First off there is a big difference between community driven events and professional conferences. I started a free monthly event called SkillSwap way back in the early naughties and know a stack of people who run similar events now. These FREE events tend to rely on local speakers (who typically don't charge), community organisers (who work for free), venue donations (usually from companies or community groups) and the occasional spot of sponsorship to pay for beer and pizza. These FREE events have grown from small local happenings into large community events like HackDay, BarCamp and Design Jam. You'll often find them run by a whole committee of organisers and bankrolled by big corporations and local sponsors. They are great fun and provide an opportunity for novices to get a flavour for these kinds of events and maybe cut their teeth on the conference circuit.
Next up you have the semi-professional conferences. Events like Build, dConstruct and New Adventures. These type of events are usually run by passionate individuals or small companies who have experienced the value conferences can give, and want to bring some of that magic back to their local community. This is exactly what the newly found members of Clearleft did upon our return from SXSW back in 2005. We paid close to $2k each from our own pockets to attend this event and found it so valuable to our personal and professional lives that we wanted to do something similar (albeit smaller) in the UK.
These kind of events tend to take place outside of major cities (which are cheaper), in quirky venues (which are cheaper) and pick a mixture of established speakers and up-and-coming talent, and expect everybody to pay for their own lunch. If the organisers are lucky, these type of events will cover their costs and pay their organisers a small amount for their troubles. So to give you a scale of reference, each year dConstruct brings in the equivalent of a single web design project for Clearleft (we probably do 20-30 per year). However it takes significantly more effort to organise than one of these projects.
As an individual or small company it is incredibly risky to put on events like this and I know numerous folks who have lost money on their conferences. As such, organising a conference isn't the path to riches than many people suspect. In fact it's an incredibly stressful endeavour that is just as likely to see organisers out of pocket. But people continue to organise these events because they love the industry and desperately want to put something back into the community. As such I really feel for these smaller conference organisers when people accuse them of not trying hard enough or profiteering.
Lastly we have the big, expensive conferences that typically happen over multiple days and multiple tracks (which means more speakers and more venue costs) at professional conference venues (which are pricey) in major cities (which are expensive). As these events are over multiple days, attendees expect to be wined, dined and generally looked after. The costs of running an event like this are extremely high, as are the risks of failure. To give you an idea of the scale of these risks, the up front costs of running an event like UX London was around $100,000. So conference organisers try to mitigate some of these risks by picking big name speakers they know will fill seats.
In the article over at tutsplus, the author bemoans the cheek of conference organisers for charging as much as $1k per ticket, calls into question their motivations, and accuses them of either incompetence or profiteering. Just what you'd expect to hear from somebody who has never run such an event. To explain this they do some really hokey pseudo-maths to show how attendees are being ripped off. However rather than pseudo-maths, let's look at some more realistic figures.
Let's assume that this $1000 a ticket conference happens over 3 days with 3 tracks and attracts 300 people. That would indicate an income of $300,000. However once you've taken off transaction fees you looking at closer to $275,000. Let us assume that the venue day delegate rate is $100 per day which is actually quite low for a major conference venue. This brings the coffers down to $185,000. As a conference organiser you also have to pay the day delegate rate for all your speakers and volunteers. So let's say there are 10 speakers per day and 10 staff. That brings your balance down to $173,000. If you pay each speaker $2,000, fly them over for $2,000 and put them up in a $250 per night hotel for 5 nights, that brings it down to a scarily low $15,500. Now let's assume that wifi is charged at $10 per head, per day. Let's also assume that the AV set-up is $5k $10k in total. This brings you down to a profit of $300 This gives you a loss of $4,700.
Let's talk about sponsorship. Say that we get 8 sponsors at an average of $4,000 a piece. That works out at an additional $32k in revenue. Now let's assume that as part of the package each sponsor will get 2 free tickets to the event, as well as 2 stand passes for their staff. That's 16 tickets we can no longer sell and 32 day delegate rate fees we'll have to pay to the venue. So knocking $25,600 off the total bill, this leaves us in profit, to the tune of $1,700.
Let's also assume we're going to print up goodie bags and give away a notebook and sharpie at a cost of $30, as Eric suggested in the comments. That's an additional $9k. Most conferences have a pre and post party. Assuming $1k venue fee (which is very cheap) and say $10 per head on drinks. That's an additional $8k. It's always nice to take speakers out for a meal to thank them for the effort. Let's say we take them out for a $100 a head meal, that comes to an extra $3k. Lastly, we've also had to hire a professional conference organisers to help manage logistics. Thankfully she charges just $150 per day. However she's invoiced 40 days work over the last 6 months, which comes to another $6k.
Totting up my figures here I can see that despite an additional $32k of sponsorship income, we've still made a loss of $24,300. Next year it looks like this mythical 300 person conference will actually have to put their ticket price up to $1,081 to make sure they break even.
The truth is that conferences are hugely costly to run and what seems like a massive profit to the untrained eye quickly fades to nothing. So what does this mean for conference organisers. Should all conferences be a single day long and only feature unpaid and inexperienced speakers? Should they all take place in second tier cities in low cost venues and force attendees to bring a packed lunch? Or should they be scrapped altogether, in favour of paid for content on a tutorial site as the folks behind tutsplus (an ad supported and paid for content tutorial site) would have us believe? Personally I think not.
Like all things, it's about the value proposition. If you are time rich and cash poor; reading books, scanning online tutorials and attending free community events makes a lot of sense. However if you're cash rich and time poor, you may not have the resources to do this. Instead paying $1,000 vs weeks of private study can start to seem like a darned good investment. Especially if you come away with some brand new skills and a few extra business contacts.
As somebody who has attended a lot of conferences—many of which have come out of my own pocket—I can't begin to count the value I've received. I've learnt new skills which have allowed me to charge more for my time or at the very least help me out of tricky situations; I've met new business prospects and built a network of friends and associates who provide leads and recommendations; I've found new staff for my company and met many people who have found jobs via a similar mechanism; and these are just the tangible things. I've met speakers who have inspired me and had hallway conversations that have helped crystallize thoughts I've been having for months. I find myself explaining techniques or using concepts with clients that I know I picked up at conferences, although I can't for the life of me remember which ones. There are so many benefits to attending a conference above and beyond the tangible; it's difficult to put a dollar value on them.
This reminds me of an article I read a while back about researchers trying to put a dollar value on a holiday to see if it's worth the expense. They calculated that (and I'm making the figures up here) a $1,000 dollar holiday bought you about $3,000 worth of equivalent happiness. I wouldn't be surprised if attending a conference had a similar effect on both your happiness and your potential profitability.