

A Web Start-Up Counting on Ad Sales? Good Luck - charlesmount
http://bits.blogs.nytimes.com/2008/12/08/are-free-ad-supported-web-sites-over/

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jfornear
A little ironic I think.

Newspapers Counting on Ad Sales? Good Luck!

They've been in trouble for quite a while thanks to Craigslist and the web in
general. Plus didn't news get out today about the NYT mortgaging their HQ to
alleviate the hit they've taken from falling ad sales themselves? If I recall,
a few other papers filed for bankruptcy or went up for sale.

Regardless, I was surprised by that Economist article posted last week that
pointed out that online ad sales were, in fact, still growing, but at a lower
rate than previously projected.

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patio11
It is, sadly, a little content-free.

>> Web start-ups struggle with the question of whether to sacrifice revenue
for several years, build a huge audience and then sell them ads, as YouTube
did >>

Hmm, my recollection was that Youtube built up a huge audience and then got
acquired by Google, which runs them as, essentially, public utility. (They
spend more on costs than they recoup from ads but they get the cross-subsidy
from AdWords like, well, every other Google property.)

For those folks who can't cross on perpetual cross-subsidization and don't
want to play the "get acquired before we are destroyed by the economics of
hosting terabytes of content that we don't own the copyrights to" game, could
I suggest, say, charging money for value? Its a business model for all
seasons.

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lawrence
I thought this was a poorly researched article. Our CPMs are up year over are,
as are most other AdSense supported sites that I'm aware of. The latest
numbers that I've seen, including those recently referenced by the Economist,
show online advertising growing again in 2009.

It's print advertising that's falling off the cliff.

Of course multiple revenue streams is preferred. But we'll certainly continue
to see ad supported business models get funded.

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larryfreeman
I think that the article is a bit naive. While the growth of ad revenues is
undoubtedly decreasing and most likely spending will greatly dip as the
"panic" continues, this doesn't mean that a web businesses cannot be
successful on ad revenue.

Newspapers succeeded during the Great Depression as did radio and other ad-
based businesses.

But this time, newspapers are going out of business because people are getting
their news from the web (the classic Innovator's Dilemma pattern). Indeed,
with the recession, people will have even more time to surf the web so web
traffic and the importance of the web will continue to increase.

Where the eyeballs are, ads must go especially during a downturn. In the next
2-3 years, especially after we move away from "panic" and back to recovery, it
seems to me, web ad spending will start growing again.

I should also mention that I currently work at an start up that depends on
web-based ad sales. I've had opportunities to move somewhere else but my gut
feeling is that a lean business with a high quality product is the place to be
right now, even if it depends on ad sales for its profitability.

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answerly
Online ad spend is continuing to grow year-over-year and accountable channels
like search and performance/affiliate marketing will be the largest drivers of
that growth.

The brand dollars are the ones that get thrown out of the window in an
economic downturn. But companies still have to acquire new customers when the
economy is bad and they are very likely to double down by spending their ad
dollars on accountable media channels to hit their numbers.

Startups that are building targetable/monetizable audiences will be just as
likely to make an ad supported model work now as they would have been able to
a year from now. Startups who believe that they will be able to just grow a
really big general audience and magically monetize it with high price CPM ads
from big brands are the ones that are in trouble.

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mattmaroon
I don't know that anyone really counts on ad sales from the beginning. I think
most startups just subscribe to the "get users now, figure out how to monetize
later" lunacy, and that usually means advertising.

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axod
I don't think it's lunacy if your startup is cheap enough to run. If you can
support a million users on $100/month, why not... It's worth that just to put
it on your resume, or just for the knowledge learned from scaling. Then you
just have to figure out how to make $0.0001 per user/month and you're into
profit.

I do agree about the ones that take a ton of funding and have a ridiculous
burn rate though.

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mattmaroon
If there's scaling involved, you're spending a lot more than $100 per month.
The only websites I can think of that could get high traffic for low cost are
blogs, since they can just run on TypePad or something, but I don't really
consider them startups generally. TechCrunch and HuffPo maybe.

There's almost nothing that's profitable at a fraction of a cent per user per
month. The net is cheap, but it isn't that cheap.

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axod
You're definitely spending more than $100/month in terms of time, but in terms
of servers/bandwidth, you can support a million users pretty well on $100 if
you don't use the standard web frameworks etc which are woefully inefficient.

~~~
mattmaroon
Well, at $100 per month there's no real scaling. You're running everything on
one inexpensive server. Scaling would be just getting a better one. (Can you
even get a dedicated for that low?)

I guess maybe you and I define scaling differently. I'm thinking like adding
in web servers, load balancing, replicating db. You may be just talking
optimizing code and caching or something.

Curiously, can you serve even some simple dynamic content like a Wordpress
blog to a million somewhat frequent users a month?

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axod
That's the issue though... you don't need a dedicated server to serve 1m
users, and you don't need to add web servers, load balancing, replicating etc
etc

VPS servers are so cheap and more than enough. The current web stacks are just
ridiculously lousy.

