The story of NeoGAF part three: money, money, money

Alex Donaldson concludes his discussion with NeoGAF owner Tyler Malka, and discusses the issue of money and how you keep something so big and influential afloat for so long.

If you missed the first two chapters of this discussion, you can catch up on part one here, and part two here.

It was only natural that over the course of our lengthy chat about the ins-and-outs of running a site the size of NeoGAF that money would arise as a topic of conversation. It makes the world go round - as the saying goes - but it also, vitally, keeps websites online.

If you’re running a web server, message boards are traditionally a bit of a thorn in your side. They’re useful tools, of course, but they sap server resources like a monster and are browsed by users in a different way to traditional websites.

The same users who might visit four or five pages per visit on a site like VG247 might visit 20 or 30 pages per visit on a board like NeoGAF, and that is as much a hindrance as it is a help.

With a ridiculous 70 million page views a month being dished out to some 2.6 million unique visitors, one would think that even before it ballooned to its current size, gaming’s most notorious mega-board would’ve been easy to keep afloat.

But that wasn’t the case. For months the site struggled with advertising, and while its future is currently secured, its owner, Tyler Malka, still has concerns and difficulties in ensuring a constant flow of revenue.

The Problem with Message Boards

“Forums are ridiculously difficult to monetize,” he admitted when I broach the subject. “The click-through rate on forums is abysmal – it’s probably the worst click-through rate – probably a lower click through rate than you get on piracy sites. Those sorts of sites do things to get disingenuous clicks, and we don’t. We have probably one of the lowest click-through rates of any sort of website.”

When Malka first took over the near-death Gaming Age Forums and relaunched them as NeoGAF, the site was merely supported by Google’s easy-to-use AdSense advertisements. These ads are simple, and will take pretty much anyone, from the smallest blogs to the most private forum, but at a cost compared to other advertisers.

“That really wasn’t making any money,” Malka said of the ad publisher, but he still pinned a key problem as the click-through rate on a forum a - symptom of one user being likely to view a metric ton of pages without being any more likely to click on an ad.

“It factors heavily into what sort of advertising revenue you get," he continued. "Starting out, the site was losing money, but once it sort of reached critical mass in terms of being a major website, then that turned around.”

Revenue grew with GAF, allowing the site to turn a profit for the first time. Even then, Malka had his sights set on replacing Google with a better-paying alternative. If GAF continued to grow alongside flagging revenue, the site could once again be in the red.

Any GAF member will be familiar with the dreaded 500 Internal Server Error, and in order to keep on top of the costs of providing additional servers to manage additional load, a steady flow of revenue was needed. There was a problem, though; once again, NeoGAF’s status as a message board would prove to have a detrimental impact on earning potential.

“There are a lot of concerns with advertising agencies and networks and things like that about unmoderated content on websites,” Malka explained. “With a lot of them it’s against the terms of service to even display ads on those kinds of pages.”

Technically speaking every single page on NeoGAF is user-generated, and this made many advertisers balk at the concept of signing a deal with the site, even though it could offer massive viewership and therefore good earnings for all parties involved.

Even with a hefty moderation team and clear policies on users posting or discussing anything illegal, many top ad publishers simply didn’t want to hear it. While he found it frustrating, Malka admitted that he understands.

“Y’know, someone can say something, and sure the post will be removed eventually and they’ll get banned and everything like that, but in that moment of time, someone is saying something and it hasn’t been screened by anybody, and that could then be associated in some capacity with the advertiser whose ad is being displayed at the top of the page, right? So it’s against the terms of service for many of these ad networks to even be on a forum to begin with.”

Time, effort and growth that advertising agencies couldn’t ignore eventually saw some come round and offer Malka deals for NeoGAF – but even then it has been a difficult process for the site’s one-man administration and sales team.

“It’s really difficult because most of the ad networks on the internet are," Malka continued. "They serve ads that are not acceptable to me to display on NeoGAF. They aren’t regulated heavily for generating pop-ups, or have non-user-initiated audio, or other questionable content and things like that.

“Ironically, of course, some of these networks don’t want to work with us because of what they perceive as questionable content ... and I don’t want to work with a lot of ad networks because of what I perceive to be questionable content displayed in their ad banners.

"Regardless, I test run a lot of these ad networks and most of them I have to drop after a day because there aren’t enough controls for regulating what I don’t want to have on there, or they produce no revenue or something like that. It ends up being limiting in terms of what I can do.”

No Deal

Malka has been offered deals for advertising on NeoGAF that offer a level of guaranteed stability, but he admitted he’d rather take his chances on his own.

“I had an offer from a prominent, high-quality agency," he admitted, "but it was an agreement where I’d be locked in for two years – more than two years – with a minimum revenue agreement that was, like, below half what I’m currently making.

"Why would I do something like that? I straight-up wouldn’t. In two years, anything can happen. I’d be locked into something ridiculous, and it could potentially sink the website. If costs increase enough and revenue isn’t up to par, I’d have to do something drastic. I don’t want to do something like that. I want to keep NeoGAF completely free to use with minimalist advertisement. I do what I have to in order to facilitate that".

Many large gaming sites such as Eurogamer or your very own VG247 sign more direct deals that result in more targeted advertising campaigns. The ad skins you see on major websites are the advertiser’s preferred choice now, and though GAF more than has the size to support such ads, fitting those campaigns into Malka’s minimalist vision for the site is something he has found difficult.

“As far as getting direct deals with gaming developers and publishers goes, there is some interest on that level,” he admits. “The big players – and we do need big players for NeoGAF – they mostly want to do site reskins. Not the minimalist banner ad at the top and bottom of the page, which is what we have.”

“They’ve moved on from thinking that is all that relevant. It’s possible to get those sorts of campaigns, and we have gotten those sorts of campaigns, but interest has been decreasing over time. It kind of stopped happening, basically. I’d probably need to hire a sort of dedicated advertising manager position to seek out those sorts of deals and manage them. Right now it’s basically just me running the website, and I don’t have the time in the day to do that sort of thing.”

Malka admitted that with GAF’s costs ever-rising, his hand may be forced to look at compromises in places to keep profit up. He suggested potentially looking into a front-page only skin, designed to hit “people who casually visit the website” rather than the most dedicated members, but he was quick to note that all of these are just potential ideas.

“I’m really – I mean really, really - strict on keeping NeoGAF minimalist,” he said, and reminded me of the stories of the Gaming Age Forums at their worst, filled with pop-ups and malware ads, detailed in part one of this article. “I feel very strongly about not ever letting that sort of scenario happen again. It’s important to me, and it’s basically why I haven’t sold out.”

The Five Million Dollar Question

(I'm running out of images of money Alex, HELP! - Dave)

While advertising companies have struggled to marry GAF with their policies, other companies have had no troubles throwing themselves at the site as potential suitors for a buy-out. Malka explains to me that he’s turned down more than a few buyout offers, saying no to deals that are difficult to believe set against the backdrop of a venture undertaken as a teenager.

“It would change the nature of the website for sure, no matter what assurances were made about how I would retain control over the operation of the site and I would be making all the decisions. When the money is on the line, the person who actually owns the site is making all the decisions,” he told me.

“I could be making a lot more on NeoGAF if I changed the way the site works, but ... it’s a conscious decision to avoid that. If someone else has control over the revenue, then they’re going to act in the best interests of the revenue and not of the vision of the site.”

The line of questioning at that point was obvious; how often, who, and is Malka ever tempted? He chuckled as I ask all three at once, and is pleasingly clear and honest in his answers. “On average, I get ... I think I would say a buy-out offer on average every two weeks. I’ve been thinking we’d run out of corporations, but maybe not.

"It’s been happening extremely frequently lately, and I generally don’t respond. If I do respond, it’s a polite reply saying that I’m happy with doing what I’m doing, and I’ve had exorbitant offers before, and, y’know, you’re gonna have to do better than that. So let’s just move on, go our separate ways.

“I’ve had some really lucrative offers - $5 million offers,“ he revealed, but the sound of my shock forced him to pause and chuckle again. “Kind of insane, isn’t it? But – I’m passionate about what I do.

“It was about ... maybe last year, is when major corporate buy-out offers really started to hit on a regular basis. That’s right around the time that I sort of investigated – out of curiosity – what sort of deal they’re actually offering here, because they talk figures right from the start.

"I investigated; I went through the process a little bit, gave them some information to evaluate – and then I got the – talking about, like, the 5 million dollar range sort of offer.”
“I’m like...” Malka began, and then he took a palpable pause. “Okay, so that’s what I have to turn down.” He laughed.

“When you’re getting into that range – ‘retire comfortably and take care of everybody you care about for the rest of your life’ - sort of money, then you really have to decide what the most important thing to you is. Do you feel like you’ve accomplished all you want to accomplish or not?

"You can keep on doing things, obviously, after cashing out, but you can’t keep doing what... y’know, what you got to that level of success with. Like, I’d still be running NeoGAF, I’d still be in control of it. Eventually I would probably leave it behind and move onto some other project that I would actually have control over again – and I wasn’t really comfortable with making that decision.”

That offer came in the beginning of 2012, Malka said, and he doesn’t regret the decision one bit. NeoGAF has seen somewhere in the region of a 50% increase in traffic since then, he says, and also points at the additional exposure the site is getting, through people like me getting in touch for features such as this and the upcoming GameTrailers TV NeoGAF Documentary.

“You could say that, OK, I was crazy to turn down that kind of offer, but on the other hand, the site has grown tremendously since then, so I would have been crazy to take the offer,” he said.

Seeing the true value

One thing Malka wouldn't be drawn on is exactly who some of those suitors were, but his explanation did at least offer something of a clue.

“It runs the gamut of all kinds,” he admitted. “Mostly the corporations that see the real value of NeoGAF aren’t ones that focus on the analysis of revenue, y’know, monthly revenue times 12 or 24 is the site worth. It might work as a valuation of a typical website, but I think it’s a ludicrous valuation of NeoGAF.

“NeoGAF is ... it’s a strategic asset on some level. By the metrics I looked at, it’s probably the largest English-language video game forum at this point. And it’s not owned by a corporation – it’s just owned by me. So there’s a lot of potential to leverage that – the notoriety, the traffic and its unique position as sort of, like... the hub or nexus of information. On a day-to-day basis, everyone in the press or industry looks to NeoGAF – so it’s a strategic asset.”

“I can go to any website and see something reposted from NeoGAF on the front page,” he said – and he proved it. He opened Polygon, and lo, one of the top stories at the time credits much of its information to a NeoGAF user. Malka laughed at that. He gleefully pointed out that the first comment on the story reads ‘I wish I could get paid to re-post content from NeoGAF.’ I tell him I have been guilty of just this on plenty of occasions; news often breaks first on GAF.

Malka’s point, though, is that NeoGAF’s value comes as much from its status as its statistics.
“A large company could leverage that asset within their own videogame network – their own website network – that sort of thing. That’s where you see the major interest from, and then you see other companies just saying ‘Oh, this site is big. We have money.’ With those guys it’s just like, yeah, okay, whatever. But, yeah – I’m not willing to name any names.”

Malka sees a value in GAF beyond merely how many page impressions and advertising clicks it gets – and that, he said, is why the site remains his passion. “It’s just – the concept of whether you want to play things completely safe or not. In business you’re always taking risks anyways, and I was comfortable taking the risk of continuing to follow my passion.

“When I travelled through Europe last year for four months, I met hundreds of NeoGAF members. There’s so much enthusiasm and appreciation being expressed – not just from people who are just fans, but also from people in the press and in the videogame industry. Not everyone loves the website by any means, but there are enough people that do that you get the sense of doing something worthwhile and important.”

It seems Malka won’t be selling up any time soon. NeoGAF is on track to hit 50 million posts very shortly, and the site's impressive growth shows no signs of slowing.