Are there enough ad dollars for the thousands of small startups?

as i have said before the big keep getting bigger and the low barriers to entry mean more and more small guys are fighting for crumbs. the only way to sustain is if dollars continue to flow from old media to new media and the pie continues to get larger. if it does not, watch out!
clipped from news.yahoo.com

The catch, according to some, is that much of the money flowing toward the Internet is concentrated on a few dozen of the most popular sites. That has left smaller, less well-known sites at a severe disadvantage when it comes to attracting advertising money and surviving.

In the United States, the top 50 Web sites accounted for more than 90 percent of the revenue from online ads in the first half of 2007, according to the Interactive Advertising Bureau and PricewaterhouseCoopers. The top 10 sites accounted for 70 percent of the revenue.

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This post was written by who has written 358 posts on BeyondVC.

4 Responses to “Are there enough ad dollars for the thousands of small startups?”

  1. Richie Hecker Oct 14, 2007 at 9:54 pm #

    You’re looking at the wrong issue. There will always be ad dollars, even in down markets there are always ad dollars. As long as you have people that know advertising selling the advertising there are ad dollars. The problem is a lot of these companies get funded without having a single person that has ever sold $1 of advertising so in most cases the answer is no – because people don’t have the experience to sell it – but the dollars are there.

    A more important question though is if you can get the impressions. A lot of people ask me how they can build a site cheap and get it live. A lot of these people have no marketing experience. What do I tell them? Don’t start it up unless you actually know how to seed market it and get it out the door, if so you will never have impressions to sell. So you’re advertising will be non existent, you’ll wish it was worthless.

    Because barriers are low,lots of junk out there, means people have ADD and are more selective. It is MUCH harder to promote a consumer site today than it was 2 years ago.

    Richie

    http://www.BootStrapper.com

  2. Ed Sim Oct 15, 2007 at 10:54 am #

    Richie-great points. There is a big difference from using Adsense to having enough traffic and know-how to build your own ad sales team. I do agree with all of them but my points are relevant when you are talking about seeing hundreds of companies that say they will get to $50mm of ad revenue in 4 years. The market cannot sustain everyone of those companies, especially if ad dollars to the web slow down.

  3. Jon Oct 15, 2007 at 12:45 pm #

    Ed,

    Richie has a good point about the expertise needed to deliver the concept and the potential of the site, i.e. speaking the ad buyers’ lingo. At the same time, Adwords and the search engine growth has shown that people will invest more of their offline budgets the more return that they see (I think that in the UK, online counts for just over 10% of total adspend – don’t quote me on that though). At present, with a good concept it isn’t difficult to outsmart a print product for the transactional ad revenue. Explaining that and getting a good price for your site is the weak link.

    As for the $50MM target – that is the pressure of the growth in the business plan to steal ahead of the guy asking for funding who promises $40MM. Ask them if they know the standard rate card for the industry, the typical method of advertising – is it direct to large corporations or via their agencies or is it a bunch of small guys paying less but more frequently?

    The revenue is there. The difference is that understanding how to get it in isn’t.

    Jon

  4. eyeconect Oct 17, 2007 at 5:19 pm #

    I have been trying to figure a way out of this and the problem has been getting more and more top sites getting all the revenue , eventually the trend will go towards top 10 sites will get all the revenue.

    This requires a shift in web site development strategy for startups. The strategy must include site ad server application which can be used by all advertisement placement agencies. I think, the startup needs to champion a Open Source Ad Server application which the marketing industry can use.

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