Investors Not Needed, Just a Site With Ads

By Yuki Noguchi
Washington Post Staff Writer
Friday, July 28, 2006; A01

For hundreds of thousands of people, the dream of making an Internet fortune works like this: Earn pennies at a time in exchange for allowing Google Inc. or Yahoo Inc. to place advertisements on a personal or small-business Web page.

Take Andrew Leyden, former House Commerce Committee counsel and founder of a dot-com venture that failed, who started PodcastDirectory.com, a search engine for podcasts. As the site’s popularity rose from a hundred hits a month in 2004 to nearly a million now, Leyden started making the equivalent of an entry-level government worker’s salary — $30,000 to $40,000 a year — simply because people clicked on ads. That allowed him to work at home in Chesapeake Beach, Md., trying to make more money by attracting still more traffic to his site.

“I went from literally 26 cents a week or something like that to several dollars an hour,” he said, by using Google’s AdSense software, which solicits bids from marketers who, in turn, pay to run ads on his site. “I get paid while mowing the lawn. I get paid while cleaning the garage. I get paid driving my wife to her office, buying groceries, seeing a movie, playing video games, or just surfing the Internet. That’s really the nice thing about AdSense: No matter what I’m doing, people keep clicking and I keep getting paid.”

A decade ago, the Internet dream was to score through venture-capital financing and by raising cash in public stock offerings. Now, people with creative ideas can get rich relatively quickly by permitting advertisers to piggyback on any Web site that attracts a lot of viewers. Technology can direct ads to more and more specific audiences, rewarding entrepreneurship on the smallest scale — even Web pages filled with obscure and homemade content.

“We have a segment of customers called hopeful hobbyists” who have Web sites devoted to anything they might care about, from crochet to sailing, and who hope to eventually make enough money to quit their day jobs, said Willan Johnson, vice president of Yahoo Publisher Network, which launched a test version of its software last year.

David Miles Jr. and Kato Leonard, two 20-year-olds in Louisville, say they collect $100,000 a month from their year-old site, Freeweblayouts.net, which gives away designs that people can use on MySpace social-networking pages. One couple blogged about their home reconstruction and made money to help pay the mortgage on their new house. Jock Friedly’s business, Storming Media LLC, allows users to download public documents; he used the money his Web site made on ads for new online ventures.

Companies like Google, in turn, also find profit in such sites. In the second quarter, Google got $997 million, or 41 percent of its revenue, through the network of Web sites that host ads through the AdSense system. Its software, like Yahoo’s, prices ads based on popularity. When users click the ads, the software keeps detailed records, including the number of page views and the amount of commission the site’s host earns from the ad — all of which Web site owners can keep track of by logging on to their accounts. Every month, Google pays publishers by check or direct deposit.

Ad publishers must be approved through Google, to ensure that the ads don’t subsidize pornography or gambling, or contain material that is racist, violent or related to illegal drugs. Among other things, Google says it watches to make sure people don’t inflate their revenues by clicking on their own ads — a practice known as “click fraud” that has plagued online marketing.

The popularity of making money this way also has led to creation of “made-for-AdSense” Web pages that contain little content and lots of ads, which critics say clutter the Internet and divert online searches.

The system depends on the cooperation of advertisers, who have to see that their money is well spent, said Jennifer Slegg, an online publisher who is a consultant on AdSense and Yahoo Publisher Network, and who makes roughly half her income from AdSense ads.

“I hear tons of stories about people who were facing bankruptcy but now are able to pay off their houses in full,” she said.

The biggest moneymakers tend to be people who started sites to document their passions. Matther Daimler, 28, developed an obsession with finding the most comfortable seats on the long airline flights he took for business. He would look at a better-situated traveler and think: “He has more legroom. I want that seat next time.”

In 2001, he took to cataloguing on his SeatGuru site all the seats on his usual United Airlines flight, rating them for best legroom, the most recline, access to video and audio entertainment, and proximity to different types of laptop power sources. Soon, at the request of people who read his site, he started taking information on other flights. He now keeps track of seats on 34 airlines.

Daimler and his wife now work full time on SeatGuru, which gets 700,000 visitors a month. About half of the site’s revenue comes through AdSense — $10,000 to $20,000 a month — and the rest comes from ad deals that Daimler makes with companies directly.

Tracking clicks and the money they earn itself has become a passion for Leyden. “In the middle of the night I’ll wonder how much I made,” he said, so he’ll check his page’s status every 15 minutes.

The money that comes in acts like microfinancing for many sites, said Kim Malone, director of AdSense. “We’re enabling creativity, 5 cents at a time.”

Friedly, for example, started his company in Washington in 2001 to make it easier for contractors, scientists and researchers to find, download and purchase public documents. He reluctantly signed up to put ads on the site. “I was skeptical because when you sell something, you want to focus on the product, not refer people to other Web sites,” he said.

But with more than 10,000 hits a day, the income started adding up. “I was surprised by how much we made. It was an excellent supplement to the business, because we didn’t have to do a lot.”

Friedly has since started PatentStorm LLC, a site where businesses can search patent records, without outside investment. “In essence, Google has turned into a venture capital or an angel investor in my business.”

But if Google giveth, it also taketh away, Friedly said. As people put up more sites that compete with his for traffic, the number of hits on his main site has declined.