March 2, 2006

Las Vegas – The New Publishing Capital?

by at 6:29 PM

I wrote a post a couple of weeks back walking through the on-site and off-site earnings of Google and Yahoo. The upshot was that if the Internet’s publishing leader, Yahoo!, with all of its technology, hardware and, most importantly, sales people, only eeks out $4 CPM (including its home page) for its non-search revenue, where does that leave the rest of the publishing industry?

I started thinking more about this and asking myself the question: why do they even bother having the rest of the site? I mean if Yahoo sports can’t pay its own bills, why keep it? And more curiously, why is Google, the internet’s search leader, averaging $50 CPM on its site, adding more and more features that will move it from the high search CPM’s to the much lower publishing CPM’s? And that’s when I remembered Vegas.

Las Vegas is an interesting place. Billions of dollars are spent every year on the latest and greatest hotels. Hotels that contain scaled versions of the Eiffel Tower, the Empire State Building, the canals of Venice, a wave pool that can host surfing contests – not to mention the rooms, the restaurants, the bars, the shopping, golf courses, etc. I am admittedly not a gaming industry expert, but my understanding is that all of these amenities are really viewed by the resorts as loss leaders. Maybe they make money on serving drinks by the pool, maybe they don’t. Maybe the room rates cover hotel operating costs, maybe they don’t. Doesn’t matter. The real money made in Vegas is the casino. Build a hotel that includes a suite with a bowling alley, a roller coaster for the kids and a buffet for everyone – as long as the guest shows up at the casino with a fistful of cash, the resort is in the black. They intentionally design every square inch of the hotel to ensure that I am more likely than not to drop some coins in the slots, play a hand or roll the dice. The décor, the layout, the location, etc. – all designed to optimize my likelihood of gambling a bit.

So what does that have to do with the publishing industry? Well, when I look at Yahoo, I see Vegas. I sign up for free email, read stock quotes and sports scores there for free and maybe even play some fantasy baseball for free. They don’t seem to mind. Why, because as long as when I am there, I do a search or two, all the bills get paid. The layout on these pages may differ, but the one consistency is the ever-present search bar on the top.

So is that the future of the publishing industry? Hiring the same consultants the gaming industry uses to optimize their hotel layouts for gaming to optimize web site pages for search? Having a news room dedicated to creating content on a daily basis which is really just a lure to get someone to do a search there?

I sure hope not. And don’t believe it needs to be that way. But, again, absent a business model showing an ROI to advertisers that is equivalent to search, that’s where we’re headed.