The following is my Advertising Age column for next week. It builds on what I wrote earlier this week - to which many of you added lots of great thoughts. If you're a web start-up now is the time to consider your revenue streams. Advertising will not save all, I am afraid. Remember - as much as budgets are going digital, advertising is still cyclical.
Only You Can Save Web 2.0
Years ago the Advertising Council started a landmark campaign with Smokey the Bear that had a rather ominous tagline. It reads: "only you can prevent forest fires." (They still use it today.) The subtext, which the recent fires in California clearly reminded us, was that the word "only" implies that the "you" here is singular. In other words, if you're not out there preventing forest fires, then no one will.
While not quite as dramatic, a similar burden is starting to fall on digital marketers. Are your shoulders feeling heavier yet? They should because, you see, "only you" can save Web 2.0.
Nearly every online start-up you can think of is basing their business model on advertising. It's as if your digital budgets are a bottomless pot of money with more than enough to go around for everyone. Ask any of them how they plan to stay solvent and they all fire off the "a-word" - advertising.
The conventional wisdom in Silicon Valley is that as all advertising goes digital, there will be plenty of money for every business. Further, they argue that it doesn't take much to make a start-up profitable. The cost of starting, scaling and operating a Web 2.0 site is a fraction of what it was during the Web 1.0 era.
However, just like Social Security won't allow every baby born this year to retire in 2072, the harsh reality is that there will not be enough ad dollars to go around for everyone. For starters, advertisers have infinitely more choices on where and how to allocate the spend. More importantly, you're wisely looking for ROI - scale, quality and performance. These are three qualities that many start-ups lack.
The only remaining exit strategy for the gaggle of Web 2.0 sites that are depending on you is to sell themselves to a larger player, such as Google, Yahoo, AOL or Microsoft. Some certainly will. Many won't.
If you feel you saw this movie before, you did - in 2000. The sequel ends the same way, but not with as much carnage. That might change. But remember, only you can save Web 2.0.
