Dave,

Wise words but one could say "isn't that common sense' --- awh but doesn't that fly out the window pretty quick (reminds one of the dotcom fools/horses!)

but no doubt u'll hammer some sense into them (and your fellow advisors) by the time they leave.

Lal

As someone whose business makes a good percentage (a majority?) of its income from advertising, it seems odd you would try to deter people from starting businesses with advertising as their revenue model.

There's plenty of potential in advertising-based revenue models. Using traditional media as an example of why this will fail is hardly fair, considering most of the traditional media companies are currently in financial decline because they are failing to adapt to the changing state of media delivery; not because the idea of advertising as revenue model is fundamentally flawed.

A fair point, Jake, but the difference is that I am not building a multi-person business or planning on seeking venture capital down the road. Is advertising a possibility for a small shoestring startup? Sure. But that's not what we're talking about and that's not the focus of the TechStars program either.

Further, since you ask, a quite significant percentage of my income comes from non-advertising sources, more traditional revenue streams for a management consultant...

I think I agree with both you and Jake.

We need to change what we call the "advertising" business, because that metaphor is hopelessly defined by newspapers and other media. If everything looks like a hammer, ...

Jake, your business is much more than advertising. I send people to you to get knowledge. I send them to you to get expert opinions. I send them to you to save me time.

It would be rare for me to find a newspaper or TV station that I could do that with. When someone wants to know about some kind of digital media, the generalized pap (think Kim Komando) that is out there in traditional channels is pretty much useless. Driven by the idea of serving the largest possible audience and offending the fewest people, there will never be much value in the information.

JLMB is very clearly focused, even though there's a lot there. It's also very clearly the opinions of an expert, and rarely seems to be rah-rah or driven by a vendor. And the tone is very different from what you'll be hearing from Katie Couric or the lovely Kim.

That's why I'd advertise on it. Because of the context, because of the cachet, and because of the community.

Hi Dave,

I have a similar problem with clients who only want to use email to communicate with their customers. In spite of overwhelming evidence that delivery is getting worse on a daily basis.

If email were taken away their business would tank.

I'm curious how you persuade your clients to use 'diversified' marketing?

Cheers,

Craig

Ok Dave you've dragged me into this from your email newsletter .

I'm helping a start-up business newspaper which is extremely tightly focussed on a section of Greater Manchester.

I really believe businesses that want to reach businesses in that part of Manchester will want to buy advertising through it. Therefore estimated revenues were identified before getting bank funding.

I think estimated revenue helps with investors. And should make the entrepreneur more comfortable. However, as you know entrepreurs are about risks too and sometimes you just have to believe in making something work and going for it.

Jim

I'm wondering how these start-ups all made it into Techstars without plans for revenue streams other than advertising, or it sounds like at least in one case, without even that! Were these really the best that were out there?

- Jeff

I was product manager at CompuServe for many years. We recieved hundreds of proposals for new services every month and the one attribute frequently overlooked was Promotions. People still seem to believe it "If you build it they will come!" There may be one or two of those services every few years, but with the millions of web sites out there, it takes more than luck!

TechStars is not about picking the perfect business and revenue model. It's about picking great founders who value mentorship so much they'll drop everything else for it, and supporting them any way we can. It's hard to judge them two days into things. Hopefully you picked up on the fact that they're all bright, motivated, and passionate founders who are focused on problem areas. Business models will evolve - that's why great mentors like you are involved!

Sitting in Boulder as I write this, I wonder at the ultimate viability of the concepts being honed at TechStars - are these seasoned founders or first timers? If they're the latter, what's the downside to a Meebo-style $12m round of funding for a concept with a 1000ish Alexa rank and no obvious business model? Given exit strategies are leaning more toward acquisition by Google/Yahoo/Microsoft/etc and not IPOs, wouldn't expanding the advertising reach of those corps be enough to justify a focus on advertising supported ventures? Or are you suggesting that the 2.0 bubble is waning, (seems like it's at about a May 2000 point relative to the first .com wave) and we're going to actually have to be creative and find some way for someone to actually pay for something and stop dropping the 'e' from our .coms?

Ah, the lure of adsense and CPM. It's started many new hobbies.

To me it is just amazing that programers build businesses and get funded. I create value in business and would never think of actually coding a website. Not sure why coders think they can pull off biz models.

Another way to look at it. In the long run, these bizs are giving something away to attract users. What advertiser can really monetize that well?? The 'customers' won't pay the primary biz but they will click through and then pay?

Luckily, I don't have either of these problems.

I worked at a startup recently for a year.

They had a pretty decent app but were going for the sm. biz segment and had the typical freemium business model.

I wrote a fun little video site / app on the side.

1 year after the day gig startup launched, with 3 co-founders + 1 full-time developer, we were only at $2100 / mo. in revenues on the freemium model.

At the same time, 6 months after launching my little side project, spending just a few hours a week on it, it was already doing $2k per month in revenues (almost pure profit).

Just one small example. The CEO of the startup had never worked in advertising-based companies so he had no clue how much you can make from them, if they go over even moderately well. (20,000 - 50,000 daily uniques, any more is pure gravy)

"Not sure why coders think they can pull off biz models." Mike, they do it because others have done it successfully in the past. You cant do what you believe you cant do.

How is it that the biggest player on the Internet is an advertising-only model. Of course an advertising-only model is valid, in fact it's the norm for most content publishers.