
We'll just put ads on - tzaman
http://blog.codeable.io/2013/01/23/well-just-put-ads-on.html
======
nlh
Leaving the merits of advertising itself aside for a bit, this post brings up
a bigger topic that I think anyone running a startup needs to think about:

When you're getting involved in a startup, it is incredibly important that you
be honest with yourselves and your partners about what the goal really is
(this is to the point made the other day about self-awareness) and what you're
really building.

A Feature: A piece of a piece of a puzzle. "It's like Facebook's News Feed,
but instead you get audio updates instead of text updates!". Hackers can be
guilty of this often - focused obsession on improving the world (or a piece of
it) by tackling even the smallest problems. Not necessarily a bad thing, but
not necessarily a guarantee of success.

A Product: Instagram is a product. It's full-featured, it's beloved (or was
;), it's free-standing, it works, and people use it. But do people pay for it?
Would they? Would they make money by themselves or only in the context of a
bigger company (like Facebook). Twitter is also a product, along these lines.

A Business: 37signals is a business. People pay them to use their products.
They are free-standing, they are profitable, and they don't _need_ outside
investors (need vs. want is different, btw - sometimes it makes sense to take
strategic investment).

There's nothing inherently wrong with any of the above paths, btw. But you
need to understand which path you're on, because you'll do a better job of it
that way. If you decide to be on the feature/product path and hope to get
acquired/acqui-hired, that's fine - it's a legitimate approach (that works, at
least for now) and folks have made $billions doing it (see: Instagram &
everyone else).

But it's a different path than starting a business. Goals are different,
operations are different, and outcome is different.

The point, in the end, is that often the response - "well, I guess we'll sell
ads" is what people who are starting features or products often say to
convince themselves or others that they're on a worthwhile _business_
endeavor. And that's often dishonest (intentional or not).

Understand the path you're on and I'm willing to bet success will be more
likely.

~~~
giulianob
What would you say is the biggest difference between a product and a business
though? Is a business just a company with a lot of successful products?
Following your terminology, I'd say people create products and if they are
successful turn into businesses. I totally get what you mean by features
though and sometimes I wonder if tackling these tiny problems with full out
services is a legitimate business strategy or just a fad.

~~~
orangethirty
The product is what you sell. The business is the rest (marketing, sales,
etc.). A product itself is not a business, because products _don't sell
themselves_. No matter how good they are, someone needs to market them in any
given way. Problem with hackers is that they falsely believe that building a
great product is enough. Nope.

Ever see the mountain of downright awful products out there? How do people buy
such such garbage? Because those products are marketed well. If people sell
garbage with good marketing imagine what a great product and great marketing
can accomplish. One word: Apple. Billions of dollars due to great marketing
and great products.

~~~
giulianob
How is Instagram a product and not a business in that aspect?

~~~
orangethirty
Instagram the social network/app are the product. The business is all the
social engineering being done to market it, the infrastructure to handle all
those booty shots, the HR dept., etc.

------
ashray
This post has a very naive understanding of online advertising. Here's a
breakdown:

\- If you're thinking of advertising in terms of just slapping on some Google
Adsense then you need high amounts (millions of users per month) of traffic to
make reasonable money.

\- If you're thinking of specific kinds of targeted advertising, this can be
very powerful depending on your niche. If you can hire a sales team to push
advertising in those niches, you may be very successful, especially if you can
show quality ROI to advertisers. eg. a cancer hospital advertising on a site
with cancer related information.

\- If you're thinking of other kinds of advertising, business partnerships in
terms of 'upsells' to a free product work really well too.

The above is a gross generalization but claiming that 'advertising' is a
broken business model is laughable. There are definitely certain use cases
where online advertising can be your business model and of-course others where
it would absolutely not work.

The main downside of advertising supported business is that advertising can go
in and out of demand, so you add an additional issue/unknown/risk in terms of
product revenues.

TLDR; most high traffic sites can make reasonable money from online
advertising.

~~~
phoboslab
I have a site that has around 4-5m visits per month, yet all attempts to
monetize it have failed. I'd love to use Amazon's referral program or Google
Ads, but I can't because the site's content is somewhere between reddit and
4chan - deemed too shady for anything else than porn ads.

So, the site still remains a hobby project - exactly as when I launched it 6
years ago.

~~~
ashray
If it's a forum style thing then discussion systems with a high number of
pageviews per unique visitor (vbulletin/reddit/etc) will generally have very
poor advertising revenue.

Maybe you need to look at a different model though ? Sort of like reddit gold,
premium memberships, or some other services that may somehow add value to your
site ? It's often surprising how many people are willing to pay $2-$10 per
month for something!

If you really mean 4-5m million visits (and not pageviews) I'd love to take a
look and see if I can help you figure out some sort of solution. Send me an
email (addrress is on my profile).

~~~
phoboslab
There's no email address on your profile :)

The site is <http://pr0gramm.com/> (NSFW) - mostly german visitors and yes,
it's 4-5m visits, not pageviews. It's kinda impossible to define what a
"pageview" is on that site anyway.

~~~
gabemart
Have you considered partnering with a company that would play off the kind of
irreverent content IRC carries? The company TshirtHell.com came to mind as
(IIRC) they've fostered controversy in the past. You do something like every
xth image on your site is the image from one of their Tees with a referral
link to buy as the source. You could tweak x to find the right balance between
annoying and profitable.

------
josh2600
Funny story that will probably get buried since I'm 2 hours late to this
thread:

When we were first working on Kazoo we had thought our monetization would come
from a service we called "promo calling". Basically we would detect the caller
ID of where you were calling and place an ad for a competitor on your phone
display with a coupon and a call to action of rerouting your call to the
alternate vendor.

It just pissed people off.

We ultimately settled on a premium SaaS model but my point is this: try lots
of stuff. A lot of it will fail, but failure is simply invalidating one
incorrect hypothesis. Try lots, fail fast if you're wrong and roll to
something else.

The key for us is that our core values didn't change. We still want to build
amazing telecom systems, it just took us a while before people would pay for
them.

Disclaimer: I am the community manager for <http://2600hz.com>

------
Swizec
Advertising is a beautiful business model that can work very well. I mean,
it's _obviously_ working for a LOT of people. And very well.

The only reason I don't want to do ad-supported products is because I believe
in delivering value that _users_ are willing to pay for. That's the kind of
products I want to build. Simple as that.

Something something, business and user interests aligned.

------
mcherm
> If the answer involves advertising, think again, chances are it’s a poor
> business model. Now you might say that [insert your favourite startup here]
> did it and succeeded, but let me warn you, those are the exception to the
> rule.

Perhaps. But the startup that succeeds is the exception to the rule,
REGARDLESS of their model for making money. And I have seen quite a few that
worried first about getting customers and only later about how to make a
profit off them.

It's not that making a profit is unimportant (it is incredibly important, and
also very hard). It is that making something that is successful is ALSO
incredibly important, and is even harder. If you can solve the harder problem
(being successful), perhaps later you can solve the problem of being
profitable also. If you can solve both from the start that's even better, but
not everyone can do that.

~~~
jeremyjh
I don't think you can just separate these two issues. If you do not monetize
your solution it will often be more attractive and thus the traction you get
will be misleading. For example, I'm sure I could make a very popular product
by simply giving away terabytes of free storage and bandwidth exposed through
a simple API and web interface. But that would do nothing but attract the kind
of takers that would never pay for anything while it hemorrhages money.

~~~
bdcravens
_If you do not monetize your solution it will often be more attractive and
thus the traction you get will be misleading._

Probably the wisest thing I've ever read on HN.

------
arthurquerou
What you say is both very true and very false, it depends a lot on the
product. Advertising can be an amazing way to get money and sometimes, even if
you could directly sell to your users, advertising can perform WAY better. The
real important factor to decide wether you should put ads or not is "will I
probably get a few paying customers or just a lot of users ?". Advertising is
all about the volume, the bigger it is, the more money you'll make and a good
relationship with your advertisers can lead to really good revenues and a real
business model. When we launched our first product with my company, our only
competitor was a paid app. We thought "f __* it, we'll make it free!". We now
have 600k monthly active users and make way much more than our competitor. So
maybe not every business should "sell". With social media &cie, it's starting
to be really easy to get a lot of users and ads can be an amazing way to
monetize it !

------
petercooper
This advice is reasonable for most types of startup though not particularly
those in media where advertising is still a leading and viable form of
monetization (principally because most media companies _start_ from and focus
on the question: how do we serve advertising efficiently and profitably? It's
not a side project.)

Slapping ads on a regular webapp will rarely yield much income without high
amounts of traffic, but savvy media companies who can target and deliver high
impact advertising aren't crazy to lean on it as their primary form of income
(although diversifying into subscriptions and products ASAP is a good idea,
nonetheless).

~~~
orangethirty
_(principally because most media companies start from and focus on the
question: how do we serve advertising efficiently and profitably? It's not a
side project.)_

That right there is why a lot of programmers these days fail tomake any money
with advertising. They see it as an add-on, rather than the product itself.
Advertising _is_ the product.

~~~
ahi
The users are the product. Advertising is how you sell them. If you think
about the advertising model as selling your users/visitors then the high
volume required becomes more obvious. You don't sell an ad slot for $1k. You
sell a user for a tenth of a penny.

------
uahal
Fred Wilson covered the validity / opportunity / challenges associated with
advertising as a business model in a recent post. The whole thing (and the
comments) are informative but here's my high level summary;

\- Huge difference between ads that are sold (niche) vs ads that are bought
(scale).

\- It takes millions of users a month to be successful at scale. It takes a
great sales team to be successful in a niche.

\- The absence of scarcity in online and mobile advertising creates structural
downward pressure on CPM.

[http://www.avc.com/a_vc/2012/12/mba-mondays-revenue-
models-a...](http://www.avc.com/a_vc/2012/12/mba-mondays-revenue-models-
advertising.html)

------
joeblau
Another issue cropping up is eyeballs moving from desktops to mobile devices.
The CPM for mobile is significantly lower than desktop which puts more
financial constraints on a company that is only ad powered. These are real
pressures affecting $FB and $GOOG right now. Based on KPCB (1) research, CPM
for desktop is $3.50 and for mobile it's $0.75.

[1] - [http://www.slideshare.net/kleinerperkins/kpcb-internet-
trend...](http://www.slideshare.net/kleinerperkins/kpcb-internet-trends-2012)

------
ballard
Why was this guy listening to an audience to begin with? People don't know
what they want, and that's entirely different from what they will actually pay
for. The only measure is the cash register, i.e., the reconciliation report
from the credit card processor(s).

Make something awesome that clearly takes away more pain than the price
incurs, more cheaply than you can produce it. If you can't make it awesome or
profitable, then it's not a business.

------
mbesto
The most important thing when creating your business model is to understanding
precisely who you're customer is. Often, someone creating an advertising
thinks their customer is a the person viewing the page. In fact, this is just
a sourcing effort.

------
ceworthington
This post is right on, but it's kind of telling that a post where the TL/DR is
"Your business idea is not good unless it makes money" can make it this high
on Hacker News.

------
wangthony
for me, the main issue with ads as a business model: they make the product
crappy

facebook, twitter, yelp, blogs/content - the more you monetize, the more
annoyed your users are

there's an inherent tension between the success of the product and the success
of the business, which is problematic especially as you scale

the only significant exception is google

~~~
jordan_clark
The success of advertising in your app depends on how valuable a service you
provide. As value increases, so does the viability of an ad based revenue
model.

~~~
wangthony
agreed, but the more ads you cram into your app, the less valuable the service

this is true for every app except google - therefore, your consumer internet
ad-supported business model probably has an inherent flaw

------
jdolitsky
this is a great point made

------
so898
FXXK ads. Ads will give no money to you!!! Nowadays, a 3 years old child knows
how to use Adblock to block ads. People do not care about how beautiful your
ads are, they just want a free website without ads. If your website or
application could not sell itself, just give it up. Ads really do not help.

