out and the good rates will rise to the top.

Users can also ‘get a quote’. This is different from comparing rates. In this case, a user enters their criteria and contact information, and instantly gets matched with up to four lenders who will contact them with a personalized offer. Strict security and privacy policies are present site-wide. This allows users to remain anonymous at all times if preferred.

Because the site is geographically-sensitive, users can discuss their experiences with other local mortgage hunters. A forum provides a great place for vent or recommend a given financial service company.

I had the pleasure of chatting briefly with the CEO, upon which I had one issue in particular. It went something along the lines of this: for the most part, people only buy one house during their lifetime. Assuming they use SmartHippo to capitalize on rates and the purchase has been completed, why would they want to come back to the site? In other words, SmartHippo no longer serves a purpose to that individual. “Not so fast…”, he tells me. The company is planning to diversify in other financial services areas, including insurance, stocks, mutual funds, etc… This helped answer my question concerning repeat visitors and site “stickiness”.

Interestingly, the service is free to use. If I’m not mistaken, revenues will be generated via targeted advertising. In addition, SmartHippo is only available to US consumers at this point in time. Ironically, the company is based out of Montreal. Plans have been made to enter the Canadian market in the near future, although the US provides a much larger base at the present time.

I think SmartHippo is a great idea that merits further scrutiny. I look forward to a time when it available in the Canadian market and I can make use of the service. The concept and basis are very new and fresh. It will be interesting to follow adoption and acceptance of the service as the industry progresses from a traditional model to a more current, innovative one.

Top (insert number) lists are a hot ticket item right now, but their appeal and popularity are getting saturated by an over-abundance of such posts and articles. I’m fairly certain that their seductive powers will soon fade and the trend will slowly die off.

But what is it that makes these posts so enigmatic and enticing? Here are 5 reasons why they we find ourselves constantly clicking and reading these (frequently) useless tidbits:

1. Easy-reading - Lists are bullet points or quick points. You don’t have to hurt your head trying to deal with an in-depth analysis of the newest application framework.

2. Comfort - People find comfort in numbers. A quantifiable list relaxes the nerves. A beginning and an end are apparent.

3. Exclusivity - “I know something you don’t.” People like to be in the know. If you know something others don’t, you have the upper-hand - or at least you think you do (in your mind).

4. Appeal - For the most part, lists tend to be quirky and interesting. This is a far-stretch from tedious newspaper and magazine articles.

5. Sex Factor - Let’s be honest. Lists are sexy. People naturally gravitate toward them. It’s no wonder they’re all over the front page of Digg. Furthermore, they’re a conversation piece. Lists are often easy to remember and provide huge gossip value.

Note: If you fail to recognize the irony in this post and choose to scorn me in the comments, it’s your own fault.

New start-up LingoZ has an ambitious goal in mind. They’re looking to build a dictionary from scratch. Thanks to the new concept of crowdsourcing (or user-contribution), LingoZ plans to harness users in an attempt to redefine the traditional ‘dictionary’ space.

Why would anyone want to enter an area dominated by such big names as Dictionary.com and Merriam-Webster? Simply put, they don’t plan on competing in the same way. The traditional players function in a stagnant manner. They are not dynamic. Obviously, definitions do not change much over time, but context, slang, and new words are appearing all the time. This is the reason for being for LingoZ. As the company puts it:

“We aim to prove that a user contributed dictionary who is subject to the community moderation can be as accurate and of high quality as a “regular” dictionary, while evolving and being updated faster than any other source.”

Registered users can do one of a number of things, including:

1. Add a new term
2. Define an existing term
3. Vote on definitions

Currently, the site supports 8 languages. They include English, Hebrew, Portuguese, French, German, Spanish, Italian, and Dutch.

So why would anyone want to edit or contribute to the site? Notoriety is key. As is the case with most sites that do not offer monetary compensation, LingoZ has done a good job of outlining the main incentive of participation:

“Users who are highly praised will gain credibility and enjoy visibility within the LingoZ community.”

The way I see it, LingoZ is to dictionaries as Wikipedia is to encyclopedias. Both will hail their criticisms, due to sourcing from so-called amateurs. Opinions and personal angles may be taken, but a community-controlled and -patrolled system should essentially weed out all the discrepencies. What’s also interesting to note is that SEO will probably be a main traffic driver, somewhat akin to Wikipedia as well.

Negatives aside, many will embrace these new dynamic mediums. Definitions, phrases, and references do change from time to time. Furthermore, new additions and words are appearing all the time, especially in this new era of technology and science. A reluctance to accept or accommodate for these trends may ultimately lead to the demise of traditional giants.

Montreal-based Defensio launched on November 7th to much fanfare. The company promises to “end annoying comment spam”. This is a great goal that we can all get behind (except the spammers, of course). The Akismet rival cannot guarantee better results than its popular counterpart, but early testing has indicated that performance is high and improves over time.

Defensio touts an average accuracy of 99.56% and product characteristics such as:

• Easy management
• Personalized filtering
• Transparency through statistics

Blogging platforms supported include:

• Wordpress
• PixelPost
• Umbraco
• Drupal
• Mephisto
• Movable Type
• TextPattern

In addition, developer plug-ins are available for:

• Ruby on Rails
• Microsoft.NET
• Java
• PHP
• Python

An API allows developers to integrate Defensio into their own application(s). Specifications are available here: Defensio API Specifications. 

To follow company progress, visit their blog and/or add the feed to your reader. I have yet to download the plug-in for this Wordpress blog, but once I have I will give you all an update. Until then, feel free to try it on your own blog and let me know how it goes…