Advertising model

I started this post a few weeks ago after reading the Top 100 Web Apps in Australia list. I had this real unease at the number of businesses on the list that were relying on the advertising model. Courtesy of Elias I just stumbled on this amazing talk by David Heinemeier Hansson about the benefits of aiming low and aiming at enterprise




There's not much more I can add really. The Dane hit it on the head.

The only thing that I would add really is that the kind of VC's that we have in Australia are more likely to go for the modest simple startups that Hansson is talking about. The kind of sums which Hansson shows in this presentation are exactly the kind of things that VC's in Australia would love to see.

And here's the old post that I started:

I work in venture capital but not specifically tech venture capital. The advertising model worries me a lot. There are so many unknowns, from what I can see, about the long term viability of this model. I can feel it myself as my media consumption habits change; I am becoming less and less exposed to traditional advertising. If I want something then I will search for it. I search for things I don't know I want yet by reading blogs and news sources and occasionally going to the shops. I have basically stopped watching TV. I read a newspaper on average once or twice a week. I listen to the radio for an hour or two a week while I am in the car. Maybe I am deceiving myself but more than ever I think we are masters of our own consumption. Any business model which thinks that this tide is going to turn and advertising is going to once again master consumers in the way it did during the 20th century is dreaming in my view.

Having said this I suspect that a lot of the VC speculation in the US is based not so much on the advertising models but on the value of the user bases to large companies. Microsoft paid $400m for hotmail when it had 8.5m users. It now has nearly 300m users. That must go down as one of the great investments of the Dot Com era. A lot of Web 2.0 companies and their investors don't seem that bothered by the lack of advertising revenues. They're in a race to get users. Monetising those users will be the work of whoever they sell to. Australians are huge gamblers. They have a whole national holiday basically dedicated to an indigenous gambling game. I'm sure if more Aussie startups pitched their business model as a gambling on a race then they'd get a lot more interest from local investors.

Having said that I think that indigenous Australian social apps are always going to struggle.

and here I stopped and started this post