Saturday, December 16, 2006
What's a Website Worth?
Writing the business case for a government website is a difficult job. I suspect few governments have made much of a science of it, preferring to go one of two routes: (1) it's common sense (everyone else is doing is so we have to do it) or (2) it's part of the government's strategy (so we have to do it). Does BSkyB's purchase of 365 Media on Friday provide a new benchmark? Purely transactional sites have a pretty easy job: cost of doing the transaction online/cost of doing it online*total number of transactions forecast is about as far as you go. There are (at least) two things that complicate this calculation: a) What is the true cost, i.e. do you include capital costs (depreciated over what period) and, if you're carrying multiple transactions, how do you separate out operational costs? and b) How do you figure out what your transaction count is going to be? Early on, many (includng me) thought that e-goverment would be a slamdunk - people hate dealing with government anyway, so give them an easy, automated way of doing it and it would attract folks in droves. Poor implementations, negative publicity (repeat until false) and too many me-too sites quickly laid waste to that view. Only now are volumes reaching levels that give a foundation for a business model. Top down business cases failed dismally, as Kawsaki advises. Pure content sites, however, are more difficult. BSkyB paid somewhere between £94 million and £103 million pounds for 365 Media's portfolio of sites (such as Teamtalk.com, PlanetF1.com, Golf365.com and Cricket365.com) which, together, attract some 2.2 million unique visitors per month. These sites are all advertising supported. The buyout suggests that one monthly visitor is worth around £45-50 which seems like quite a lot of ad dollars. Direct.gov's October viewing figures (page 23 of the eDt monthly report) show 2.75 million visitors, up 68% on the same time last year (a pretty good growth rate). Only 320,000 of visitors use the search function, either proving the original design point that good navigation and great content brought together from all over government was the main factor or that, over time, people have learned that the search (which doesn't cover all of government but is restricted to the site itself with occasional offsite recommended links) isn't very useful. So, if direct.gov were valued on the same basis, would BSkyB pay £124 million for it? It seems unlikely given that there's no advertising-supported model (eDt's 2004 efforts to syndicate advertising involved placing ads on a network of a dozen or so government sites, hoping to refer business between them. The most popular ad led to the "search government" page). Would it be possible to put commercial ads on a government site and so drive revenue? Would it be possible if government outsourced its sites to commercial entities? It seems unlikely that ad dollars are going to be attracted to government sites (can you imagine, "dealing with a death in the family, phone Stanleys, leading undertakers in the UK"? or "need somewhere to spend your benefits? try 888.com"). So if you're going to invest a few million in a content aggregation site - a "super-site" - you have just a few numbers to play with: - X number of other websites will be switched off at an average cost of £Y, meaning there'll be an absolute save of £X*Y, less wind-down costs and any write-offs. - £Z pounds of capital investment in existing sites will be avoided, some of which will be redirected to the new site (and then those sites will be switched off). Such capital spend might be required for routine upgrades, provision of accessible services (although this doesn't seem high up anyone's list with over 60% of sites not meeting the standards) Without hard numbers and cast iron commitments backing up these assumptions, the business case is unlikely to have much credibility. The business case for direct.gov included a line that noted that other government websites would wither and eventually die, because all the visitors would first go to direct.gov. It's hard to test that now, 2 and a 1/2 years after launch, but I suspect that it hasn't proved as true as many would have liked. One thing I am sure of though is that the myriad government websites that exist today lack a collective business case, so I am heartened to see the Varney report reiterate the need to consolidate down to two (one for individuals and one for businesses, leaving the self-employed with a slightly split web personality), even if there's nothing new in that. Disappointingly, Sir David didn't have a go at the business case for this recommendation. That would have shown some interesting numbers but instead we're still working on the "leap of faith" business model.
Posted by Alan at Saturday, December 16, 2006