According to a Forrester Research study of Web site economics released in mid-June 1996, Web-based content publishers shouldn’t expect to turn a profit until 2000. Content publishers are restricted to three basic revenue streams: advertising, subscriptions, and transactions, which so far have proved to be more of a trickle than a stream. Don’t expect for that to change in the near future, Forrester warns.
Forrester’s research indicates that an “average” Web site generates 1996 revenues of about US$170,000 but must meet expenses of US$1.37 million for the year. The costs associated with providing content on the Web will account for more than 75 percent of operating costs through 2000, according to the Forrester report.
The report maintains that over the next three years, content publishers can expect to see subscription revenue grow from US$60,000 in 1996 to US$210,000 in 2000. Similarly, transaction-based revenue will likely grow from US$10,000 in 1996 to US$60,000 in 2000. Unfortunately, costs will also continue to escalate, reaching US$1.88 million in 2000.
I'm not a mathematician, but those numbers would seem to indicate that Web publishers can expect to meet about 20 percent of their publishing costs through subscription and transaction revenues. Apparently we'll all be making it up either on volume or advertising.
Ah, but there lies the rub. Forrester's research indicates that advertising revenues will grow much slower, from a total of US$80 million in 1996 to a total of US$200 million in 1997. Apparently volume is the answer because total advertising revenues will reach US$4.8 billion by 2000 since the growing Internet population will push advertising revenues. The result: in 2000, the "average" Web site will boast advertising revenues of more than US$3 million, according to the Forrester report, finally turning a profit.
Here's a look at Forrester's numbers:
| Year | Advertising | Subscription | Transaction | Expense | Net Profit (Loss) |
| 1996 | $100,000.00 | $60,000.00 | $10,000.00 | $1,370,000.00 | ($1,200,000.00) |
| 2000 | $3,000,000.00 | $210,000.00 | $60,000.00 | $1,800,000.00 | $1,470,000.00 |
And here's a look at a graphical representation of those numbers:
I guess this is just one more instance where being "average" doesn't pay.
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