I believe that start-ups that are working on ad-based revenue models are in for a rude shock.
In my opinion, this model has lead to the demise of one too many interesting start-ups.
Some reasons for me to having arrived at this decision are as below:
- Advertising industry itself is going through a major tectonic shift and will need to re-discover itself in a new avatar before it can support any new business model.
- Having an ad-based revenue model is worse than having no revenue model at all as it provides start-ups with an illusion of revenue sooner than it will ever come.
- Not betting on ad-based revenue model, will force a start-up to think about other revenue models and if thought well, there are always other models that can enable them to survive. Also, this puts a serious cap on the burn rate as they will spend much more carefully and give more time for their products/services to gain traction in the market.
- There are very few start-ups which are able to consistently get funded so that they can keep working on product that will need some serious traction before they can expect to generate any revenue at all, which in turn means, that a bulk of new start-ups will need to think of revenue models other than advertisements.
The advertisements, if and when they come, can be the icing on the top.
These are some of my thoughts. What do you think? Do you agree or disagree? Please share your thoughts by commenting on this post or by tweeting to me at @rmukeshgupta.