Bijan Sabet
About Tweet Work Archive
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Funding startups that rely on advertising
“I’m not looking to fund startups that rely on advertising”
I heard this from another investor yesterday.
There is no question that building a company around an advertising business requires significant scale. Fred has a great post highlighting the facts about CPM rates over time.
And here’s the thing.
Building a company around advertising has always been hard. And so is building an enterprise company. Or an ecommerce company. Or a marketplace. Or anything of value. There is not just one way to make things work and none are easy.
Much of the reaction to consumer startups seem to have come from Facebook’s IPO and subsequent market valuation.
Yes, the company today isn’t worth $100B. Today.
Will it be someday ? Probably.
What’s it worth today? Something like $60B.
What’s the problem again?
I think in uncertain times we need to step back and figure out what works and what doesn’t work. I’m all for that.
But in my mind themobile and the consumer market are alive and well.
The great ones are making it work. They are delighting their users every day without spending a dollar on customer acquisition. Their users count on them. They get pissed when the service has an outage and they smile inside when the app does something magical.
Re ad models. Let’s not paint with a broad brush. Let’s talk about the ads that are built on faulty premise. It’s not online ads. Generic CPM rates are coming down as targeting/retargeting/ and data are going up. Native ads that google pioneered with Adwords are finding their own in places like fb, twitter, and now tumblr and foursquare. Native ads aren’t the new black. We’ve seen and had them for awhile but few have taken the time to get it right. But we are all learning fortunately. Native ads done right plus earned media is a compelling value proposition
TV ad dollars is the big thing we should all be talking about. Not internet or mobile. I submit that mobile is completely underhyped. And TV is way overhyped.
Why TV ad dollars are constant year over year when DVR penetration is on the rise and mobile is sky rocketing doesn’t compile for me. There is only one reason why we have DVRs and that is to skip the ad entirely. People say it’s because we all love our TVs and the reach is beyond anything else we can get elsewhere. Yes we do love our TVs but we hate those ads. They aren’t native. They are hostile and get in my way.
I’ve got a hunch that Facebook is going to have a surprisingly great Q4 and beat their number. The stock price will rise. Will those VCs come back to the consumer sector? I have no idea but it will be interesting to watch.
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hyv said:
because a company shouldn’t be an ‘ad’ based company anymore… It should be an ‘integrated retail’ based company. Most of the time there is no reason to focus on advertising when you now can instigate a purchase.
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