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Since we're talking about tech startup marketing budgets, it's a good time to reread http://www.paulgraham.com/yahoo.html http://www.paulgraham.com/yahoo.html

Since we're talking about tech startup marketing budgets, it's a good time to reread http://www.paulgraham.com/yahoo.html http://www.paulgraham.com/yahoo.html By 1998, Yahoo was the beneficiary of a de facto Ponzi scheme. Investors were excited about the Internet. One reason they were excited was Yahoo's revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in. When I realized this one day, sitting in my cubicle, I jumped up like Archimedes in his bathtub, except instead of "Eureka!" I was shouting "Sell!"

cortesoft 7y ago
Makes me think of my days working on a facebook app in 2007-8... every single app had the same revenue stream - selling installs to other apps. The price per install was crazy high, and this was before Facebook started enforcing rules about shady practices, so every app would do things like "Install this other app, and we give you these perks in our app" It was ridiculous. There was no real money, just app developers paying each other for installs.
- duskwuff 7y ago
  The same thing has been true of mobile games for a while. A lot of the ad inventory displayed in free games is ads for more free games -- sure, there's some real revenue from in-app purchases, but there's also a lot of money getting passed from hand to hand for ads.
  - BigJono 7y ago
    I think that 'some' real revenue probably dwarves most industries tenfold. Look at what something like Candy Crush makes in IAP, the top 5 players could probably support the entire ad industry themselves in perpetuity without breaking stride.
mrnobody_67 7y ago
40% of all invested VC dollars go to Facebook and Google in the form of customer acquisition costs
- bmiller2 7y ago
  Source?
- pandapower2 7y ago
  Curious what percentage goes to AWS...
  - bloemy 7y ago
    If you look at Uber/Lyft, quite a lot...
- cm2012 7y ago
  90% of all new ad spend goes to either FB or Google because they actually work for acquiring customers at scale. Every other ad provider squeezes into the last 10%.
  - dalbasal 7y ago
    Not sure this is true anymore. The market is so big, those two can't cover it all.
- scarface74 7y ago
  This is no different than what happened with Yahoo and AOL before the dot com bust.
  - cm2012 7y ago
    Most modern ad spend is tracked to ROI. Yahoo and AOL was not.
    - dalbasal 7y ago
vmurthy 7y ago
Thank you for this. Lovely read! :-)

cortesoft 7y ago

Makes me think of my days working on a facebook app in 2007-8... every single app had the same revenue stream - selling installs to other apps. The price per install was crazy high, and this was before Facebook started enforcing rules about shady practices, so every app would do things like "Install this other app, and we give you these perks in our app" It was ridiculous. There was no real money, just app developers paying each other for installs.

duskwuff 7y ago
The same thing has been true of mobile games for a while. A lot of the ad inventory displayed in free games is ads for more free games -- sure, there's some real revenue from in-app purchases, but there's also a lot of money getting passed from hand to hand for ads.
- BigJono 7y ago
  I think that 'some' real revenue probably dwarves most industries tenfold. Look at what something like Candy Crush makes in IAP, the top 5 players could probably support the entire ad industry themselves in perpetuity without breaking stride.

mrnobody_67 7y ago

40% of all invested VC dollars go to Facebook and Google in the form of customer acquisition costs

bmiller2 7y ago
Source?
pandapower2 7y ago
Curious what percentage goes to AWS...
- bloemy 7y ago
  If you look at Uber/Lyft, quite a lot...
cm2012 7y ago
90% of all new ad spend goes to either FB or Google because they actually work for acquiring customers at scale. Every other ad provider squeezes into the last 10%.
- dalbasal 7y ago
  Not sure this is true anymore. The market is so big, those two can't cover it all.
scarface74 7y ago
This is no different than what happened with Yahoo and AOL before the dot com bust.
- cm2012 7y ago
  Most modern ad spend is tracked to ROI. Yahoo and AOL was not.
  - dalbasal 7y ago

vmurthy 7y ago

Thank you for this. Lovely read! :-)