An Economist’s Bold Proposal To Solving Entrecard Inflation And Attain Stable Economy
Posted by
eli
on 8/29/09• Categorized as Consulting
image from freejunkeasymoney.blogspot.com
Last of Two Parts
Entrecard is a wonderful place, an awesome bloggers community. It is a community where you can boost your unique visitors, grow your blog audience, increase readers and comments, as well as network with other bloggers in different niche. And it’s free to join and be a member.
However, Entrecard is now beset with the problem of inflation, where the total number of Entrecard credits (ec) in the system (supply) has grown rapidly vis-a-vis its demand.
This situation has been due to the fact that more credits are being created than credits are leaving the system. As announced by Entrecard’s Director of Business Development Cindy Ung, if this inflation continues, Entrecard credits will be worth less and less.
Since the main purpose of the credits or ec is to pay for advertising on the blogs, it makes the ec buy less ads, because its value is decreasing by the day. Thus, you need more ec to be able to advertise on some blogs, especially the popular blogs in the campaign.
As a consequence of inflation, some popular blogs have astronomical ad rates, equal to an average of 5 days to 10 days of dropping 300 cards maximum daily just to advertise on these blogs for 24 hours.
If this is not an absurd or ridiculous economic situation, then what is?
Therefore, there is an immediate need to overhaul the virtual economic system that Entrecard is, especially the advertising rates, to curb or control inflation.
To do so, I am proposing the following solutions:
1. Change the present Ad Pricing System. This is the main cause of inflation in EC. Hence, change the current policy of doubling the ad rates of the blogs, where the rate goes up DOUBLE in value every time there is a new advertiser, say, from 2 ec to 4 ec, to 8 ec to 16 ec to 32 ec to 64 ec, and ad infinitum.
The current ad pricing system is chaotic, which is an indicator of a poorly managed economy. For example, as of today August 29, 2009, here’s the ad prices of the top 5 most popular blogs in all categories:
The Ad Master — 4,096 ec/day
Margie & Edna – 2,048 ec/day
First Door On the Left – 2,048 ec/day
A Grateful Heart – 2,048 ec/day
Cromely – 1,536 ec/day
As you can see, it takes a member 13.6 days of dropping the 300 maximum cards a day to generate 4,096 ec just to advertise on The Ad Master for a 24 hour ad exposure.
On the other hand, it takes 6.82 days of dropping the 300 maximum cards every day to earn enough ec to advertise on Margie & Edna, First Door On The Left and A Grateful Heart.
It also takes 5.12 days of dropping 300 cards maximum daily to earn 1,536 ec to buy an ad on Cromely for a 24 hours exposure.
Since dropping 300 cards usually take 2-3 hours every day, can you now imagine the time and effort you need just to earn those credits?
2. Replace the present Ad Pricing System with the Ad Rate Equals to the POPULARITY RATING of the blogs. This is to encourage and reward members to visit many sites a day as possible, not necessarily 300 sites, to earn credits and make their blogs popular.
If the ad price of the blogs shall be equal to their popularity – which is a fair formula-the ad rates of the aforementioned top 5 popular blogs (as of August 29, 2009) for illustration purposes only, are as follows:
The Ad Master — 2,033
Margie & Edna – 2,007
First Door On the Left – 1,901
A Grateful Heart – 1,835
Cromely – 1,812
3. Adopt a pricing system where the rate increases at TWENTY PERCENT (20%) every time there is a new advertiser, but not the current doubling in the ad rates, as discussed above. This way, the credits will have more purchasing power and become valuable.
4. Auction the ad space, where the members themselves will set the minimum price of their respective sites, and let the other members BID on it.
This method will combat, if not eliminate inflation, and will reflect the market price of the blogs based on the law of supply and demand as determined by the market forces, as a result of the interaction of the members in the EC community, e.g. buyers of ad space and sellers of ad space.
In this set up, the lower the ad price of the blog, the higher is the demand of the members who are willing to put their ads on that site, and conversely, the higher the ad price, the lower the demand by the advertisers, other factors being constant.
If there are no bidders for the higher ad space, the price will just go down, until it attracts some advertisers who will bid for the space, and the price will go up again, other factors being constant. The other factors that are constant here are the popularity of the blog, the traffic, its attractive design and niche or the categories where it belongs.
If the ad pricing system is reviewed, it should be done as soon as possible, and whatever changes to be made, it must be implemented effective September 1, 2009, simultaneous with the new one credit per drop, no credit for the site owner policy.
This is because the ad pricing system is part and parcel of inflation problem in Entrecard, resulting to the general increase in the level of ad prices.
This way, Entrecard can attain a healthy and stable virtual credit economy.
Your proposed solution is very good. But will the new Entrecard management will listen? The previous EC management of Graham did not. Hopefully the people “up there” in EC management will be able to read this article of yours and consider this.
Excellent and well thought out ideas. You have my vote!
Hi Eli,
Good worked out topic, for a better exposure i think you should put this up in the EntreCard forum!
There EntreCard admins could read it directly and perhaps they will give you a comment.
There are also some benefits for specific members in EntreCard… have to work out this topic for a post tomorrow and then the rules… as you will be one of the first sponsors in our contest!
Entrecard should just sell ad space on all blogs in network and on it’s page and get it over with! This will generate money. have ads on blogs that pertain to the subject matter of the blog like Google’s adsense. -Ann
The whole proposal is worth considering by EC management. I would like to suggest a small change in your ad pricing proposal. Instead of ad price equal to popularity (5-day total visits on a site), I suggest that the ad price be equal to daily average visit only (popularity divided by 5). After all, that is the maximum number of visits that an advertiser could expect if all visitors to the site will click the advertised widget.
There are many more changes that can be proposed so that EC management can earn money on their business venture with Entrecard. It’s not enough that they control EC inflation, they must make money so that we can continue to enjoy the benefits of the system. If they would just listen, I know it could be done.
@ Tissa, thanks for your comment. Do you not consider re-joining EC now?
@ Brad, thanks for the compliment. You know, I always visit your site daily. But starting September 1, you will have no more 1 ec from Entrecard if I drop on your widget, and vice-versa.
@ Cornyman, thanks for your comment. I’m not inclined to post this in the EC Forum. But I’ll wait for your article tomorrow on related topic, it’s surely a must read on your blog.
@ Ann, your suggestion is very good, although some EC members don’t like the paid ads. But I personally believe Entrecard must make some money for admin expenses, web hosting and server expenses, and profit as return for the owners’ investment, to continue to provide services to us.
@ Ed, you’ve got a very good idea. How I expect that you write about it, it is surely worth reading, considering your in-depth analysis of the issues and your well-written posts, as always, in your blog.
How about let unused ads expire similar to how your mileage expires if you don’t use it. If Entrecard credit expires, then it guarantees of removal of credits from the system and it forces people to use the credit for advertisement or other types of market transaction, which will make Entrecard a more interactive place.
@ Plin, your idea is novel and worth exploring. Indeed if there’s expiry dates on the credits, members will be forced to spend it, either to buy ads, services or other goods in the EC market. Thanks for your comment.
I agree with your proposal, at least some form of it. I recently returned to EC after a four month absence. Part of the reason I left was because my ad cost was typically in the 4,000 EC credit range and I never felt my advertisers were getting their credits’ worth. I always wanted to set my own price, obviously much lower than that. Short of setting my own price, I’d like to see something like you propose, which will bring my ad cost down within reach of more advertisers. I’m not sure the EC management will change their strategy, though. I’m debating leaving again. It bugs me that my cost is still so high.
great suggestions. hope entrecard hears them!
@ Kathy, thanks for your comment and for sharing your thoughts. I appreciate it.
@ Mike, thanks a lot for visiting my blog and for your comment. I drop at your site every day because your blog is on my drop list, but beginning September 1, Entrecard will no longer give you 1 credit for my drop.
As an economist, have you worked out the inflation rate for your model versus the proposed system?
It’s obvious that cutting the number of credits in half will cut the inflation in half. (I’m fairly confident on this.)
On the other hand, lowering the cost of ads will increase purchasing power, -temporarily-. But we know from supply and demand curves that if you lower the price of something, the demand goes up. More advertisers will put their ad in the queue perhaps. But as more advertisers go in, the ad rate goes up until it reaches the amount that people used to pay for it under the doubling system, or thereabouts.
I think all that a popularity/20% increase system would do is make the wait for advertising longer, and not actually influence inflation rates at all. What do you think?
I like EdZee’s suggestion. As a general rule, I will not buy ads that cost more than a fifth of the popularity. Ideally, I like to get them between a tenth and a fifth of the popularity. This is because of other variables such as how accurate I think the popularity is, how close the ad matches my desired audience, and so on.
It would see that the best pricing should start at one tenth of popularity and keep climbing by 20% or by some bidding process.
Hi Eli,
Hmm. Interesting takes from all, I believe.
I like the idea of a bidding process and the idea of “use them or lose them”.
Actually, the idea of credits expiring may the simplest to implement, methinks.
Consider this:
Any credits above a certain amount, say 2,000 credits not used in a 30 day period, get returned into the EC economy, in addition to basing the ad rate on popularity. This way, the highest ad rates would be no more than the allowable amount of credits any one person could stash away. And since the clickthrough ratio isn’t really that great in EC, let ads run for more than 24 hours, similar to CMF. Not 30 days, of course, but 2-3 days a piece.
Or, am I not making any sense. LOL
I hope this finds you well, Eli and thank you very much for your comment
Sincerely,
Mike