Tapping the Feed: In Search of an RSS Money Trail

Page 1 of 3

A year ago I would have said that the XML-based RSS (real simple syndication) protocol is still way too geeky for mainstream users. Even now, when most of us hit one of those orange "subscribe" buttons at a site we get a screen of cryptic code for RSS or Atom (a related protocol) that looks more like a browser error than the hot new way of pulling in a publisher's content updates. In just the last few months, however, RSS has taken aim at mainstream use and is beginning to hit its target. Yahoo! now makes these feeds available for easy integration in its My Yahoo! pages. Mozilla's very popular Firefox browser has a convenient RSS reader built in. And the number of feeds and users has risen exponentially. "In the existing feeds we manage, the base of subscribers grows about 1% to 1.5% a day," says Dick Costolo, company founder and CEO, FeedBurner, which provides metrics and distribution for 25,000 RSS feeds.

That's right. He said 1% to 1.5% subscriber growth a day.

While no one really knows how large an audience the RSS platform eventually will attract (the geek factor is still there, after all), the race has already begun to find ways of cashing in on this gushing new channel of content. In fact, as really simple and small as an RSS feed may be, all of the usual revenue model suspects are lining up to chart a money trail from the new platform: advertising in CPM and CPC models, sponsorships, affiliate marketing, enterprise sales, and even subscriptions. The perennial online mantra applies to these geeky little RSS feeds as well: where there are eyeballs there must be a way … to monetize them.

Feeding the Ads
For Matt McAllister, VP and general manager of InfoWorld.com, finding revenue models for RSS became a critical issue last year when he saw traffic to his main news RSS feed approach the popularity of his Web-based home page. "That was a big wake-up call for me. I got very worried and saw there was no way to stop this, so we had to get ahead of it." InfoWorld.com has become one of the most evolved test beds for finding revenue from RSS, and it discovered early that publishers need to tread carefully in this realm. When McAllister started by inserting text ads as the sixth entry in his feeds, InfoWorld.com got slammed by some high profile bloggers who resented the model.

He's had better luck now inserting text ads at the bottom of every fifth news entry, and he plans to increase the frequency to every third post. With 50 feeds parsed along granular interests, McAllister can target his ad insertions to good effect. Clickthrough rates in some feeds are up to .5%, well above typical banner CTRs. His sales team now bundles the RSS placements into its lead generation packages, and he soon will start selling ads on a cost-per-click basis. "As the numbers start adding up, it starts to make real sense as a revenue stream. Since most RSS readers can handle HTML code, InfoWorld is already testing inserting graphical banner ads in headline entries. While McAllister admits that the dynamics of RSS are different from the Web, as is audience tolerance, he says that theoretically, "It is possible you could recreate all of the revenue streams you have on a Web site article page in an RSS feed."

Well, maybe. Even among other providers who are trying the traditional ad model in RSS, the jury is out. "It does okay," says Erik Matlick, president of IndustryBrains, which just started inserting its contextual text ads into some partners' feeds. "It's a little early, but I'm not overwhelmed with it yet."

Thus far, RSS tends to appeal to hardcore information junkies, so it remains unclear how large the audience ultimately will grow, let alone how sensitive RSSers will be to pulling down paid promotions with their feeds. "When we tested it, the overwhelming response was negative," says David Sifry, CEO of Technorati, the search engine for a blogging community that makes extensive use of RSS. "It will have to be done in a very user-friendly way."

Sponsorship is among the most unobtrusive traditional forms of advertising because it makes very clear to a user that a specific company is underwriting their free content. Tech enewsletter publisher LockerGnome offers its subscribers the option of receiving updates via RSS feeds that are sponsored by clients like Microsoft, Google, and PayPal. The ad "is set apart by a line that denotes ‘brought to you by,' and the sponsor's message is typically in line with the reasons the user subscribes to the feed," says Chris Pirillo, LockerGnome's "head geek and founder." And business is great, with sponsors paying $2,500 for a week's run across Pirillo's 150 feeds. "ROI is fantastic, considering that RSS clicks are defeating email clicks by a sizable margin."

Contextual relevance is another way to ease end-user resistance to a commercialized RSS model; make the ads so germane to the user's interests that it feels more like information than a sales pitch. And so, RSS services provider FeedBurner is experimenting with Amazon's affiliate marketing program. The Amazon Web service can use keywords in a publisher's RSS item to match it with a book promotion. If one of FeedBurner's publishing partners opts in, the company can send selected items through the Amazon Web service engine to pick up a relevant text ad and insert it into the publisher's RSS flow. If the ad results in a purchase, the publisher and FeedBurner share a cut of the revenue. Using a contextually relevant affiliate marketing model in RSS has potential, and the company is going to launch similar tests with other vendors. "But we don't have enough data points yet to develop trend lines," says Costolo.

For the media buyer, one of the missing pieces in RSS advertising is a reliable metric. Because many portals and aggregators like Yahoo! will pull an RSS feed once on behalf of thousands of readers, actual audience size for an RSS subscription must be extrapolated. FeedBurner says its calculations of raw circulation of a feed are fairly accurate, but publishers are going to need greater metrics precision and detail if they expect to sell space regularly to advertisers. For now, InfoWorld's McAllister has to "ballpark" a circulation figure for his advertisers, but he would like to do better. FeedBurner plans to roll out a premium metrics service that will drill into how individual news items are accessed or whether a feed is going to an individual reader client or a Web page. "As this happens more and more, it will be compelling for publishers to understand what Web sites out there are repurposing their content," says Costolo. Knowing where and how an RSS feed is viewed will also help ad sales teams and buyers normalize a system of selling and buying RSS ads.

Page 1 of 3