Monday, April 15, 2013

Advertising as primary revenue stream in startups

Over the last few months I have seen a lot of business ideas that base their revenue generation through advertising. In my experience this is a very dangerous strategy for a startup. Let me narrate my experience about implementing this strategy on a website that Inforica had developed called mindqjobs.com.

We launched this website in the last week of december 2012 with much fanfare with the assumption that we will get the traffic to monetize through advertising. The assumption was made on the fact that the website was to be used by the students of a software training institute Mindq Systems which number in the 1000s every month. We started off by putting Adsense and the pennies started to flow in almost immediately. Thats right, all we got were pennies which added up to a few dollars every day, an amount barely enough to pay for hosting the site on a shared server. One of the reasons is because the traffic was from India and not the west, so you end up making very little in terms of CTRs and CPCs. About a month later one fine day we get a mail from Adsense saying that our adsense account is banned for illegal traffic and that was the end of adsense on the website. 

We then went on to try out other ad networks such as Komoona ads. We get absolutely nothing from this ad network, just a few cents every day which we continue to get as of now. We got an account on infolinks - this made the whole page very ugly by linking up text to extra information and it was not the kind of user experience that we desired on the website. Another ad network that we tried out is Chitika - the issue with this is that it is targeted towards search pages and not content pages so they have very few ad types. The new one that I am trying out now is Tyroo - this is an ad network where you promote products and you earn commissions. 

Based on my experience this is my feedback for all those considering an advertising as their main source of revenue
  1. Ensure that you have 10's of thousands of page views per day with a majority of the traffic from the west. 
  2. Adsense is by far the easiest ad network to implement with the least amount of work. They have a wide array of ads suitable for every kind of page and the kind of revenue you earn from it is much more than any other ad network we have come across.
  3. Have one person full time only evaluating and trying out ad networks and changes to your web pages so that you manage the fine line between a good user experience and good chances of a click through.
  4. There is very little control that one has over the ad network and if all your revenue is dependent on a third party you have very high risk inherently built into your revenue model that can drive you into the ground very easily.
  5. Since traffic takes time to build up so ad revenue takes time to build up and also there is no guarantee that the ad revenue is directly proportional to the growth of the traffic although a pattern develops over time.
My personal opinion is that ad revenue cannot be your primary source of income of your product unless you are a google, facebook or linkedin and none of us are that when we startup. Ad revenue should only be a supplementary source of income. Build something that a customer is going to love using and is willing to pay you for it. That should be your primary source of income.