A Web Start-Up Counting on Ad Sales? Good Luck

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.

>> 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.

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.

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.

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.