E-commerce as a Revenue Stream
for editorial web sites
The significance of E-commerce to Editorial Sites
This million-dollar bill is really not a great example of the e-commerce revenues on editorial sites.
E-commerce on editorial sites does not seem to match consumer behavior on non-editorial sites like eBay.com, Amazon.com, etc. According to a December 2000 report from the Forrester research group, editorial sites do not feel they have enough unique merchandise to produce large revenues from e-commerce, and consumers aren't necessarily expecting to buy content at the editorial sites.
Forrester Research
Based on the responses of 40 content sites, Forrester found that:
- 15 percent of editorial site revenue comes from e-commerce. It is
the second-highest revenue aggregator, but much smaller than advertising,
which brings in 67 percent of editorial sites' revenue.
- When asked what the revenue mix would be by 2003, 35 sites responded
that 20 percent of revenue would be from e-commerce, second to advertising,
which is projected to bring in 59 percent of total revenue. According
to the report, the definition of e-commerce includes revenue share,
selling original merchandise directly from the sites and slotting fees.
- Online retail will continue its growth, reaching $269 billion in annual direct sales by 2005, but content sites will only garner $6.7 billion
Why is this happening?
- Retailers will get the majority of the sales. Just 9 percent of consumers
learn about online buying opportunities from stories on content sites.
- Revenue shares are small. Typical affiliate and transaction fees return
only 5 percent to 10 percent of the sale price to a content site.
- Most editorial sites cannot move directly to commerce (like BabyCenter.com
did). However, some newspaper sites have had success when they've sold
branded merchandise. For example, The Miami Herald and Baltimore Sun
successfully sold T-shirts, coffee mugs and other items with their logo
long before they began selling these items on the Web. In addition,
photos, reprints of front pages and books written by staff writers are
for sale at the Herald
Store.com and SunSpot.net.
When users visit, they tend to be more interested in items for sale
here than in generic merchandise sold at other news sites.
- In terms of subscription competition, individual editorial sites must also face the challenge from subscription-services sites, like Enews.com. According to a January 2001 report by Media Metrix, traffic to Enews.com surged by 48 percent during Christmas 2000. The increase was due to the convenience of a site where users can purchase multiple editorial subscriptions.
Editorial Integrity
Editorial sites also face the challenge of combining content with commerce. For example, visitors may question the editorial integrity of the site if it combines a book review with a link to purchase the book on Amazon.com. Editorial sites face similar challenges with advertising, as they may not be able to provide unbiased reporting on a company that buys advertising space on the site.
While editorial sites worry about sacrificing their integrity by integrating e-commerce, non-editorial sites like eToys added editorial to encourage buyers (before the site went bankrupt in February 2001). A September 2000 article by The Industry Standard indicated that eToys thought that including articles on child development would propel users to buy toys for their children.
A Short History of E-commerce on Editorial Sites
- In 1996, Amazon.com
launched its Associates Program, which allowed other web sites (many
of which were editorial) to sell Amazon.com content.
- In October, 1997, The
New York Times incorporated links at the bottom of book reviews
so that users could be immediately transported to the Barnes
and Noble web site to purchase the book reviewed. According
to an April 2001 article from the American Journalism Review, the practice
"raised eyebrows" in the editorial world.
- An October 1999 Businessweek
Online article entitled "Journalism's Online Credibility
Gap" discusses the ongoing conflict between e-commerce and ethical
journalism. Ironically, a Forrester Research analyst was quoted in the
article as saying that by 2003, media sites would receive $25 billion
in revenue from transaction fees, compared with $17 billion from ads
and $5 billion from subscriptions. One year later, Forrester estimated
that content sites will only receive $6.7 billion.