No shock here: the legions of consumer Internet startups plan to build a huge audience, then to monetize the audience by putting ads in front of them (and/or flip the company to a portal to let them monetize).
There are two problems I am seeing with this mindset.
First, actually making an ad supported media business work is hard, and more often than not the entrepreneurs who are able to build web properties that attract large audiences don’t have a clue how to build a media business.
Over breakfast this morning with my friend Michael Dearing, we discussed a second negative that is probably more problematic in the long run: the perception amongst web entrepreneurs that you can just slap an advertising model on top of a web property, sprinkle water, and have a real business, has led many to spend much less time and energy thinking about how to make money. While advertising surely is a real opportunity for many web properties, in many cases that is just one slice of the business opportunity, and I think the emergence of more robust web businesses has been stunted by the general presumption that advertising is the cure for all web business models.
July 17, 2008 at 1:08 pm |
Finally, someone confronting reality as it is, not as everyone wants it to be.
Well done.
Peter
July 19, 2008 at 1:36 am |
I couldn’t agree more, Mike. It just so happens I have recently completed a business plan for a new Internet company I am starting that will introduce an entirely new approach to web advertising; one that may render site adverstising completely unnecessary on my site.
However, I know that a business needs to be diversified in order to minimize overall business risk, and therefore will I have built into the business multiple revenue models on top of my innovative advertising model. Anyone who believes site advertising alone can generate the revenue needed to create a profitable web-based business I feel is mistaken. It is a good supplement to other revenue channels, but should never be used as the sole revenue model in my opinion.
- Barry
July 21, 2008 at 10:01 pm |
Great, thoughtful article.
The other thing that I think many startups miss is the introduction of a third party into the software-user relationship: the advertiser.
“Classic” software businesses are often solving purely for the user (i.e. how do I help the user get a certain job done). In advertising-based businesses, there are two customers: the user and the advertiser. And, they usually don’t always have the same interests.