Unfortunately, it happens too often: companies have financial problems. Yesterday, it became clear that a design site had financial problems: Smashing Magazine. They blocked access to the content of their site with a page asking for financial help with a link to their PDF book. Later in the day, they opened access to content and made an entry, with comments closed and no explanation on what was going on, asking people to purchase the book.
The traffic myth
Many site owners think if they can get those magical traffic numbers, everything will be okay. Advertisers will be dying to advertise on their site, for expensive prices. That is not always the case and honestly, it is entirely possible to not be able to sell all your inventory.
What advertisers are really looking for is a return on their investment (ROI). Initially, the site might get advertisers but the higher an advertiser pays, the more ROI expected. A site that cannot deliver ROI will not have advertisers for long.
Being able to maintain the site financially and being able to maintain the site owners financially are two different things. A site can be profitable but not making enough to sustain the owners.
Smashing Magazine has a healthy amount of advertisements on their site but they are using a third party to sell ads. A site as large as Smashing Magazine usually moves to hiring a salesperson or the owners selling ads themselves to receive the most for their advertising (an expected move ad networks have to deal with). Large sites will sell ads themselves and use ad networks for inventory they cannot sell themselves. Perhaps they use an ad network so they can focus on other areas of the site. Obviously, areas that make money should be the concern. The one thing to remember: when you have a site this large, maintaining it properly is a full-time job.
About the book….
By offering the book as a way to help, they completely destroyed any way of knowing how many people would purchase the book on their own. If you read the comments, you will see people saying they bought the book to help the community. Matter of fact, most of the comments lean in that direction. When looking at book sales, how many people purchased the book and did not comment on why they bought it? For a while, people will buy the book hearing about what happened yesterday later than the norm. Unless sales drop to zero, if the person does not comment on why they purchased the book, they will not know if the book was purchased to help them or the customer had interest in the book.
This is important to note for future monetizing prospects. Honestly, with the trouble people had receiving both the digital and print forms of the book, books might not be the best method for them to monetize. The sales (obviously) were not high enough on their own. Why?
Considering price points: notice that Smashing Magazine priced the book at $8.95 Euro and $9.90 US. When working out price point, look at your traffic and see where the majority comes from. If it is from the US, price it accordingly to appeal to the US. If there is a conversion (dollars to Euros) and it is too low, back away from the project.
In the comments, people mentioned the price being too high. Another piece of valuable information not only for Smashing Magazine, but for other design sites. If other sites were thinking about creating a book, they can compare the content in Smashing Magazine’s book, realize that the approximately $10 price is too high, and work to see what price point works and whether the effort is worth it.
Another interesting fact is that many prefer a print book. Self-publishing can be expensive but being able to charge more for the book (within the limits people will buy the book) makes it possible. However, with a printed book people expect original quality content. Mashups of blog entries will not lean to optimal sales.
Of course, this might be the perfect time to create a book designed for the iPad. Again, high quality original content would be the way to go. Designers, on average, are interested in the iPad but again, the book would have to be content designers are interested in purchasing. Unfortunately, Smashing Magazine would have to be careful going the book route. Coming out with one too soon most likely will not sell well.
Keep expenses low
Vitaly mentioned they moved to a new office and hired more people. I have no idea on the hires and what these people do but it is wise for large sites to keep their costs at a minimum. The beautiful thing about having a web site is that the owners can have a virtual office. The employees can work from home. For most sites the need to have overhead is minimal, depending on the goals. For most purposes, especially with video communication, physical office space is not necessary.
Shark infested waters
I do not know a person who started a design site for it to remain small. Most want their site to be big, and there is nothing wrong with that. However, most have an unrealistic view on how that is going to happen.
Companies become big by either being the first to do it, or growing larger than their competition. Be aware as the site grows, it is taking readers and advertisers from other sites.
Readers and advertisers do not grow on trees. There is a limited amount, especially in a niche topic such as design. You will often hear people say they started reading X site because of a feature they liked. This usually leads to the reader paying less attention to some of the sites they normally read, or unsubscribing. The reality: the larger the site the more important to get the reader back because there isn’t a new reader to convert.
There is a difference between transparency and stupidity.
The corporate world is very competitive. Only the strong survive. Just as a wounded animal in the wild will not make their vulnerable state known, companies normally keep that a well hidden secret, if they can help it. Why? Because, as in the wild an easy meal is wounded prey, a vulnerable company is easier to surpass.
The bigger the mistake, the harder the fall. The harder the fall, the greater the odds of not recovering from the mistake.
In the corporate world, Smashing Magazine would definitely be swimming in shark infested waters. Nothing personal against the Smashing Magazine team, it is business. It is to be expected. Expecting competitors to feel sorry for you, to the point of not jumping at an opportunity, is unrealistic. If the goal is to be one of the top three design sites, the person is saying they not only want to be better than those in slots four through ten, they intend to take their positions. If a company is being managed properly, that eager site owner will not get far.
Getting “big” is the easy part. Maintaining their position is the hard part because there will always be people who want their position.