For this post, I would like to treat this blog as a company and try to derive a cost function, a demand function, a revenue function, a profit function.
As I already mentioned that this blog was started as a creative endeavour and since it does not function on the basis of anonymity, I am going to use a slightly different criteria for the calculation instead of taking advertising (Wordads) revenue and e-book sales to derive a revenue function. I feel this would be flawed anyway, since WordPress basically obliterates revenue optimising options. I am hoping this analysis is going to be interesting.
Lets derive the functions on the basis of the following example :
Suppose I paid $25 for the domain (annual charge).
Therefore, fixed cost (F) is $25.
Now, if I spend 3 hours on each post (most of them are analytical/ lengthy with diagrams and graphs) and the number of posts per week vary from 1-4 ie ,110 in 40 weeks; we can have a cost function as:
C(x) = F + V (x) where x is the units of production, here the no. of posts.
And V is the variable cost that depends on the number of units of x produced.
To calculate V:
Suppose I tutor a school kid 1.5*3 = 4.5 hours a week, that’s roughly 18 hours for a month and charge around $2 per hour. This might seem ridiculous to you but if you convert the currency, you’ll get the real deal. My masters degree costs around $2 a month since it’s from the 2nd ranking university in the country after the Delhi University, it is sponsored by the govt. Furthermore, tutoring adults or a large group can increase the per hour rate 10-20 fold or more.
So taking V as $2*3 (hours) per (x), we have a cost function, C (x) = $25 + $6 (x).
If instead of tutoring charges, I take Freelance charges (just a newbie’s), its probably around $25 + $ 9 (x).
So for a year, its more or less:
C (x)= $25 + $6 (110) = $685 to $25 + 9 (110) = $1015
Since I can’t put a money value to the posts, I will try to derive a demand function on the basis of subscribers per post (Our subscription rate is standardised at 10-12% of all page views, not visitors).
No. of subscribers = 2375
No. Of posts = 110
Rate of subscription = 22/post
Here let (x) be the number of units demanded, ie the subscription turnover rate , ie x= 22 (x taken as a single unit demanded by 22 people, ie 22 units)
Price of one unit of (x) = cost of 3 hours . Therefore demand function in terms of x , p (x) is $6*22 =$132.
Revenue Function : x* demand function= x* p (x) = $6(1)*132 = $792
Profit Function : Revenue function – Cost function
ie, R (x) – C (x) = $792-685 + $107 (profitable compared to tutoring
but not in comparison of freelancing: loss of $223).
Hope you liked this brief analysis in terms of hours put in and capital investment and derivation on the basis of demand for a post.
©the Idea Bucket, 2013. Submitted by Ananya.
