Wednesday, May 03, 2006

Australia: your IP not wanted here

I've been sitting on this post for a while now in the hope that I could use it to launch my problogging career later in the month, but I can't wait. This is ticking me off too much.

Our fantasy Aussie Rules football site FanFooty, the first project Tony and I started under the banner of our company FanSports Committee last year, is just now getting to the stage where user growth is nearing critical mass for it to produce meaningful revenues. Our user base is growing at 8-10% every week, and our April revenue from AdSense almost tripled our previous record, set last August (the previous full month of AFL action). What's more, the numbers are going up each week, so that the last week of April (from 215,754 page views across the whole site) more than doubled revenues in the first week (116,505 page views).

It's all good, yes? Um, no. We moved to a co-located server just before the season started. Our host provider Hostcentral, like just about every other in Australia, charges for incoming traffic, with their price being 9.4 Australian cents per megabyte with the first 500MB free in the A$99 monthly rack rental. Our incoming traffic in April was 3267.25MB. So our costs look like this:

99 + (3267.25 - 500) * 0.094 = A$359.12

I'm not allowed to tell you how much revenue we made, because that's against the AdSense Terms of Service. I can tell you that we're making a loss, and it is roughly the same size loss we were making last year when we were earning no money to speak of at all, and being hosted on a shared server. Essentially, the revenue we have earnt from the extra traffic is completely wiped out by bandwidth costs.

This is, to use the language of the Internets, ricockulous.

The obvious solution is to host the site in the US. Instead of paying A$350+ for that kind of traffic, if we went for a shared server we'd pay... US$9.95. And that would be good for up to 200 times the amount of traffic we got in April. But of course that's not comparing like for like, since our business requires a dedicated server due to the extremely spiky traffic graphs we generate by providing live fantasy scoring during AFL games.

If we went with a random provider in the US such as we wouldn't be paying anything like $A0.094 per incoming megabyte, we'd pay something like US$3 per GB of data transfer (in or out). Given that our outbound:inbound ratio is 5:1, that works out to Australian bandwidth being roughly 7 times more expensive for us. And that's not counting that the Hostcentral deal includes 500MB of inbound while the deal includes 300GB of data transfer, so we'd need to grow our traffic by over 15 times before we even start paying bandwidth charges over the US$99/month rental.

It might seem l'm picking on Hostcentral here but I'm not: AFAIK every other independent Australian provider has to work with the same numbers, because that's the cost structure imposed upon them by their upstream carriers. They're only passing on the per-MB inbound charges that the likes of Telstra, AAPT and Optus hit them for.

Is it any wonder Australia is lagging in the development of local content? How can any local business with major ambition justify hosting their data on these shores? The reason I tried out Hostcentral is that I wanted to host the data here for (a) the benefit of users, who wouldn't have to wait the extra 150-200ms for the data to flow under the Pacific, and (b) I wanted to support local industry.

More fool me.

I don't know what the solution is. It would be useless waiting for the government to subsidise local Internet content industry as they do with the film industry. The Liberals' only effective policies relating to the Internet have been to nobble industry bodies and impose censorship laws. We don't have impossibly cute movie starlets to spruik our case, only fat nerds in glasses and bad hair (Peter Coroneos excepted... he's bald!). It's also pointless to wait for the Australian Competition & Consumer Commission to get around to investigating the carriers for their strategy of stifling the development of locally-hosted content, so that ISPs are reliant on their pipes to the US. The ACCC have enough trouble figuring out the most basic, obvious things like how Telstra charging their wholesale ADSL customers more than Telstra's retail customers is a Bad Thing.

Like just about everything else tech-related, Australia will continue to lag two to ten years behind the world standard, our intellectual property will keep flowing out of the country, and our deficit in the balance of trade in IP packets will continue to widen.


Anonymous Anonymous said...

Re Adsense; You can post revenue - it is click-though rates etc you can't post

10:10 am, May 03, 2006  
Blogger Paul Montgomery said...

Ooh, you're right.

10:34 am, May 03, 2006  
Anonymous Anonymous said...

Tuff break dude. Best of luck sorting it out. Know Cam reported similar problems when he looked for a a new host for TPN.


12:13 pm, May 03, 2006  
Anonymous Anonymous said...

Write your MP regarding the Digital Content Industry Action Agenda (DCIAA).

"The Australian Government is committed to supporting the digital content industry, as the industry is growing faster worldwide than other economic sectors. The digital content industry produces the digital products and services for diverse sectors such as film and post production, broadband, games, mobile content, broadcasting and information and communications technology."

1:37 pm, May 03, 2006  
Anonymous Anonymous said...

Here's my favorite snippet from the DCIAA report from last November.

"[...] the Australian industry is projected to grow between 5.9 and 6.3 per cent annually. This would mean output would increase from $18 billion to between $36 billion and $37.6 billion by 2014–15, placing it ahead of industries such as agriculture and communications."


1:51 pm, May 03, 2006  
Blogger geoff said...

Been blogging for a year plus now just for fun and starting to look at 'problogging' I have no hesitation in selling out off shore for the same reasons I do anything else. Australia is a very small market economy population wise and you get absolutely nothing by 'playing by the rules'. Someone else made the rules to suit themselves at the time not the future. Hell we only got colour tv in the 1970's. And now we are being encouraged to go digital. LMAO

5:07 pm, May 03, 2006  

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