Business Models for the GeoWeb - Is Advertising Dead?
June 24th, 2008by Sean Gorman
One of the most anticipated and most hollow panels at GeoWeb conferences of late is “Something Something Business Model”. I think the reality was best captured by the Fake Steve Coast:
The default business model of Web 2.0 has been advertising. The problem is you are largely limited to placing advertisements around maps and you can’t leverage the local or geographic content on the map to target with. So, you have to generate a massive amount of traffic to make enough money with your ads around maps. Which is difficult, since most of the clicking is on the map and you don’t get loads of page views to push ads against.
The dirty secret - it is even tough for the big guys (Google, Yahoo, Microsoft) to generate big revenue with their mapping applications. The mapping applications are largely loss leaders. The scary bit is they are loss leaders and GYM control the ad inventory. Meaning they actually have a network of advertisers willing to pay to have their content shown in conjunction with their maps. This is no small feat and I would love to hear how folks like Lat 49 are fairing in their endeavors to build an ad network for maps.
Even if we do finally get advertisements on maps and a version of Adsense to go with it - are you likely or unlikely to be able to pay the bills with it? Not to say it is impossible.
Platial has stated in the past it is generating revenue (possibly even cash flow positive) and has the level of traffic (15MM unique users per month) to support an ad based business. Although where does it go (acquisition, IPO, Kleiner et al want their money back eventually)? How many other GeoWeb companies out there are able to support themselves on advertising?
What are the other alternatives? Maybe we can start with how folks pay for geo applications and content today:
GIS - I pay for licensed desktop software (sometimes a client server deployment)
Google Earth - I pay for the pro version that has extra functionality
API’s - I pay for geo type API’s when they are not used on the public web
Integrators - I’ll pay you to build a geo type mash up (sometime you have your own product to make this easier)
Data - I pay you for proprietary data that I can use in my geo application
Subscription - I pay to use your service on a recurring basis
Market places - I pay for third party content through your website and you get a cut
Buying devices - I pay for a GPS or other mapping enabled piece of hardware.
I’d argue that the majority of GeoWeb companies that are making money are doing so with one of the business models listed above. Further, I’d argue that of those most of them are doing so as integrators. Paying for licensed GIS software is the most real of the models generating over a billion in revenue, but it is not really GeoWeb outside of people paying to license Google Earth.
Selling geospatial data is another real business generating around $660 million. The companies selling this data are rarely GeoWeb companies unless you count NAVTEQ and TeleAtlas. In the data old guard the business model to sell their geospatial data is often a hot topic.
Selling API’s is a very GeoWeb method of doing business, but with the abundance of available free API’s how many people are actually paying for them? While subscription services have been big winners in other Web 2.0 spaces (Basecamp, Salesforce etc.) I can’t think of a successful geospatial subscription service (help me there must be one…).
For market places, WeoGeo has been successful in getting content providers to make their data available for sale through their service. It will be interesting to see how it scales and if a market develops, but it is one of the few GeoWeb areas where there has been business model innovation.
Interestingly, there are a myriad of business model options but nothing I’ve seen to date really pops out as a clear cut winner. Whether you are a start up or one of the big incumbents figuring out how to monetize the GeoWeb, it is going to continue to be a bur in the saddle (aka pain in the ass)…
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June 24th, 2008 at 12:32 pm
Excellent post, near and dear to my thinking. Since Google Earth, all internet based geospatial has become a loss leader. It is really a hard market to compete in when there is a well financed operation (Google) that floods the market. The only real business strategy available anymore is to come up with a unique or patented technology and hope to be bought out. Just like all the other web 2.0 companies.
June 24th, 2008 at 2:11 pm
One of the reasons why ads-on-maps hasn’t taken off yet is because in most cases advertising engines are hard-wired to API’s and not content. Google is working on an map-advertising module but it will only work with their JavaScript API, you are out of luck if you want to use OpenLayers. Lat49’s engine works with any API but it is limited to overlay ads and quite primitive when it comes to back-end logic. From what I know, Lat49 reads map bounds+zoom to determine which ad to display.
June 24th, 2008 at 4:32 pm
Good points from both Matt and Andrei. It raises the question are GeoWeb start ups barking up the wrong tree by continuing to make social mapping applications that are dependent on Google, Yahoo, and Microsoft. Inevitably G. Y or M just copies what is successful - a.k.a. Google MapMaker today. Might it be a better strategy to build applications that compete with technology people are paying for today (GIS, commercial data, mobile devices). Maybe the iPhone app store will be another monetization path foe GeoWeb apps?
June 25th, 2008 at 9:55 am
Sean, I am curious to get your feedback on UMapper (www.umapper.com). UMapper is a universal map authoring application that works with any map data provider - Google, Microsoft, OpenStreet… The service is still in ALPHA but there is enough to get the idea.
June 25th, 2008 at 5:09 pm
Hi Andrei,
I like the Flash implementation and the ability that adds to switch between tile providers. While the look and feel is nice it would be cool to have the ability to add data other than push pins. Flash has lots of cool rendering capabilities and would be great to see that pushed. The ability to load third party datasets is one angle for that. Nice work over all and cross application embedding capability is great.
From the text it looked like their was a monetization mechanism for people paying for maps that are generated for embedding. Is that correct? Would be great to get your thoughts on that angle and how it would work.
best,
sean
June 26th, 2008 at 12:37 am
There is one thing where the big 3 are not good at, it’s B2B services. I strongly believe that startups like Geoweb will have to forget online advertising as primary source of incomes in order to focus on providing brands customisable services like maps and the service attached to that. I wrote something on this last night: http://hervecuviliez.com/blog/33/startup/how-the-online-advertising-evolution-will-impact-startups-business-model/
June 26th, 2008 at 11:18 am
Sean, you asked how lat49 is doing - glad you asked! Lat49 is seeing incredible growth in this, our first full year. To-date we’ve had well over 150 publishers sign up for our API, our revenue is growing rapidly. Like FortiusOne we were selected for the Red Herring 100 this year.
Our success is based on our unique approach to geo-contextual advertising with specific optimization for ad presentation on map-centric sites. Targeted advertising by traditional networks and platforms just don’t work for map sites - that’s dead. Our model is re-affirming that geo-targeted advertising is alive and well - it can (and is) working when delivered with location as the core component of relevancy.
Keith Ippel
President, lat49
June 27th, 2008 at 2:14 pm
Hi Keith,
Thanks for the response and great to hear things are going well at Lat 49. I think having a robust network for geographically placed ads will be a huge enabler for GeoWeb start ups. I hope the ecosystem grows quickly and there is lots of inventory to drive revenue for you all and the community of map mash-ups. I definitely agree that ads around maps is not sustainable and excited to see ads on maps take off.
best,
sean
July 9th, 2008 at 4:01 am
[…] things get more complicated when it comes to monetizing a geoweb service. As Sean Gorman clearly explains in the Off The Map blog that selling ads on maps is Google-Yahoo-Microsoft’s business, and they have pretty much […]