Crunch Time, Part 2

Dan Knight - 2001.06.04

I've received more email about the site over the weekend than I usually do in a month - lot's of generous donations (ranging from $1.50 to over $60) from dozens of site visitors, and some questions about how dire the situation is.

It's an honor to serve the Mac community, and it's humbling to hear all the kudos and see the donations roll in. As I write this, we've received about $1,000 from Mac users all over the globe. We always knew Mac users were great and thought our site was special, but this is overwhelming.

Suggestions

Some have suggested we move to a subscription model for Low End Mac. That's an idea I resist on principle - I believe our content should be freely available to all.

Some have offered server space for part of the site (graphics, software, etc.), while others have offered to host the entire site. I'm hoping to avoid moving LEM for two reasons: first, it's hosted by BackBeat Media, who also runs our ad server, and second, we serve up a fair bit of data every month, over 12 GB last month.

A few have purchased used equipment listed on our Macintosh Classified Ads page, which I've had to update several times over the weekend.

Some have suggested fund raisers - max out an older Mac and auction it off on eBay. We're thinking about that. And some have offered to sell or auction some of their own equipment with proceeds (after shipping costs) being donated to LEM.

Like I said, we're humbled.

Expenses

Finally, some have asked how serious the problem is. Will we shut down Low End Mac? How deep in the hole are we?

We're not in too deep, in part because Cobweb Publishing, Inc. (the fancy legal name for my business) has a fairly low overhead. We pay maybe $200 a month for hosting four sites and Internet access. We have no telephone bill, no electric bill, and no rent, since I operate out of the house.

We budget $400-500 per month to pay freelance writers, something we do on the principle that those who generate income for the site deserve a reward. Even then, some insist on writing for free.

Our biggest expense is my salary. Until last September, Low End Mac paid its way, paid for trips to Macworld (7/00 and 1/01), and usually covered a single family vacation each year. Since September, I've actually taken an income from the site.

Of course, that leads to another expense category: taxes, FICA, unemployment taxes, and the like.

In the end, our annual budget is based on $5,000 to $6,000 of monthly income to cover expenses, pay for Macworld, buy office supplies, and turn enough profit to owe the taxman something at the end of the year. In reality, we can squeak by on $3,200 a month - no profits and no Macworld, but enough to pay our bills.

Income

We have one primary income category: advertising. That include the banner ads and badges and text ads you see throughout the site. It also includes text ads on our mailing lists. Further, it includes a handful of affiliate programs that net us 3-15% on items you buy from MacMall, Outpost.com, Software Outlet, Amazon.com, CoolVCD.com, The Sharper Image, and a few other links you might find here and there on LEM and our other sites.

Display ads on the site are handled by BackBeat Media, which has done a great job for us despite the downturn in the dot-com world. As I noted on Friday, we're making about half as much per page as we did during 2000, but we're also serving about 50% more pages. We're not coming anywhere close to the $3,000+ per month we'd anticipated when we built our budget, because back in January we had no idea how deeply the dot-com failures would impact us.

We were billing over $1,500 per month for ads on email lists, both ours and those run by The Macintosh Guy. Of course, he gets a percentage of that for ads on his lists.

Affiliate fees are unpredictable, but probably average $200 a month.

Because things have been tight, and as a favor to our favorite local Apple dealer, we've also been brokering some used equipment, which brings in a couple hundred dollars in a good month. It's not an area I'm interested in expanding - just helping them get rid of some abandoned and obsolete inventory.

The Bottom Line

We anticipated about $5,000 income per month. We ended 2000 with a bang, shattering that level for the last three months of the year - and paying the taxman accordingly.

Then came the dot-com meltdown. Instead of averaging over $3,000 per month of ad income, which we'd anticipated, we're averaging less than $2,000 per month. Affiliate fees still add $200 or so each month, but we've really taken it on the chin.

Because of the tight economy, several list sponsors have pulled back, but we're still taking in about $500 per month from the lists. However, we're billing a lot more than that.

The drop in income from site ads pales in the face of one simple detail: A company which we've been working with since 1998 hasn't sent us a check since the end of December. This organization has been running a badge ad on the site and text ads on all our email lists and the Macintosh Guy's lists for ages. They now owe us over $7,000 (and we owe a percentage of that to the Macintosh Guy).

In the end, we're averaging about $2,500 income per month, which gives us an average deficit of $700 per month.

Cobweb Publishing has very few assets, our PowerBook G4 and G4 Cube heading the list. (In fairness to the sponsor who hasn't sent us a check, they did send us the G4 Cube as partial payment on their account.) Now that the TiBook is back from Apple service, I've got abuyer for the Cube. I can't very well sell the TiBook, since it's the computer we use to run the entire organization - email, Web design, MYOB, etc.

We have few expenses beyond hosting and content. I've already notified writers that we're changing our pay scale to reflect the drop in site income.

The only give in the budget is my salary, so I fall another week or two behind each month. Sometimes a big check comes in, and I almost get caught up, but before I know it, I'm four weeks behind again. If nothing changes, I'll have to find another job.

No, that won't bring Low End Mac to an end or shut down the email lists. I ran the site for almost four years in my spare time, and most of that time with no personal income from the site. As they say, it's hard to get rich on the Web. (To those who asked: No, I won't sell the site.)

For the record, we are prepared to turn our remiss sponsor over to collections if they haven't paid in full by noon Friday. Until then, don't ask us who they are - we want to give them every opportunity to fulfill their obligations and avoid damaging their reputation.

If they pay, we'll be sitting pretty for a little while. I'll get my back pay. The Macintosh Guy will get what's owed him. I'll be able to go to Macworld in July. And maybe they'll agree to resume sponsoring our lists and site.

If that happens, we won't be soliciting donations. We'll remove the Amazon Honor System box from the site. I won't have to find a second job.

If they don't pay, LEM will once again become a part-time job. If they do pay and don't resume sponsorship, then I'm not quite sure what will happen.

But right now, we're hurting. Your generous donations and the sale of the Cube will let us pay our writers for April, cover our current bills, pay the June taxes, and keep me from falling further behind on payroll.

Your support is greatly appreciated, whether via the Amazon Honor System, PayPal (if you send a donation via PayPal, be sure to reference webmaster@lowendmac.com), or money mailed to Cobweb Publishing, Inc., 2544 Martin S.E., Grand Rapids, MI 49507.

We'll know a lot more by the end of the week. We'll keep you posted.