We’ve been looking carefully at the Syntagma network over the early summer, thanks to Gerry Reynolds, a business consultant specializing in the retail sector. Like all such exercises, much of what emerged was already known to me from the experiences of the past two years, but two thoughts in particular were illuminating.
Gerry’s first insight, which I was aware of, is that the online content business is a small margin trade — unless you’re prepared to invest heavily ($20m). By that he means that there are few big payouts for individual sales — i.e. of ad space. Big bucks have to be accumulated over time from small sum payments.
Drawing on his retail knowledge, he likened the business to little corner shops, which make margins of around 2 percent. To make that sort of business pay it has to be run almost around the clock. Most small shops are owned by immigrant groups and open between 8am and 10pm. Moreover, they are family run, with the kids roped in for shelf stacking after they’ve returned from school. Teenagers and grandparents also take turns behind the counter.
The owner may also import exotic foods from Asia or elsewhere and wholesale them to other outlets. Other shops may be opened in different parts of town. Everything is optimized to lift that slim margin to an impressive return.
Similarly, a digital (blog) network needs quantity and variety to make the business pay. For example, some of our sites do well on text link ads, selling out in a couple of months. A few are Adsense magnets drawing clicks from heavy, regular traffic. Others attract different types of advertising, while one or two specialize in affiliate sales. Often you simply can’t tell until you try.
The attraction of multi-domain networks is that they can contain a variety of advertising magnets, which allow many fingers in different pies.
All sites need time to mature, of course — around 18 months — before they reach their potential and start contributing to the pot.
Rarely will one site make a living salary for its owner. It does happen, of course, usually for quirky, semi-commercial blogs which catch on for reasons known only to visitors, or sites using below the radar techniques for hoovering up Adsense clicks.
By accumulating sufficient inventory in the right niches, and optimizing it for profitable trading, network owners can make a good living from the business. In some isolated cases, they can even sell off the company for seven or eight figure sums, but that should not be taken as read for the vast majority.
So, that’s one of Gerry’s insights : the need, like corner shops, to work with low margins through quantity, while not compromising on quality. A hard call, and only for the determined. But does anyone think it’s easy winning a gold medal in the Olympic Games?
Another aspect of the business our consultant stared hard at was the use of branding. He looked at our basic brands and assessed their worth.
On his advice we closed down our Allusionz network magazine last month as it was going nowhere. The brand last in, Moneyizor, has already overtaken LifeTimes, but is slightly behind Phi still. It could end up in front of both.
However, one brand stood head and shoulders above the remaining three, and it’s not hard to guess what it is : Syntagma. The whole network should be pulled together more tightly like a drawstring, he suggested, to emphasize the Syntagma brand, while retaining the three subsidiary brands as “sections” of one online publication — with their own portals as now — instead of separate “magazines”.
It makes a lot of sense, and marks a retreat from the long-list method of presenting a network, which we partially moved away from with the network magazine concept. It’s simply the logical next step along the same path.
We’ll be working on this project over the rest of the summer.
There are other profitable elements in this package too, but those are confidential and for my eyes only.