Great post, and it raises a few interesting questions that we've been trying to answer at our startup. You mention 'obvious opportunity' when it comes to business models. I couldn't agree more. Targeted or contextual advertising is one such tried and tested model, but there's a general feeling that more and more VCs are looking for more than just the standard advertising based business model, despite the fact that it has had tremendous success. I understand that you can't just stick ads anywhere (see Facebook's notoriously low click through rates), but are we coming to the end of the road when it comes to advertising as a biz model? Is the bubble about to burst? Clearly its not a simple answer, but just thought it'd be interesting to hear your thoughts...
matt_winn
· 2 years ago
Thanks, Shafqat. You're getting at something that I think has a lot of folks concerned - investors, entrepreneurs, and even established media companies. Is advertising as a business model over? Definitely not. It's become the defining monetization mechanism for content on the Internet. Are VCs a little shy around pure advertising models? Some are. Investors saw the advertising spigot dry in 2001/2002 and they're afraid it'll happen again. Forget the short-term outlook on recession; VCs will take the long view since it's usually the only route to building the kind of value we need in order to drive the kinds of returns that make fund economics hunt. The long view indicates that there will likely be a business cycle dip over an investment horizon and advertising may be a scary place to hang your hat during that time. You'll hear some counter that measurable, ROI-based advertising would be the last to go. I think there's some validity there. I also think entrepreneurs will continue to innovate around monetization. "Attention" always has value; one must examine HOW MUCH value in a given scenario. In order to justify a venture investment, a VC might have to believe you can drive LOTS of attention to weather the downturn. Plenty of investments are being made under that assumption today.
Best, Matt
Nick Thacker
· 1 year ago
@Shafqat:
Good ideas, I think you have a valid question! I've hesitated to base a business model solely around an advertising schematic for that reason: Is the bubble about to burst (or more long-term: Will the bubble ever burst?). It seems to be an issue mostly regarding the internet and Web 2.0 industry because it seems that people are now not only used to how the internet operates but they know precisely what to expect.
Example: When I browse a site, my eyes barely even notice the Google Ads, banners, and other clickable advertisements. Don't even get me started on pop-ups--I began my vendetta against them at the ripe old age of 14 (yes, I'm only 20 now!)
The point is, Matt has a great point when he states "entrepreneurs will continue to innovate around monetization." We (entrepreneurs) are charged with innovating every monetization opportunity to not only squeeze every drop out of tried-and-true profit method, but to create new ones. Online advertising falls under both these umbrellas.
The biggest issue for me when I'm reviewing/preparing a business plan or model is not the question of whether or not to include a plan for advertising online or elsewhere, but whether or not to base my bottom-line strategy on it. As an entrepreneur, I sometimes feel slightly defeated when I realize that my great idea must sit shotgun to an advertising campaign. It's not my call to judge the validity of these claims, but something about starting a business based on advertising or advertising alone just doesn't sit well with me!
All Comments
Best,
Matt
Good ideas, I think you have a valid question! I've hesitated to base a business model solely around an advertising schematic for that reason: Is the bubble about to burst (or more long-term: Will the bubble ever burst?). It seems to be an issue mostly regarding the internet and Web 2.0 industry because it seems that people are now not only used to how the internet operates but they know precisely what to expect.
Example: When I browse a site, my eyes barely even notice the Google Ads, banners, and other clickable advertisements. Don't even get me started on pop-ups--I began my vendetta against them at the ripe old age of 14 (yes, I'm only 20 now!)
The point is, Matt has a great point when he states "entrepreneurs will continue to innovate around monetization." We (entrepreneurs) are charged with innovating every monetization opportunity to not only squeeze every drop out of tried-and-true profit method, but to create new ones. Online advertising falls under both these umbrellas.
The biggest issue for me when I'm reviewing/preparing a business plan or model is not the question of whether or not to include a plan for advertising online or elsewhere, but whether or not to base my bottom-line strategy on it. As an entrepreneur, I sometimes feel slightly defeated when I realize that my great idea must sit shotgun to an advertising campaign. It's not my call to judge the validity of these claims, but something about starting a business based on advertising or advertising alone just doesn't sit well with me!