Bum's feet.  Manhattan, summer 1995.

Chapter 2: So You Want to Join the World's Grubbiest Club: Internet Entrepreneurs

by Philip Greenspun, part of Database-backed Web Sites

Note: this chapter has been superseded by its equivalent in the new edition    

Eels.  Fulton Fish Market.  Manhattan 1994 (pre burning). "The guy with the Web site." That's how my friends introduce me at parties. I guess that says something about what a rich, multifaceted, textured personality I've developed by spending 15 out of my 33 years at MIT. Yeah. Anyway, the response from my new acquaintances is invariably the same: "How are you going to make money off your Web site?"

If they'd been told I'd spent $20 on a subscription to Playboy, they wouldn't ask how I intended to make money off that. If they knew I'd splurged for a $5000 Viking stove, they wouldn't ask if I was going to start charging my brunch guests $5 each. If I told them I dropped $20,000 on a Dodge Caravan, they wouldn't ask if I was going to charge my dog $10 for every trip.

Web site hosting can cost less than any of these things; why does everyone assume that it has to make money? I did not set up my site to make money. I set up my site so that my friend Michael at Stanford could see the slides I took while driving from Boston to Alaska and back. It turns out that my site has not made money. Yet I do not consider my site a failure. My friend Michael at Stanford can look at my slides anytime he wants to by typing "http://webtravel.org/samantha/ ".

I'm not saying that this should be everyone's goal. After all, you might not know my friend Michael at Stanford. Or, if you do know him, you might not like him. But keep in mind that if you are destined to lose money on your site, it is much less humiliating if you can say that making money wasn't the idea.

If you can't remember that greed is one of the seven deadly sins, then I suppose it is worth thinking about how to make money on the Internet.

First, ask yourself the question, "Why do we think that there is money to be made off the Internet?" Karl Taylor Compton, former president of MIT, said it best in 1938: "In recent times, modern science has developed to give mankind, for the first time in the history of the human race, a way of securing a more abundant life which does not simply consist in taking away from someone else."

I believe that computers will secure a more abundant life for the human race.

Mine wouldnot have been a controversial statement in 1960, when IBM was just beginning to saturate corporate America with mainframes

It was obvious to everyone in 1960 that computers were going to usher in a new Age of Leisure. In 1997, my statement seems absurd. Computers have been around for fifty years now without doing much for the average person. In fact, it is a commonplace among economists that computers have reduced the productivity of American business.

Computers by themselves are a liability. Getting information into and out of them is so expensive that using paper and file cabinets is probably less trouble. Sure, in 1997 we don't see too many people manually writing payroll checks or calculating artillery shell trajectories. But most people get through most parts of their day without relying on a computer. Why don't I think that will be true in another 50 years? Because of the network.

The Steam Engine and the Railroad

Train viewed from Interstate 70 in Colorado.

James Watt's 1765 steam engine didn't change your life unless you were pumping water out of coal mines. A steam-powered factory could have produced enough goods to supply an entire nation, but since there was no way to distribute that output there wasn't much point in building such a factory. With the railroad came the ability to serve a national market with one factory. Factories grew enormous and pulled people out of the countryside to work inside the Satanic Mills. It was the mounting of the steam engine on rails and the spreading of railroads across nations that transformed society, not the steam engine per se. The computer is the steam engine of today; the network is the railroad.

With a ubiquitous network, all of the information that you consume will arrive in a machine-readable form. If the information is structured appropriately, as with standards like Electronic Document Interchange (EDI), it will arrive in a form that is immediately applicable to your internal databases without human intervention. Your computer will truly be able to handle routine transactions on your behalf.

When the network infrastructure is powerful enough that most houses enjoy video-rate bandwidth, the computer will be able to support your collaboration with other people. If you had TV-quality video and audio links to your collaborators and a shared workspace, you wouldn't have to commute to work or fly around from city to city so much. Though I don't like to predict the demise of a 3,000-year-old trend toward urbanization, it indeed seems possible that collaboration tools might enable some people to move out to the country yet still keep their urban jobs.

The Internet will change society. Some people will get rich off that change. I guess you might as well be one of them. Probably your safest bet is to figure out where all those telecommuters are going to end up living and open a little mall there with a McDonalds, MicroCenter, and Trader Joe's. But this is a book about building publicly accessible Web sites, so here are my ideas.

Four Ways to Make Money from Your Site

I think that all consumer-oriented Web services fall into one of the four categories below. If you are starting a new site for the purpose of making money, it is worth considering which categories your planned services fall into and how hard it is to make money in those categories.

Here are the categories:

1. Sites that provide traditional information. This is the type of site that requires the least imagination but also the most capital investment. Find bodies of information that consumers in the 1980s bought offline and sell them online. This includes movies/videos/television, newspapers, magazines, weather reports, and stock market information. Revenue comes from advertising, links to sites that do retail transactions and give you a kickback, and occasionally subscriptions.

2. Sites that provide collaboratively created information. This is information that was virtually impossible to collect before the Internet. A dead-trees example would be the Consumer Reports annual survey of automobile reliability. They collect information from their readers via mail-in forms, collate the results, and publish them once a year. The Internet makes this kind of activity less costly for the provider and provides much more immediate and deeper information for the user. Revenue comes from the same sources as in Category 1 but production expenses are lower.

3. Sites that provide a service via a server-side program. An example of this would be providing a wedding planning program. The user tells you how much he or she wants to spend, when and where the wedding is, who is invited, and so on. Your program then figures a detailed budget, develops an invitation list, and maintains gift and thank-you lists. You are then in a position to sell an ad to the Four Seasons hotel that will be delivered to couples getting married on June 25, who live less than 100 miles away, with fewer than 80 guests, who have budgeted more than $17,000.

4. Sites that define a standard that enables a consumer to seamlessly query multiple databases. For example, car dealers have computers managing their inventory, but that data is imprisoned on the dealers' computers and is unavailable to consumers in a convenient manner. Suppose you define a standard that allows the inventory computers inside car dealerships to download their current selection of cars, colors, and prices. You get the car dealers to agree to provide their information to you. Then your site becomes a place where a consumer can say "I want a new dark green Dodge Grand Caravan with air conditioning and antilock brakes that's for sale within 60 miles of zip code 02176." From your query to the dealers' multiple databases, your user can get a list of all the cars available that match their criteria, and can jump right to the relevant dealer's Web site.

Figure 2-1: A Category 1 site simply provides bodies of information that consumers in the 1980s obtained offline. A classical example is an on-line magazine or newspaper. Putting up a Category 1 site requires almost no imagination, technology, or investment, but it will cost you a fortune in the long run as you keep buying content to keep it fresh.

Figure 2-2: A Category 2 site provides collaboratively created information. Each user tells you how frequently his car has broken down and you end up with a valuable database of car reliability statistics to give back to users collectively. Even a humble classified ad system falls into this category. It costs money to establishing your server as a forum for users to exchange data. You have to buy some magnet content and write some programs. But once established, the site can grow in popularity with very little additional investment on your part.

Figure 2-3: Category 3 sites provide a service to the user via a server-side program. For example, suppose that you can convince people to use your server to fill out their income tax return. Why should they go to the trouble of installing a program on their computer that they are only going to use once. Your Web site is so much more convenient! Meanwhile, as they are filling out their taxes, you are building up a database of information that they would ordinarily be reluctant to give you, e.g., how much money they made last year. Armed with this information, you can sell very expensive and highly targeted advertising. Did the user make more than $350,000 per year? Rolls-Royce might pay you $10 to show him an ad for the Corniche IV. Did the user cheat on his return? VARIG would probably pay you $25 to run a page with Brazil's extradition laws and fares to Rio.

Figure 2-4: Category 4 sites define a standard for cooperation among databases and then let users seamlessly query them all. Just about every bank has a computer database of the interest rate they will pay on a certificate of deposit. But these data are not in any standard form. You engineer a standard that lets bank computers tell your Web server what CDs are available and at what rate. Then when a consumer visits your site and indicates an interest in 6-month CDs, your server can display a list of the banks, ordered by interest rate offered. If the consumer clicks through to a bank and buys a CD, you collect a commission.

In terms of bang per dollar invested, the most expensive type of site is Category 1. To create a site like this, you have to hire writers, pay photographers and editors, and scrupulously maintain your site. If you stop updating for one day, people may turn away to a competitor's site.

A Category 2 site is very cheap to start up. You spend a little bit of money for programming, a data model, and "anchor content". Thereafter the site expands itself.

Category 3 sites require much more investment and effort, particularly in selling ads and working with advertisers, but they have potentially much higher payoffs since you know so much more about your users. An advertiser won't pay too much for an ad on the Netscape home page, perhaps a few cents/impression. All that anyone knows about the readers is that they haven't changed their browser's default first page. An advertiser will pay a lot more for an ad on a search engine's site, if delivered only to those people who've entered query words relevant to the product advertised. For example, Century 21 would pay a lot to have their ad delivered to people who included "real estate" in their query string. If you learn enough about your reader, you might be able to charge an advertiser several dollars just to display one banner ad to that reader.

Category 4 is probably the most lucrative because it harnesses the full power of the Internet. Entering this area requires having the right connections and making the proper business arrangements. It is the Category 4 sites that will change the way the computer is seen. In a Category 3 car site, you offered users a new car planning service. You know what kinds of car they need, their budgets, and where they live. You can charge car manufacturers and local dealerships quite a bit to serve banner ads that might tempt particular users. But in a Category 4 site, you know which user is about to drive to which dealer to buy which car with which options. You can demand a commission from the selling dealer. You can charge $50 to a competing dealership to run an ad that says "Just wait two days and Joe Foobar Toyota will have that same color sedan in stock. The price will be $75 lower and Joe Foobar Toyota is 10 miles closer to your house than the dealer you're planning to buy from."

Let's consider how we'd use these categories to build services for a variety of fields.

Travel Example

A lot of money dangles from the travel tree. Vendors and consumers are separated by vast distances and numerous intermediaries. Each intermediary extracts a commission. It is the sum total of those commissions that is potentially available to Web travel sites.

Traditional publishers do their best to capture these commissions with guidebooks, magazines, advertising supplements, and plain old brochures. Despite the vast forests that are chopped down in this valiant attempt, dead trees publishers aren't satisfying travelers. A subscriber opens a travel magazine and finds all of the articles either much too long, because he or she isn't planning to visit the city described, or much too short, because he or she has a definite trip planned and is hungry for detail. Travel books are better, though they generally suffer from the "one voice" problem and the best-written books usually don't have any pictures because of expense of printing color can't be justified when there aren't any ads.

Traditional travel publishers don't even try to give consumers the most critical information, e.g., "How did the last 100 people who went there like it?"

An Internet travel site starts off with a huge relevance advantage. Search engines consistently deliver travel URLs to people who are about to book a trip or leave for a destination. No other advertising-carrying medium comes close, except perhaps the airplane and hotel magazines that consumers get after they've started their trip.

The most important Category 1 service for a travel site is magnet content that will attract people to Category 2, 3, and 4 services. You can organize all kinds of Category 2 services around magnet content. For example, suppose that your magnet content in an Italian site says "I went into the cathedral at Assisi to reload my camera; there were some pictures on the walls. I think somebody next to me said they were painted by a guy named ‘Joe'." Somewhere out there on the Net there is a guy who did his art history Ph.D. on those frescoes by Giotto. Your magnet content's function is to draw that expert into surfing your site and contributing a few paragraphs via your comment server.

You will also want to have classified ads for vacation homes and tour packages, Q&A forums, and a quality rating system for tour operators and hotels. What makes this all more useful than rec.travel.europe is that the magnet content gives structure to the user-contributed thoughts.

Check out http://webtravel.org/webtravel/ for a glimpse at my idea of what a Category 1 and 2 travel Web site should be like

The obvious Category 3 service for a travel site is a trip planning system. Your database will know where the consumer intends to be at every hour of every day of his trip. With that kind of information about your readers, if you can't sell high-priced ads for delivery to specific people, it won't be my fault!

The obvious Category 4 application is a hotel room booking system. Your server queries all the hotel reservation computers and the consumer can query you: "Show me the available hotel rooms in Paris for September 15-20, sorted by distance from the Louvre and then by price. Oh, and convert the prices to American dollars, please."

Real Estate Example

Real estate agents in the United States collect a 6 percent commission every time they connect buyer and seller. This leads to musings like "Why does New York have so much garbage and Los Angeles so many real estate agents?" (standard answer: "Because New York had first choice"). This kind of humor would hurt realtors' feelings if they weren't raking in $142 billion each year (Source: 1992 Census).

Realtors are precisely the sorts of intermediaries that Internet technology is supposed to eliminate. If you were trying to capture a share of this $142 billion, you'd want to start in Category 1 with articles about moving or character sketches for neighborhoods. This content would attract search engine users. Moving into Category 2, you'd run a commission-based classified ad system to connect renters with landlords and buyers with sellers. For a Category 3 service, perhaps you could create a moving planner. You'd get the old address, the new address, and the moving date from the user. You could use that data to help the user disconnect and hook up utilities, compute cost-of-living differences, and arrange travel. Meanwhile, you are bombarding the person with ads from competing communications, furniture, and appliance vendors in the new locale. For a Category 4 application you'd cut deals with other real estate sites to query their databases. If a user makes a transaction on that foreign site, you split the commissions.

Medical Example

Joe Schmoe is treated at five different hospitals over a 3-year period. Each hospital has a sophisticated computer medical record system. When Mr. Schmoe visits Hospital Number 6, they create a record for him on their big database. But even though Joe's entire medical record is available in electronic form, the new hospital has no way to import it from the previous five hospitals. So they don't realize that Joe is allergic to an obscure drug. Joe dies.

You could have saved Joe's life. You could have built a Web site where Joe can store and control his own medical record. When he goes to a new hospital, he can authorize them to retrieve portions of his record and to store their findings back on his personal server. Then when he goes to a new hospital, they can download his record and find out just which drugs will provoke a life-threatening allergic reaction.

This is a Category 4 site with a vengeance. All of the challenge is in figuring out to make disparate databases talk to each other. The data models on the hospital systems can be radically different. Even trivial differences, such as different abbreviations for the same disease, can prevent databases from understanding each other. You have to find a way to get these databases to cooperate even though they were never designed to do that.

Big companies do this all the time, of course. They'll decide that starting July 1, everyone is moving to the big new central database system and everyone will use the same part number for a #8 machine screw. They have the money, resources, and authority to make this happen. On the Internet, there are many more organizations who could benefit from data exchange, but there is much less trust, less money, and no central authority.

There is a huge technical challenge in figuring out a cheap automated or semi-automated method of integrating databases. In fact, this is my primary research focus at MIT. Though my partners and I have done some interesting things in the medical domain, I won't say that we've got any kind of general solution. As soon as we do, we'll have a killer Web site.

That's a whirlwind tour of the four ways to break down consumer Web services. Assuming you run with one of my ideas or come up with a great one of your own, then you'll be on your way to achieving the Holy Grail of the Web: traffic.

We Lose Money on Every Hit But Make It Up On Volume

If nobody ever visits your site, then you won't make any money. Advertisers don't like to place ads where nobody will see them. You can't sell stuff to nobody. Collecting a middleman's commission on no transactions is not very attractive. If you have visitors then you at least have a chance to make money, even if you didn't have a specific plan when you set up the site.

Internet commerce is the most obvious method of making money from a popular site, but it may not be the best. Internet commerce appeals deceptives to a particularly male fantasy. Guys like the idea that after a short initial period of programming, a computer will tirelessly slave away for them, making them money 24 hours a day. Set up the site, walk away, and watch the money pile up in your bank account.

You can feed this fantasy by reading articles in the business press about http://amazon.com, the perennial poster children for Internet commerce. They set up what is essentially a front-end to a wholesale book distributor's database, and now they are selling books every few seconds. It sounds like they are rolling in money.

Well, it turns out that I know some people who work at amazon.com. The customers don't always fill out the forms exactly right. The books aren't always in stock like they should be. The customers send e-mail asking when their books are going to be shipped. So instead of one Unix box and a big vault for the cash, the company has 200 employees sucking all the money out of it. And remember, this is the best that anyone has really done: high expenses and high sales. More typical is an Internet store with high expenses and low or no sales.

If amazon.com offers a cautionary lesson to those who would make their fortune processing transactions, it offers an encouraging lesson to those who would publish deep content.

They have an "associated bookstore" program. You become an associated bookstore by adding an encoded link from your pages to amazon. This doesn't mean you have to uglify your site with sales promotions. In my case, I just went through http://photo.net/photo and replaced

You should check the Kodak Professional Photoguide


You should check the 
<a href="http://www.amazon.com/exec/obidos/ISBN=0879857595/photonetA/">
Kodak Professional Photoguide</a>

When a user clicks on the link, he is presented with an order form from amazon.com. Should he complete the order, amazon will kick back to me 8 percent of the price of the book.

I got some e-mail from a travel agent offering a similar arrangement. If I linked to them from my travel pages, they'd kick back to me half of their travel agent's commission (about 12 percent) on any sales that resulted from the link.

It occurred to me that, in a perfectly competitive environment, referral arrangements like this would eventually result in almost all of the profit being paid to the owner of the content. Transaction processors will earn a normal return on their investment, but nothing extra. Why? I'm currently linking to amazon.com for an 8 percent blandishment. If Barnes & Noble offers me 12 percent, I can write a perl script to grind over my 1000 .html pages and replace references to amazon.com with references to Barnes & Noble. If I were linked to a travel agent offering me 50% of their commission, a travel agent late to the Internet booking market might offer me 100 percent of their commission in hopes of capturing my users as repeat customers. Another five minutes with perl and all of my static .html pages are pointing to a new travel agent.

Word to the wise: Be sure to carefully check out the conditions under which you get paid. All of the revenue from my site is donated to Angell Memorial Animal Hospital here in Boston. With 5,000 readers on my Web site every day, I figured all that money flowing from amazon.com would buy the dogs filet mignon in gold-plated bowls. But it turns out that special orders are excluded from my take. And a lot of the books that I recommend are special order only. And if the user buys ten books in the session, I only get paid for the one title that I referred him for. This was beginning to seem unfair. After all, suppose I refer Joe User to amazon for a special order book that I think he should read. While he is there, he swells amazon's coffers by picking up ten more books. I get nothing. Nada. Zip.

The worst was yet to come. Amazon only pays a referral fee if the user you refer buys the book that you recommend and does so from the very first amazon page he is shown. Suppose I refer Jane Clever to amazon.com to buy The Practical SQL Handbook. She looks at the amazon page and is happy with the book, price, and so on. But she decides to browse around a bit before ordering. She ultimately ends up buying The Practical SQL Handbook and $500 of other database books. I get nothing. Nada. Zip.

Figure 2-5: the first page a user sees when referred to amazon.com from an amazon.com "Associated Bookstore". The referring site will get an 8% commission, but only if the user orders immediately without being tempted by the 25 other links on the page.

Figure 2-6: the bottom of the same amazon.com page, note the profusion of links, clicking on any one of which will result in the referring site getting no commission

The amazon folks say that they don't expect too many people to go browsing before purchasing. This, of course, is common sense: When you go to a store knowing that you need something, you always walk right up the register and buy it before turning your head to the left or right and looking to see if there is anything else you need. Yeah. And just in case the user isn't predisposed to browse, amazon provides about 25 internal links on the page that they serve for their associated bookstores (see Figures 2-5 and 2-6). If the user clicks the order button then the associated bookstore will get a referral fee. If the user clicks any of the other 25 links, such as "books on SQL," "books on relational databases," "browse," "books by the same author," or "search," then amazon has gotten itself a new customer without having to pay anything.

How does this work in practice? Listing 2.1 shows a weekly report from amazon.com to me.

Listing 2.1

Weekly report on my commission from amazon.com

Click-throughs and sales by individual book
For the week of 15-Dec-96 through 21-Dec-96
Store ID photonet
------------ ---- ------- ------ ---------------------------------------
0028604881      5     0     0.00 Baedeker Prague (Baedeker Guides)
0028609034      3     0     0.00 Frommer's Prague and the Best of the Cz
006091985X      1     0     0.00 Modern Baptists
0062771590      1     0     0.00 Access Cape Cod Martha's Vineyard & Nan
0070074178      1     0     0.00 **2** Principles of Corporate Finance (
014012991X      4     0     0.00 Tales of a Shaman's Apprentice : An Eth
0201447878      3     0     0.00 The Practical Sql Handbook : Using Stru
0201622165     10     0     0.00 MacIntosh Human Interface Guidelines
0240800265      9     1     0.00 **2** Basic Photographic Materials and
                      1          sold at  0% off list price of   44.95
024080158X     11     0     0.00 **2** View Camera Technique
0240802519     28     0     0.00 **2** The Hasselblad Manual : A Compreh
0393315290      4     0     0.00 A Random Walk Down Wall Street : Includ
0679025723     15     0     0.00 Fodor's : The Czech Republic & Slovakia
0679733485      1     0     0.00 The Marriage of Cadmus and Harmony
0679765425      2     0     0.00 **1** The New Yorker Book of Dog Cartoo
0684830426      1     0     0.00 **1** The Great Gatsby (Scribner Classi
0810960885      1     0     0.00 *** This item no longer in our catalog
0811807622    726     0     0.00 The Body : Photographs of the Human For
0821223321      2     0     0.00 America in Passing
0823049752     56     0     0.00 Photography
082306459X   1152     0     0.00 Graphis Nudes
0855339438    135     0     0.00 **2** The Workbook of Nudes and Glamour
0864422458      2     0     0.00 Lonely Planet Czech and Slovak Republic
0871062380      4     0     0.00 Berlin (Cadogan City Guides)
0879857595      7     0     0.00 Kodak Professional Photoguide
0893815322    329     0     0.00 Edward Weston : Nudes
089526529X      2     0     0.00 Hill Rat : Blowing the Lid Off Congress
0899330169      5     0     0.00 Vermont Atlas & Gazetteer
0899332501      2     0     0.00 Maine Atlas and Gazetteer
0899332544      5     0     0.00 New Hampshire Atlas and Gazetteer
0911515003      2     0     0.00 **2** The Permanence and Care of Color
0918373883      2     0     0.00 **2** New Zealand Handbook
0936262389     30     0     0.00 Infrared Photography Handbook
1558603239      2     0     0.00 **2** Joe Celko's Sql for Smarties : Ad
1560986220      5     0     0.00 Pinhole Photographs : Photographs (Phot
1564400069      1     0     0.00 **2** New York (Cadogan City Guides)
1564581845      1     0     0.00 New York (Eyewitness Travel Guides)
1564585034      9     0     0.00 Prague (Eyewitness Travel Guides)
1566910153     22     1     1.08 New Mexico Handbook
                      1          sold at 10% off list price of   14.95
1566910358      8     2     2.87 Costa Rica Handbook (2nd Ed)
                      2          sold at 10% off list price of   19.95
1568842031      2     0     0.00 The Unix-Haters Handbook/Book and Barf
1858281210     10     0     0.00 The Czech & Slovak Republics : The Roug
1860110150     11     0     0.00 Prague : Cadogan City Guides (3rd Ed)
1880559234      1     0     0.00 Mastering Black-And-White Photography :
188332338X      1     0     0.00 Czech and Slovak Republics Guide
1885492022      1     0     0.00 The New York Dog Owner's Guide : Everyt
1885559003      2     0     0.00 Passage to Vietnam : Through the Eyes o
188555902X      2     0     0.00 Passage to Vietnam/Cd-Rom
2061569072     11     0     0.00 Michelin Green Guide : New England (7th
6301973259      1     0     0.00 **2** Marty
------------ ---- ------- ------ ---------------------------------------
     Totals: 2651     4     3.95

I sent people to the amazon site 2,651 times. Only 4 of those people ignored the 25 extra links and bought books off the very first page. One of them bought a special order book for which the dogs at Angell got nothing. Bottom line: The standard Internet price for a clickthrough is 10 cents; it would have cost amazon.com $265 per week to get these users by purchasing ads on other folks' sites; amazon got them from me for $3.95.

A Final Plea

I suppose that it is possible to make money with a Web site. But before you build your site, take a moment to think about the things that you went into because you thought you could make money. How many of them proved satisfying in the long run? How many actually made money?

You could start your Web site by asking, "What can I get from this right now?" Alternatively, you could start out by asking, "What can I give people?" I expect that in the long run, you'd be about equally likely to make money with either approach. I started with the latter.

I gave away my pictures. I gave away my stories. I gave away to "competitors" my advice and software. The Web gave me back a large and growing audience for my work. The Web gave me back some money, to be sure. But I actually do place a higher value on some of the e-mail that I've gotten:

"Thanks for getting me thru some sloooow weekends at work. . . . I have been working all the holiday weekends here at Directory Assistance & I wouldn't have made it out alive without your book. Thanks for sharing."
-Mary in Wisconsin

"I love your book for two reasons. First, it's great, the story is fresh and honest. The second is of course that it is the kind of thing that this technology has been building for-it some how makes all those millions of dollars spent on computers, on the Net, on decades of development seem like there might have been a reason for it all. Thanks for the warm glow."
-Jonathan in New Zealand

Note: If you like this book you can move on to Chapter 3.

Update: October 20, 1997

Note that this material did not appear in the paper edition...

I've had some more experience with amazon.com since I wrote the above chapter. They've changed their associates program so that it doesn't have as many loopholes. They've also changed their user interface and graphic design a bit. Finally, they've upped their referral fee. Here's how the bottom line plays out in last week's report:

 Click-throughs and sales by individual book
 For the week of 12-Oct-97 through 18-Oct-97
 Store ID photonet
 ------------ ---- ------- ------ ---------------------------------------
 0028604881      7     0     0.00 Baedeker Prague (Baedeker Guides)
 0028609034      9     0     0.00 Frommer's Prague and the Best of the Cz
 006091985X     12     0     0.00 Modern Baptists
 0060987049     11     0     0.00 Microserfs
 0062771590     60     0     0.00 Access Cape Cod Martha's Vineyard & Nan
 0070074178    111     0     0.00 **2** Principles of Corporate Finance (
 0070572771      4     1     5.99 Hp-Ux System and Administration Guide (
                       1          sold at 20% off list price of   49.95
 0070713979      3     0     0.00 New York : A Guide to the Metropolis :
 0078821762      2     0     0.00 Oracle Pl/Sql Programming (Oracle Serie
 0078822858     15     0     0.00 Oracle : The Complete Reference : Elect
 0078822890      1     0     0.00 Oracle Dba Handbook 7.3 : 7.3 Edition (
 0131820079      2     0     0.00 **2** Practical Programming in Tcl and
 0140053204      9     0     0.00 Travels With Charley : In Search of Ame
 014012991X     48     0     0.00 Tales of a Shaman's Apprentice : An Eth
 0140143459     16     0     0.00 Liar's Poker : Rising Through the Wreck
 0156036002     51     0     0.00 **2** Aia Guide to New York City, 3rd e
 0201447878    226     2     9.59 The Practical Sql Handbook : Using Stru
                       2          sold at 20% off list price of   39.95
 0201565455      3     0     0.00 **2** The Sql Guide to Oracle
 0201622165      2     0     0.00 MacIntosh Human Interface Guidelines
 0240800265      8     0     0.00 **2** Basic Photographic Materials and
 024080158X     30     0     0.00 **2** View Camera Technique
 0240802314      2     0     0.00 Pinhole Photography : Rediscovering a H
 0240802519     48     0     0.00 **2** The Hasselblad Manual : A Compreh
 0262011530      3     0     0.00 **2** Structure and Interpretation of C
 0312099266      1     0     0.00 **2** Travels with Lizbeth
 0321011082      4     0     0.00 **2** Photography
 0374189870      6     0     0.00 Lives of the Monster Dogs
 0385267061      3     0     0.00 On Photography
 0393315290      7     0     0.00 A Random Walk Down Wall Street : Includ
 0394726413     43     0     0.00 Bright Lights, Big City; A Novel
 0395585686      6     0     0.00 Blue Highways : A Journey into America
 0395590728      6     0     0.00 Walker Evans : A Biography
 0449909433      1     1     1.32 Travels With Lizbeth
                       1          sold at 20% off list price of   11.00
 0451522737     40     0     0.00 Sister Carrie
 0451526120     75     0     0.00 The Age of Innocence
 0453008976     11     0     0.00 Travels With Charley : In Search of Ame
 0486220125      1     0     0.00 How the Other Half Lives : Studies Amon
 0671760599      1     0     0.00 Blue Highways
 0679025723     18     0     0.00 **2** Fodor's : The Czech Republic & Sl
 0679426272      2     0     0.00 American Visions : The Epic History of
 067944386X     58     0     0.00 The Rich Are Different
 0679733485      4     0     0.00 The Marriage of Cadmus and Harmony
 0679735739      5     0     0.00 The Information
 0679765425      1     0     0.00 The New Yorker Book of Dog Cartoons
 0684830426    164     0     0.00 The Great Gatsby (Scribner Classics)
 0684874350      4     0     0.00 Angela's Ashes : A Memoir
 069100076X     16     0     0.00 Cape Cod (The Writings of Henry David T
 0771082398     22     0     0.00 Paddle to the Artic : The Incredible St
 0783818319     16     0     0.00 **2** Summer (G K Hall Perennial Bestse
 0805051708     16     0     0.00 Photomosaics
 0806995270    119     0     0.00 John Hedgecoe's Figure & Form : Photogr
 0811807622    309     0     0.00 The Body : Photographs of the Human For
 0817440526     27     0     0.00 John Shaw's Closeups in Nature
 0817450068     20     0     0.00 Nature Photographer's Complete Guide to
 0821223321      2     0     0.00 America in Passing
 0823049752     55     0     0.00 **2** Photography, 5th ed.
 082306459X    391     0     0.00 Graphis Nudes
 0855339438      8     0     0.00 **2** The Workbook of Nudes and Glamour
 0864422458     10     0     0.00 Lonely Planet Czech and Slovak Republic
 0871062380      3     0     0.00 Berlin (Cadogan City Guides)
 0871563673     15     2     6.00 Mountain Light : In Search of the Dynam
                       2          sold at 20% off list price of   25.00
 0874778476     33     0     0.00 Seven Years in Tibet
 0879857595    206     3    10.78 Kodak Professional Photoguide
                       3          sold at 20% off list price of   29.95
 0879857641     22     0     0.00 Copying and Duplicating : Photographic
 0888012012     33     0     0.00 Kabloona in the Yellow Kayak : One Woma
 0890877378      3     0     0.00 Jet Smart
 089190509X    128     0     0.00 **2** Ethan Frome
 0892363177     13     0     0.00 Walker Evans : The Getty Museum Collect
 0893815322    166     0     0.00 Edward Weston : Nudes
 089526529X      4     0     0.00 Hill Rat : Blowing the Lid Off Congress
 0899330169     30     0     0.00 Vermont Atlas & Gazetteer
 0899332501     10     0     0.00 Maine Atlas and Gazetteer
 0899332544    192     0     0.00 New Hampshire Atlas and Gazetteer
 0911515003     72     0     0.00 **2** The Permanence and Care of Color
 0936262389     20     1     2.99 Infrared Photography Handbook
                       1          sold at 20% off list price of   24.95
 0940450313      1     0     0.00 Edith Wharton : Novels : The House of M
 1555840450      1     0     0.00 **2** From Cape to Cairo : An African O
 1558603239      7     0     0.00 Joe Celko's Sql for Smarties : Advanced
 1560986220      7     0     0.00 Pinhole Photographs : Photographs (Phot
 1562765302     75    12    43.18 Database Backed Web Sites : The Thinkin
                      12          sold at 20% off list price of   29.99
 1564400069      2     0     0.00 New York (Cadogan City Guides)
 1564407179      5     0     0.00 Off the Beaten Track : Czech & Slovak R
 1564581845     27     0     0.00 New York (Eyewitness Travel Guides)
 1564585034     13     0     0.00 Prague (Eyewitness Travel Guides)
 1565921429      2     0     0.00 Oracle Pl/Sql Programming (Nutshell Han
 156592214X      1     1     3.59 Web Client Programming With Perl
                       1          sold at 20% off list price of   29.95
 1565922352      3     0     0.00 Html : The Definitive Guide (Nutshell H
 1565922379      2     0     0.00 Oracle Performance Tuning (Nutshell Han
 1565922573      1     0     0.00 Mastering Regular Expressions : Powerfu
 1565922689      1     0     0.00 Oracle Design (Nutshell Handbook)
 1566910153     55     0     0.00 **2** New Mexico Handbook
 1566910331      5     0     0.00 New Zealand Handbook (4th Edition)
 1566910358     35     2     4.79 Costa Rica Handbook (2nd Ed)
                       2          sold at 20% off list price of   19.95
 1566910366      3     0     0.00 Road Trip USA : Cross-Country Adventure
 1568843224      2     1     3.60 About Face : The Essentials of User Int
                       1          sold at 20% off list price of   29.99
 1858281210     11     0     0.00 The Czech & Slovak Republics : The Roug
 1860110150     12     0     0.00 Prague : Cadogan City Guides (3rd Ed)
 1880559234      7     0     0.00 Mastering Black-And-White Photography :
 188332338X     14     0     0.00 Czech & Slovak Republics Guide
 1885492022      3     0     0.00 The New York Dog Owner's Guide : Everyt
 1885559003      1     0     0.00 Passage to Vietnam : Through the Eyes o
 1885559011      2     0     0.00 **2** Passage to Vietnam/Book and Cd-Ro
 188555902X      5     1     4.79 Passage to Vietnam/Cd-Rom
                       1          sold at 20% off list price of   39.95
 188641114X      8     1     2.52 The No B.S. Guide to Windows Nt 4.0
                       1          sold at 20% off list price of   21.00
 2061551114      4     0     0.00 **2** New York City, 11th 1994 ed. (Mic
 2061569072    131     0     0.00 Michelin Green Guide : New England (7th
 6302794870      2     0     0.00 **2** Scent of a Woman/R
 6303192459     49     0     0.00 Breakfast at Tiffany's Collectors Ed.
 ------------ ---- ------- ------ ---------------------------------------
      Totals: 3602    28    99.14

Now Angell Memorial's amazon.com booty is $100/week. If we were to apply this to a typical Web publisher, it is probably worth taking out the $43 that were for the 12 copies of Database Backed Web Sites that were sold (I have the full text of the book on my site, something the average book recommender is unable to do).

One thing amazon.com has not changed is that they don't pay referral fees if the user doesn't immediately add the recommended item to his shopping basket. Nor do they pay if the user buys something other than the book recommended. Nor will they give me the stats on how many of my readers bought something who did not show up in the above report. But I was able to do an experiment by signing up with Computer Literacy. They have what should be a more fair system (they pay $10/referral if my reader buys something, anything, during a clicked-through session). Here's my report from Computer Literacy:

--------- ---------- -------- ------
9/1/1997         3        3      0
9/2/1997         4        4      0
9/3/1997         6        5      0
9/4/1997         6        6      0
9/5/1997         2        2      0
9/6/1997         4        3      0
9/7/1997         3        2      1
9/8/1997         7        5      0
9/9/1997         4        4      0
9/10/1997       12        8      0
9/11/1997        9        6      0
9/12/1997        4        3      0
9/13/1997        8        8      0
9/14/1997        3        3      0
9/15/1997        8        8      0
9/16/1997        8        8      0
9/17/1997        3        3      0
9/18/1997        6        5      0
9/19/1997        3        3      0
9/20/1997        1        1      0
9/21/1997        6        6      0
9/22/1997        4        4      0
9/23/1997        6        5      0
9/24/1997        3        2      0
9/25/1997        5        5      0
9/26/1997        1        1      0
9/27/1997        4        3      0
9/28/1997        7        5      0
9/29/1997        3        3      0
9/30/1997        4        4      0
--------- ---------- -------- ------
TOTAL          147      128      1

Angell Memorial is the beneficiary on the Computer Literacy program as well. And they'll be happy with the $10 they got for September. But it looks like I was wrong about the importance of the remaining amazon loophole. It took 147 clickthroughs at Computer Literacy to generate 1 sale. That's a very similar number to what my amazon.com reports show. It would appear that Internet users are very fickle. It would also appear that the amazon.com brand name and site design are contributing to clickthroughs and sales (see the book behind the book behind the book for my theories on what makes the amazon site more effective than other book marketing venues). You'd think that Computer Literacy would be the preferred vendor for Database Backed Web Sites since they ship it same day (versus either 24 hours or 3 days for amazon, depending on whether they have it in stock). But it has not worked out that way. Retailing is apparently more complicated than it looks...


Reader's Comments

Just to present a little balance, the books I recommend on my page (http://www.guitar9.com/labelres.html) have gotten less than 10% of Mr. Greenspuns 'hits', but generated over 10 times the income. It would be folly to generalize that all book-recommendation pages will get the same results, something amazon.com tries to drill into all of it's associates.

-- Dan McAvinchey, March 17, 1997
Last week I put up a page with a half dozen real estate related books on it through Amazon.com. I must say I didn't think about people "clicking through" my commissions until I got my first statement and out of 5 visitors only one bought in spite of the of the fact the link connecting clearly state "order here". I consoled myself with the fact that I was giving a future real estate client information at a nice discount and I should be content with that. Now I'm not so sure. I wish I knew how many of the remaning 4 bought something for which I got nothing. I do feel cheated and I've only been an associate for 2 weeks. Thanks to Mark Welch I found your site and a number of other book associate programs that don't pay the now "15%" commission (you don't get anyway) they do pay 8% for every book purchased from you link. My only problem now is that I don't write pearl script, but I guess it isn't that tough to change half a dozen reviews anyway!

-- Michael Warner, September 13, 1997
Amazon has updated their program since this was published. If someone goes to amazon.com through your site and purchases the book/cd/video you recommend, you get the full percentage commission. If they purchase a different book/cd/video, you get a lower percentage commission.

-- Andy Hughes, July 1, 1999
Just wondering: What happens if instead of just linking to the book (Kodak Photoguide, say) from Amazon.com each time, you put something like "the [Kodak Photoguide or whatever] book at Amazon.com"? I only ask because earlier I clicked on one of your links to Amazon.com thinking it would take me to another site with some free online content, rather than one that was trying to sell me a book. (I didn't stay at Amazon.com long after that...) I guess you could get some idea how much this was happening by looking at your access logs. Of the 2000-and-some people you sent to Amazon.com, what proportion came back to your site a second or two later?

-- Ed Edgar, January 31, 2001
I was about to write this comment when I read a posting of Ed Edgar, January 31, 2001 that essentially sais what I was going to say.

Clicking first time on a reference to some book on photo.net, I did not expect to be thrown to amazon.com. I suspect that quite common expectation among people clicking on those links (first time at least) is to get some more information on the subject, but not to be offered to *buy* the book. The text of those links to the books on amazon.com seems to be off-harmony with the nice non-commercial environment they are in. The same thing would *not* be confusing if there were ads/offers/sales all around on a page.

-- Boris Vilkoff, August 10, 2001

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