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FWIW, you don't have to charge users. Ad supported/affiliate marketing is a pretty viable business model and will often fit better than trying to charge end use

• keiferski 16y ago
  Rather than downvote you, I'll disagree in a reply. Ads are an extremely unreliable business model. If you want to be an entrepreneur, run a business. If you want to run a business, sell stuff. Don't fall into the trap of "oh, I'll just tack some ads on later and we'll be fine."
  • axod 16y ago
    > "Ads are an extremely unreliable business model." How much money do you make from advertising revenue that allows you to quantify specifically how reliable it is? I'd question if you have enough data at your disposal to make a statistically valid assessment. You can't disagree with data, and it's only unreliable if you don't know what you're doing.
    • lyudmil 16y ago
      How about the fact that most successful businesses that have ever existed have charged for their products? Why is this data that can safely be ignored? It's the most proven business model out there. Furthermore, it takes time to get good at anything. As you implied, making money from advertising is a skill, so how long does it take for you to get good enough at it to support yourself? Charging for things is simply more conservative. It's for people who don't want to risk going under while learning how to advertise.
      • axod 16y ago
        There's pretty substantial industries that are built on advertising revenue - free papers, television, and the internet. Over the last 15 years countless websites have proven you can make substantial amounts of money from advertising income. It's a proven business model. Getting paid subscribers isn't trivial either. You need to learn as you go with either approach.
        • lyudmil 16y ago
          Advertising was, for the most part, invented for traditional media (papers, radio, television). In many ways traditional media and the marketing industry are the same thing, so bringing that up as an example of a proven business model doesn't really say much. As far as the Internet, how many publicly traded Internet companies actually make their profits primarily from advertising? Okay, all the search engines obviously, but who else? I just don't think you can say that ad-revenue-based models are as proven of a business model as just selling things.
          • axod 16y ago
            You seem to have something fundamentally against advertising, which is ok, it's a commonly held view on HN. I just like to point out it's stupid to rule it out as a possible revenue stream every so often.
            • lyudmil 16y ago
              Sorry, I didn't mean to sound partizan. I have nothing against advertising, I was just trying to counter a point you had made. And you're correct - it's stupid to rule out any source of money.
        • rick888 16y ago
          "There's pretty substantial industries that are built on advertising revenue - free papers, television, and the internet." In the beginning, it was easier to get advertising dollars for a website. Things have changed in the last couple of years. Advertisers want numbers. How much traffic are you getting and is it targeted? Sure, you could use adsense or some or service, but it will take thousands of unique, targeted visitors to make enough money for a business to survive. This takes lots of time and energy. If you aren't pulling in any other revenue, you will most likely go under. Charging for a service or product doesn't require those numbers. You can have 100 people a day coming to your site and make 10X more in revenue. I've been there.
    • MicahWedemeyer 16y ago
      I have data from my own experiences, and while I won't release it, I will say that in our case subscription revenue is an order of magnitude higher than ad revenue. I can possibly see my business becoming a full-time job from subscription revenue. I wouldn't even cover hosting costs from ads.
      • axod 16y ago
        I guess in summary then, both are viable. I've been making a living mainly from advertising income for just over 10 years now. I've also tried getting users to pay for things, and it's orders of magnitude harder (for me).
        • MicahWedemeyer 16y ago
          I know there are some viable models that depend on ad revenue. It sounds like you've found some of them. That's very commendable. In my experience, I wasn't very good at balancing my desire to serve the user's needs while also increasing ad revenue. The two goals seemed to be at odds. Either litter the page with ads and annoy the users, or make no money. Not to say it's not possible, just that I didn't like worrying about it or working on it. I found that the subscription route was much easier. It aligned me perfectly with the users. All I had to do was please them and they would continue paying. No need to test optimal placement, worry about ad fatigue, ad blockers, etc, etc. Not to say there aren't problems. Finding the right freemium feature balance, dealing with churn, and the horrible beast that is credit card processing are all pain points. But by and large, I have found it much easier to run a business based on subscriptions than ads.
          • axod 16y ago
            That's cool, there's definitely pros and cons with both. I've tried both, and even the time I spend with the charge backs and "I changed my mind and want a refund" aren't worth my time dealing with. It's just boring hassle. I definitely agree, there's a balance between making easy ad money, and satisfying users. That's the hard bit - making the advertising useful enough, unobtrusive enough, but effective. A lot of it perhaps depends on what sort of person you are. Making money from advertising is basically a numbers game, which you can just optimize iteratively. Selling subscriptions involves feelings, random users, and all those fuzzy things that I personally find a lot harder. I'm not a salesman and never have been. I don't like trying to charge people for something I'd never pay for. OTOH, I would, and have paid for advertising, I have used websites that carry advertising obviously, so I'm just a lot more comfortable with that whole ecosystem. I can put myself in the position of all parties.
• wensing 16y ago
  Stormpulse has around 5 million uniques per year and the ad model still isn't viable without destroying the user experience. In other words, you need more traffic than most people can fathom.
  • axod 16y ago
    It's not the amount of traffic, it's the fit between your users and the advertising, how targeted they are, intent, etc etc. Also it totally depends on the service/product. For stormpulse I don't think advertising supported is probably the right idea unless it's made more mainstream. For example I'd start a "enter your email to get local weather reports free". Build up a massive email list, then start including promotional adverts at the top/bottom of each mailing. You'd be sending out a large amount of mails, to a large amount of people... I think it could generate a good revenue. It's not as simple as slapping up some ads and going home. This is the mistake I think most people make.
    • wensing 16y ago
      Let's boil it down to eCPM. What is your eCPM going to be? Multiple that by impressions and tell me how you're going to support N employees on that revenue.
      • axod 16y ago
        For what? What website? One of my websites generates $20 eCPM. Another generates $0.10 eCPM :/ What's your service going to cost? Multiply that by paying users and tell me how you're going to support N employees... I don't think arguing over this is useful - making money out of advertising isn't rocket science, but it does require learning and experience.
        • wensing 16y ago
          It's important for bootstrappers to understand the mass traffic that's needed for advertising to fuel growth. $20 eCPM means to have just a $200k/yr. business you need 10 million impressions per year. $0.10 eCPM means you need 2 billion.
• charliepark 16y ago
  The OP was making $60 per hour per user. Is there any advertiser in the world who'd pay $60 to "sponsor an hour" with them for access to a single member of the OP's userbase?
  • axod 16y ago
    Making $60 per hour per user isn't scalable. You can only service one user at a time. So it's apples + oranges comparison there.
• ahoyhere 16y ago
  The metaphor I use with my startup students is this: PPC (even banner) advertising is like scrounging for scraps at the table of someone successful. AND, of course, if the ads work -- if the advertisers get their money worth -- then of course the ads are leading your users away from your app, which means of course a lower rate of returns. Ad-supported biz models are difficult to achieve, fickle, counter-productive and, frankly, more work than charging people.
  • axod 16y ago
    That's a ridiculous metaphor which completely misunderstands advertising. Your metaphor would be more correct if you said it's like scrounging for scraps at the table of millions of successful people all at the same time. But you're not "scrounging for scraps". You're selling exposure, mindshare and traffic to advertisers willing to pay for it. You obviously haven't been successful with ad-supported.
    • ahoyhere 16y ago
      Nope, you're mistaken. I've made tens of thousands on ads... and hundreds of thousands on products. Products that cost money. It's easier to control, more rewarding intellectually (because your interests & customer interess are in sync), and much more profitable -- without counting on a stroke of luck. If people pay you a percentage of their cash flow, that's a mere scrap. Sell your own product and you get the lion's share.
      • axod 16y ago
        Well, take your numbers, and reverse them for me /shrug/
        • ahoyhere 16y ago
          That doesn't invalidate my metaphor. If an advertiser is willing to pay you $x then you can be guaranteed they're earning $x * 2 -- or more. If you had the product instead, and were the advertiser, you could be the one making a lot more money. Advertising expenditure is always a sliver of total expected revenue, except in two rare cases: when a company bets the farm on an ad campaign, and when the advertiser is a startup running on VC. Therefore, the amount of money the ad generates will almost always be more than it costs. That is indisputable. Ergo, making products is a better way to capture more money.