Disclaimer: the following calculations are unproven, non-scientific, and cannot be used as a financial advice.

Despite a good and long list by Alex Lam of potential revenue possibilities for StackOverflow, they make money only via paid job posts and site ads (rectangle banner in the right column and sponsored tags).

1. Paid job listing is very easy to calculate. They have about 8-9 new job posts a day. One costs cool $350. So let’s estimate it at 9 * 350 * 30 = $94,500 per month.

2. Ad revenue is hard to estimate. Let’s start with the 26M pageviews per month they claim to have. A lot of these pageviews don’t carry any ads at all: pages like About, FAQ, list of users, etc.

2.1 I would take 80% are ad views and 20% non-ad views. This gives 20,800,000 pageviews with ads.

2.2 The ad inventory is not sold out. Every now and then they display an internal ad – ad for job.stackoverflow.com. To make matters worse, the ads are geo-targeted, showing different ads for different countries. This means that ad inventory and its sold out ratio is different for every country. My tests showed it is about 75% for USA and 45% for India and Russia. Let’s take these figures and assume 75% rate for highly ad-targeted countries and 45% for the other countries.

2.3 My estimation is that half of pageviews go from highly ad-targeted countries and another half from the other countries. Originally I thought that low ad-target countries would make most of the pageviews. However, I browsed through the list of registered users and was impressed with the big number of USA, UK, Australia, Canada users. So let’s take 50% – 50% split, which gives average of 60% sold out inventory ratio. Thus, only 12,480,000 pageviews carry paid ads.

2.4 Now the trickiest part, CPM – the cost per 1000 impressions. fabien7474 came up with roughly $5 CPM for StackOverflow and I tend to agree, not going into details.

Drum rolls: the estimated banner ad revenue is $62,400 per month.

2.5 There are also sponsored tags that display ads as well. I don’t think those are sold on CPM basis, and hardly a lot of people click those tags anyway. Also, consider that few tags are sponsored so far. A week ago I saw a bunch of tags sponsored by Adobe and them are gone. Let’s add ballpark $10,000 for the tags.

The total revenue is $94,500 (for job posts) + $72,400 (for other ads) = $166,900 or $167K per month.

A few observations:

• The job listing brings more money than the ads!
• I can try and estimate the costs (hosting, traffic, staff), but no matter what chairs you buy for your guys, the costs will be lower than $167K monthly. So, this is definitely cash-positive.
• This revenue figure is nice and it is a good achievement, but looking for VC money to scale this business? You gotta be kidding.

In the next post I will go through competition and examples of similar sites to get the whole picture…

In other words, the businesses grossly overestimate their ability to raise capital. “Grossly overestimate” is probably not good enough to describe the 41% vs 1% discrepancy.

And if you are not an average native Silicon Valley grad (like me), the chances are even worse. Says Vivek Wadhwa, former entrepreneur: Despite having co-founded a software company that we took from startup to $120m in revenue; profitability; and IPO in a record five years, I couldn’t get Research Triangle Park (RTP) VCs to even return my phone calls when I was ready to start my second venture.  I later found out why: “my people” <Indians> were great at mathematics and made great engineers, but didn’t make great CEOs — “we” didn’t have the necessary management skills, didn’t like diluting our equity ownership by raising venture capital, and couldn’t “fit” into the rough-and-tough American business-management culture.  That’s what one RTP VC told me over lunch, to explain why his firm wasn’t inviting me to pitch my business plan.  They were very busy and had to be selective in who they met.

Now, one would think that it’s not easy to sell these things to the programmers for a variety of reasons:

• There are many open-sourced and free alternatives.
• High piracy rate. Programmers (in general, but not all of them) love to find and download things they need without paying.
• A lot of programming is outsourced these days, meaning there are many programmers from India, China, Russia and other countries, whose buying power is reduced. In other words, there are a lot of customers who won’t spend an extra dollar unless absolutely needed.
• Build or Buy thinking, meaning that every time a programmer evaluates someone else’s software, he thinks “I can build it myself and it will be better”.

For me personally, these reasons are scary enough to keep away from programmers market as far as possible. I know there are people who built successful companies selling stuff to developers, like a code review tool or bug tracking system. Well, these people are very smart and lucky. I’ve seen dozens of companies that tried to sell components and crashed into the ground.

So guess what happened. Joel started looking for VC money to fund his StackOverflow project. Funny enough, he also wrote in that post that it is a sign that you should NOT be looking for VC money ”if there is any other way to raise the kind of money you need, for example, by selling actual products to customers“. In other words, he doesn’t think that he can make good money by selling actual products (ads or whatever) off StackOverflow and decided to go to VCs. This is exactly the answer the OnStartup lovers didn’t like.

It is not necessarily a bad business model for Joel and StackOverflow. This is the way to do things in Silicon Valley – you get a site off the ground, get funding, grab the audience, do IPO or sell to a strategic investor, and then you walk away smiling. Webvan, anyone?

Now we are trying Microsoft adCenter. The CTR in Search will probably be low as well. The idea is to get somewhere on a Microsoft page with “OneNote” on it. This should be a relevant page for OneNote client for iPhone, ain’t it?

This is obviously wrong, because it’s legal to use a trademarked term to describe product compatibility. And the sole purpose of using the word is to say that our app is designed for iPhone, nothing else.

Funny enough, we can use “Onenote” no problem, even though it’s a trademarked term too. So, Apple nowadays is really the Microsoft of 90s, the enemy of openness, competitiveness, trying to preserve the monopoly by any mean.

By Phil Santoro:

Turned out, I was all wrong: the iPad will arrive soon, it’s seemingly not overpriced, and it’s totally not cool. Let’s start by comparing iPad to Mini 311c and then see if the tablet is good for anything at all. I won’t compare GHz’s and GB’s. They are in the same price category, similar size, the tablet is slightly smaller and lighter. Let’s get down to consumer characteristics:

So, I can use the Mini for web browsing, video chats, HD video, gaming. I can use iPad for lame web browsing, and for …. AppStore browsing. iPad is not a normal computer, is not a multimedia device, not a gaming device, not an eBook reader. To further add to the offence, it’s locked into the AppStore.

Obviously, Apple is up to something. They can’t just deliver a device, which is not good for anything at all. What they are trying to do is to invent a new product category. Something like “a household tablet to read e-magazines and for occasional web-surfing”. The fact that the category name is so long is a bad sign. It means they will have to educate consumers about how their iPad is nice and useful.

But it won’t help, because their product is very ordinary. With iPhone, it tooks others 2-3 years to deliver similarly cool devices. With iPad, it will be eaten alive by the competition this year.

• Price reduction by 2 times resulted in 3 times more units sold.
• Free ad supported version of an app can easily bring more revenue than the premium paid version.
• Good free version of an app is a must, especially if the premium version is expensive.
• Web advertising for AppStore is utterly useless.
• Cross-application advertising for AppStore is almost useless.
• AppStore Ranking algorithm revealed!