Gannett's original daily deals site, in Phoenix, is now averaging $250,000 in gross monthly revenue -- 10 times more than when that DealChicken site got launched in September 2010, CEO Gracia Martore told Wall Street stock analysts during yesterday's third-quarter conference call.
That's impressive. But it's not the whole story.
GCI shares a big chunk of that revenue with the merchants who offer the deals -- about half, according to the last figures I saw published. What's unclear to me: How much commission does GCI pay the salespeople who sell deals to merchants? In other words, of that $250,000 gross, how much does GCI actually keep?
Also, Phoenix is perhaps the biggest of the more than 50 markets where DealChicken is being launched, so it's unlikely other markets will come close to the monthly gross now being racked up there.
That's impressive. But it's not the whole story.
Also, Phoenix is perhaps the biggest of the more than 50 markets where DealChicken is being launched, so it's unlikely other markets will come close to the monthly gross now being racked up there.
Phoenix grossed $250,000. Not bad. More or less 50-50 split with advertisers $125,000. Okay. Not that good but still $125,000 is $125,000. Now deduct commissions and we're probably somewhere south, maybe well south, of $100,000. Now we're talking chump change for a company the size of Gannett.
ReplyDeleteThere have been promotional and hiring costs associated with DealChicken: Dedicated managers were hired at many sites.
ReplyDeleteAlso: Many sites had to purchase email lists when in-house lists and promotions proved insufficient to build a base.
dedicated site managers, dedicated web servers, dedicated technicians and support reps. the list goes on.
ReplyDeletetrust me, the chicken has not broken even yet, by ANY stretch.
True to all of the above and actually the $250K a month is an inflated figure. The way that $250K is counted is for example (1000 widgets from merchants were sold at $250 bucks each, then that equals $250K) so its not like a regular ad sale where the company keeps all of the revenue, pretty much all of that $250K is paid back directly to the merchant and Deal Chicken actually operates at a loss, but they can count it as $250K in sales per month because it comes through the Deal Chicken web portal. For Deal Chicken to make any money the economy of scale would have to be enormous (at approximately a $1 million a month they would ALMOST break even and even then probably not because of the sales force necessary to build the platform. Such is/are Gannett's business models, they take so much human capital and money to even operate that it's almost more worth while to not even do the projects. If you have to spend a dollar to make a penny is it really worth your time? In Gannett land it is and always has been.
ReplyDelete11:46 is correct, the math doesn't work but it's amazing Wall Street hasn't reacted. Again, this is just the flavor of the week versus a real plan from management.
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