Direct ad sales and startups

I have recently met a number of startups with interesting consumer applications or services.  As expected, many of these startups have a vision to rely on advertising to pay the bills.  And like many startups, a number of these companies have plans to add a direct ad sales staff over time.  That makes a ton of sense, but what I believe is that many entrepreneurs underestimate the direct capital and management costs necessary to build such a team.  In many ways, building a direct ad sales team is similar to building an enterprise sales team.  These thoughts may seem quite basic to you but here they are nevertheless.  First, don't ramp up your sales team too quickly until you have a product to sell.  That means if you don't have scale or enough eyeballs you are better off using Google Adsense.  If you don't heed this advice you may quickly burn yourself out of business.  Secondly, I know that many startups may not know what kind of ad units to sell but be careful of not having a standard product list or rate sheet when you go out to the market.  Yes, I know you have to be creative if you have a new service and listen to your customers, but at the same time don't base your business on selling one-off ad units for each advertiser because this can be a huge drain on your technical resources over time.  Next, make sure you never forget that what is right for your users is right for your business.  Many times I have seen companies that are trying to meet the advertiser's inventory requirement make the ads much too prominent and sacrifice usability in the long run.  While this may drive some initial short-term results, it may come to bite you in the ass in the future. 

The bottom line is that Google Adsense works well for a reason-it has scale-it has tons of eyeballs, it has a huge customer list of advertisers, and is therefore more likely to get you great pricing and ad targeting.  Yes, I don't disagree that over time you want your own sales team and don't want to solely rely on one partner for your revenue, but just go into this with your eyes wide open and don't ramp up before its time.  The direct costs, management costs, and hidden strains on your infrastructure may be more than you can handle if you ramp up too quickly.  Start slowly, figure out what it is that advertisers love about your service or product, figure out what kind of units deliver the best results, and then ramp.  Here is an earlier post on ramping up an enterprise sales team as there are many similarities to direct ad sales and direct enterprise sales.

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9 Responses to “Direct ad sales and startups”

  1. Joe Suh Mar 31, 2008 at 2:32 am #

    Great advice, and timely for me. What would you say is a good threshold to start building a direct ad sales team? Do you have a rule of thumb that you advise?

    We’re at 6M monthly pageviews, and I’m debating on whether to 1) outsource to an agency 2) bring on a full-time sales person or 3) keep running adsense for sub-$1 CPM’s :)

  2. Jeroen Bakker Mar 31, 2008 at 3:19 am #

    Another interesting way is to look at other means of generating revenue besides selling ads. There’s a lot of hidden value underneath most of these services and apps, which can be a lot more interesting to monetize. I’ve written about some of the possibilities on the The Next Web blog, for start ups to consider:

    link to thenextweb.org

  3. Ruchit Apr 2, 2008 at 10:43 pm #

    Keeping a sales force in early days of product can be bit too much. Especially when there have been no direct sales.

    How about giving the cut and only cut for your sales team to start with?

    This way you get new revenue channel by selling direct and can pay to your sales team as well.

  4. Jason Apr 3, 2008 at 10:51 pm #

    @Joe: join an ad network and keep running adsense until you reach a higher level of revenue to hire sales people

  5. Austin Apr 6, 2008 at 1:32 am #

    Thanks for the good advice. I absolutely agree with you – we actually had to turn down some people who approached us about advertising on our site because we couldn’t handle it at the time, but thankfully we’re in a stronger position now. Still mostly using google adsense though…

  6. DJ Chang Apr 13, 2008 at 6:03 pm #

    @Joe: With current economics of online advertising, your 6 million impressions is worth nil with Adsense; and $30k if 100% sold. The problem is you need too many sales people, and they probably don’t have the unique users to interest brand buyers. Best to join an ad network.

    There is clearly a longer term problem where the Long Tail is poorly served, online. We are working to solve that problem.

    -Dash
    The New Economics of Advertising
    (link to adecon101.blogspot.com)

  7. Chris Allison May 7, 2008 at 1:00 pm #

    I’m in a similar position myself, a little larger but still debating whether or not now is the time to start paying a sales team. We’re at 45k uniques a day and 39m pageviews a month…thoughts? also what do you think about ad exchanges?

  8. DJ Chang May 19, 2008 at 10:23 pm #

    @Chris, 45k per day is probably under a million UU per month. 40+ pages per user is a lot.

    I’m afraid you are still an order of magnitude under the limit before a direct sales force makes sense – based on current online economics. Stay tuned as link to adecon101.blogspot.com disrupts the economics for the Long Tail.

  9. Tim Halbur Jul 16, 2008 at 2:28 pm #

    So what do you recommend for those of us with a niche audience to whom we can sell direct advertising, but can’t afford our own staff? Are their small ad agencies who will sell ads for a cut, and if so, how can I find them? Adsense ain’t going to pay the bills, and we have gotten ads that do without much effort in the past.

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