On surface, IGN Entertainment is an attractive business: Loyal customer base, need-to-know information, targeted eyeballs, fast growing vertical... 25mn+ uniques and 550mn+ page-views in the month of April 05. Not bad at all, especially considering its favorable customer demographics (teens and young adults, with skew towards male). Yet, the valuable "eyeballs" has not yet converted into profitability. A quick skim at its S-1 reveals that in 2004, IGN recorded operating loss of $9mn+ on revenue of $33mn. And yes, it has filed for an IPO.
I have always believed in targeted eyeballs - what's better than a captive, measurable audience? There seems, however, to be a mismatch between the cost and value of those eyeballs. I struggle to find lead generation sites that are comfortably profitable (if you are aware of any, let me know!). There appears to be three structural obstacles: 1) pay-per-click model is inherently flawed, discounting the value of brand exposure; 2) online audience is more fragmented, resulting in higher fixed acquisition costs; and 3) online divisions within large corporates are often not very sophisticated.
Luckily, the trend is in our favor. Online advertising dollars is growing ~30% year-on-year, and has reached over $10bn in 2005 (note it's still <5% of total ad dollars). As valuable eyeballs continue to shift from traditional media to new media (online, games, mobile), so too would advertising dollars. My prediction (or hope, rather) is an insurgence of in-game, mobile and online advertising; unfortunately won't happen in the near future unless there's a major shake-up in the industry...
Image Credit: http://www.greenscreen.org/newsletter/articlesjr/images/EYES_2ROLL.GIF
Comments