Andrew Chen: Most Web 2.0 Media Startups Have a B2B Enterprise Model

June 7th, 2009 Sean Murphy

I don’t know how I overlooked Andrew Chen’s “Your Ad-Supported Web 2.0 Site is Actually a B2B Enterprise in Disguise” He succinctly outlines some hard facts that many founders spend a year of their life to learn:

1. Unless you are a ridiculously huge consumer internet site, you have to build up your revenues through brand advertising sales. It’s very hard to just use ad networks like Google AdSense to sustain yourself: just do the math using 10 to 25 cent CPMs and you’ll quickly see why.
2. The users of your website are not really your customers. Your actual customers are the ad agencies and advertisers. Your Web 2.0 consumer startup is actually a B2B that sells inventory to brand advertisers.
3. How to avoid this: directly monetize your users by coming up with something so compelling people will pay for it through subscriptions, virtual goods, or other E-commerce models.

Too many media startup founders think that their audience is their customer, when it’s their advertisers (or the firms who want to advertise to reach the audience that they have assembled). As Patrick McKenzie commented on Hacker News: “I’m terminally old-fashioned in a lot of ways. I hold open doors for ladies, take off my hat before entering buildings, and define customer as “someone who pays money for a good or service”.

Entry Filed under: Finding your Niche Stage, skmurphy