Gross profit is a useful way of measuring the financial health of a Web site.

Yahoo Finance is a great Web site for investors. It also is a good tool for Web site publishers because of the financial data about the most successful Internet companies such as Google, Amazon and Ebay.

Note the 2006 income statement for Google showing a gross profit of $6.4 billion after “cost of revenue” is deducted from total revenue of $10.6 billion. In other words, the cost of revenue was $4.2 billion or 40 percent of revenue. Gannett, arguably the most financially disciplined media company, had a cost of revenue at 55 percent.

Think of cost of revenue as content (news) and production costs. Internet companies don’t need printing plants, therefore their cost of revenue is lower. Media Web sites don’t need printing plants, either, therefore their cost of revenue must be lower to be financial competitive with pure Internet plays that are invading their turf.

A common mistake among inexperienced media company Internet managers is to overspend on content and production. So look at your cost of revenue and make sure it is trending down over time. Try to keep it between 30 and 40 percent. When it drops below 30, spend more on content and production for the sake of long-term growth.

Those of us who followed this concept ended up with 20-40 percent profit margins and high growth in audience, revenue and profit because of a strategic approach to spending. It isn’t the only answer to achieve sound profitability, but it’s a critical start.