I´ve recently heard a few people talking about their business ideas. Not at a specific setting or event, more like a collection of occasions. And one thing I´ve seen quite a bit of are business models based on making stuff free, providing the users get shown some ads.
I´m not going to list examples, you know what I mean. Hell, the internet somehow seems to work like that. I´m not going to say these models don´t work.
But there is a skeptic in me.
The feeling I almost always get when people get all hyped up about “making milk free, as long as you watch a few banners” is that they are leaving the money-making part as an afterthought. And when asked how they will make money, they spurt “with ads, of course”.
This whole mentality of just sticking some ads on it and expecting them to they pay for the operation seems flawed to me in three major ways:
- Advertising is easier said than done.
- We almost don´t notice much of it
- Advertising must be tailored to context
1 – Advertising is easier said than done
I´ve worked in advertising, but not the online kind. And from my experience with online marketing, it is clear that it is way more complex than sticking ads on sites and applications. It was very humbling to understand this. What I think is that sometimes people are thinking that just because you put some ads on your product, these ads will bring in money. They seem to fail to think who is going to pay for them, how much, and perhaps more importantly, why should people advertise on your product and not somewhere else?
Ads are becoming a commodity and they tend to have heart-breaking conversion rates
(how many people who actually click on the ad go on and buy the advertised product).
If you are putting “Advertising” on your Business Model Canvas, take pause and think it through. Maybe not immediately, but do talk to people that know a lot about it, mentors, fellow entrepreneurs and the people you expect to actually pay you for this advertising.
2 – We almost don´t notice much of it
We know we get bombarded with ads everyday. But how many, really? Depending on which study you read (check this Quora post) you will get different answers, but one thing is certain. It´s a lot. And thank god we don´t really see them all. Now, this tells us two things. The first is that it is very hard to stand out in the ad jungle (especially when most ads seem to be written/designed the same way), the second is that you will need a large presence, for your ads to reach “critical mass”.
I´m not a specialist, but I figure that a single ad for the most awesome service in the world (“Free T-rex rides in Las Vegas, everything included”) wouldn´t get much attention surrounded by 10.000 Coca Cola ads.
When people don´t notice ads, they don´t buy more. When they don´t buy more, businesses don´t spend money on ads. This is a gross generalization, but you get my drift.
3 – Advertising must be tailored to context
This is for me, the most visible issue with paying your product with advertising. It isn´t all the same, it does not work all the same way, for the all the people. When you casually say “we will put ads on it”, what I hear is something like “we will put banners, popups (god forbid) or funny loading screens.”.
Talk about a missed opportunity. How can you really integrate ads with your product or service? There are a few interesting cases ( TapJoy is famous, but you will remember GoClapp) that do this. But to really make sure the type of ads you serve are fitting the context of your product/service, it is probably a good idea to think about it early on, when you are thinking about your business.
What is your market, how do they interact with your service, what sort of buying habits they have? As a Designer I have to say you need to speak with people to find out. Don´t get lost getting statistically relevant data, but consider these things and try to come up with answers that at least guide you in figuring out how to best apply advertising to your product.
Naturally this is just my personal view on this topic and I don´t know enough about the inner workings of online marketing to give great advice on it. I just wish future entrepreneurs to start thinking about this as early as possible. Don´t ruin your business with advertising that doesn´t pay or your product with ads that suck and interfere.Bonus suggestion:
If you are organizing bootcamps, idea competitions or accelerator programs.
Throw in this constraint: you cannot get paid via ads.
Lets see people getting creative