Revenue Per Visitor vs. Unique Visitors at TheStreet.com

Posted by: Matt Shanahan

Any publisher faces price limits on what they can charge advertisers for impressions and/or visitors for access.  Each of these revenue streams is also limited by the maximum potential size of their audience.  Part of my investigation into RPV, is to understand how RPV affects business decisions.

Between their investor fact sheet and press releases, TheStreet.com provides good insight into their business model.  The content provides information about uniques, breakdown of revenue, expenses, and more.  So it seemed perfect to delve into the question about revenue per visitor (RPV) versus number of unique visitors (uniques) to achieve profitability.

As of the close of Q2 2010, the 6-month revenue for TheStreet.com was $28.1M generated from an audience of 4.1M monthly uniques.  During that time, their operating expenses were $28.9M comprised of “cost of services,” “sales & marketing,” and “general & administrative.”
The business model is running about breakeven.  At the current run-rate, their RPV is $13.70/visitor/year.  The RPV composition is 69% premium services (subscription) and 31% marketing services (ads). 

So is it viable for TheStreet.com to be breakeven on 100% ad revenue?

If TheStreet.com had tried to be 100% ad revenue, they would have required an additional $19.5M in ad revenue to breakeven.  Given that 4.1M audience members generated $8.6M in ad revenue (i.e., $4.20 ad RPV), breakeven would require an incremental 9.3M audience members at the existing CPM.  So the basic answer is 13.4M uniques would be required.  However, 13.4M uniques is not likely to be enough. 

In their investor fact sheet, TheStreet.com points out that they are able to garner premium CPMs because of the quality of their audience.  Assuming 20% price erosion on the CPM in a 100% ad revenue model, the total audience size would need to be 16.1M (1.2 * (4.1M+9.3M)).

So a key decision in going to a 100% ad revenue would be whether the 16.1M audience size is achievable and sustainable.  What is the demographic that makes up 16.1M uniques?  What percentage of the total population does 16.1M represent?  What competition will the publisher be facing for those individuals?  What percentage can the publisher win?  Is it better to segment down and focus on a niche with a higher RPV?

Of note, I have not found any publishers achieving profitability under $5 RPV, but I am still looking.