The number of visitors does not necessarily increase the profit
Being someone so immersed in web culture, I always find it slightly surprising that people think that way, so I thought I would speedily jot down a simple explanation…
Does a shop make money when someone visits it?
The internet is no different to any other business; it makes its money when some form of transaction – the sale of a good or service – takes place, not simply because someone looks at a web page.
Let me use a high street shop as an easy analogy…
- The number of transactions counts
If a shop has 5,000 visitors in a day, but none of those spend any money, it won’t make any profit. But a shop that receives purchases from 10 visitors will make more money. The same is true of the web: high traffic without any sales doesn’t make money.
- The value of transactions counts too
Advertising revenue isn’t ‘visitor dependent’ either
Many websites also have advertising, yet the web has meant that advertisers tend to pay in a far more targeted way than with conventional ads. With newspaper and TV ads, the cost of the space or time depends on the number of readers or viewers.
Meanwhile there can sometimes be a ‘visibility payment’ on websites i.e. a company pays simply for how many people see the ad. They are more commonly based on ‘click throughs’ i.e. how many people click on the adverts or possibly how many people click through the adverts and then go on to make a purchase.
Therefore it’s possible that a site with 1,000,000 users in a month could look succesful, but with no buyers, and no one clicking on its ads, it would have zero income.
And indeed something close to that has been seen with the likes of Twitter and Facebook where there’s been a struggle to convert huge traffic into commerciality. That’s why alternative streams are looked for, such as surveying and monitoring user habits to sell the data, which caused a big scandal.
How are sites financed?
Yet ultimately these mega-traffic worldwide sites are saved by their revenue potential rather than the actuality; in other words they’re valued highly because “surely with that much traffic there has to be a way to make them pay”.
A sweet shop with 100 purchasing customers in a day will probably makes less than a Rolls Royce shop that sells a car to one customer.
The same is true of the web, how much money is made depends on what the transaction is. An online car seller needs a lot less sales and customers than a online MP3 singles download store.
The costs of running a website….
It isn’t just about revenue though, it’s also about costs. Of course there are all the usual ones with staff, premises, phone bills, tax and the like which are common to all businesses.
Yet it’s worth noting that if a website has more users, then it will increase the cost of running it (even if it doesn’t do anything extra).
- Bandwidth
This is all about the size of info coming to and from a website. Think home broadband here. To get more info to and from your broadband you need a bigger download limit and the same goes for a website: the more users visit the site, the more data you’ll be throwing and the more bandwidth you’ll need.
Servers
A server is basically a big computer that processes all the requests to view pages, or utilise tools on a website and send the right things out to the right people. The more users are connected to a website, the more processors it will need to be able to serve all those people and crunch the data.
The summary
So overall the strict answer is no, more visitors doesn’t mean more money. Though of course in general the bigger and more popular a site is, the more chance it will have to generate revenue.
