Who Needs Google? Ning, ShopWiki, Wetpaint
In the “Pmarca Guide to Startups,” Marc Andreessen shares at his new blog his “accumulated knowledge and experience in building start-ups,” citing his recent venure Ning, a ”private consumer Internet company.”
What is great about “doing a startup,” for Andreessen?
Most fundamentally, the opportunity to be in control of your own destiny — you get to succeed or fail on your own, and you don’t have some bozo telling you what to do. For a certain kind of personality, this alone is reason enough to do a startup.
What about a startup being in control of its own destiny, then?
Ning, as a case in point. What is Ning’s business model? Ning asks, and answers:
When you create your free social network on Ning, we run ads on the right hand side of every page to support the service. That’s our main souce of income.
What ads does Ning run “on the right hand side of every page”? Google AdSense.
Ning dependency upon a third-party for its revenues is not an entrepreneurial model worthy of emulation.
The downside risks of a third-party, such as Google AdSense, monetization of a startup include:
No proprietary monetization model competive advantage,
At the whim of the performance (or not) of the third party,
Startup driven revenues are shared with a third party,
Limited, or no, direct paying client relationships,
Non-innovator, “me too” image before users and tech community,
Difficult to iterate revenue stream…
Andreessen’s Ning is not the only Web 1.0 veteran’s try at Web 2.0 entrepreneurship. Kevin Ryan, formerly of DoubleClick fame and Ben Elowitz, an alum of both Blue Nile and Fatbrain, have also joined the social startup fray: Ryan is ShopWiki CEO & Co-Founder and Elowitz is Wetpaint CEO.
Ning, ShopWiki and Wetpaint are all the Web 2.0 brainchilds of entrepreneurs who made their mark in the first commercial wave of the Internet.
What else do the three Web 2.0 startups have in common? All are highly Google dependent for their livelihoods.
Ryan and Elowitz are in the Google AdSense revenue model camp, same as Andreessen.
When I interviewed Elowitz and Ryan about their startups last year, I asked about the long term viability of a Google AdSense dependent business model.
Ryan stressed a technology differentiation strategy, citing ”advanced Web crawling technology,” not surprising given the founding team’s DoubleClick background. No perceived need to differentiate on the ShopWiki revenue model front, though, given the turnkey, easy money AdSense spigot.
While Elowitz comes from a sales driven ecommerce world, he also believes in the beauty of contextual advertising, of the AdSense variety.
It is not just “lone” entrepreneurs, however, that are outsourcing their economic future to Google: Barry Diller’s IAC is, so far, content to wage Ask.com search engine war against arch “rival” Google, while at the same time rendering Ask.com dependent upon key “partner” Google for its search advertising livelihood.
SEE: IAC’s Ask.com: Beware Google, Ask Yahoo!
ALSO: Cisco to Google: Get Real! and Facebook Generation: Entrepreneurs or Hackers?
I have to disagree a bit here - when starting up, you have a limited amount of resources, and have to choose where best to focus. In our own case, we started off with Google initially (and still have). They provided stable revenue - not the highest CPM, but a decent/stable enough that we could focus on the core technology/promotion of our product.
Now that we have matured, we are starting on working on ad relationships. I am sure Ning and so forth have the same idea - focus on attaining a stable useful product, and then focus on ad sales.
Is it the best strategy? Maybe, maybe not. We do have the advantage of being very focused on one niche, but it has worked out tremendously for us.
Comment by AhmedF — June 19, 2007 @ 11:24 am
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Pingback by Insider Chatter by Donna Bogatin » The Google - Yahoo - Overture Story — June 19, 2007 @ 12:46 pm
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Pingback by Insider Chatter by Donna Bogatin » Wesabe: MySpace For Your Checkbook — June 20, 2007 @ 9:29 pm
Hi Donna, I would disagree that Ning’s ad-supported business model means that “Ning dependency upon a third-party for its revenues is not an entrepreneurial model worthy of emulation.”
Ning’s decision to serve its default ad inventory with highly targeted Adsense contextual ad units hardly means that it cannot swap in higher CPM inventory that it sells through an exchange like Yahoo/Right Media. This is an ad-serving question, not one of business strategy. In fact, effectively targeted Adsense placements can generate significantly higher eCPM’s than comparably placed banner units — especially with user-generated content. This is more about sales performance of different ad units than about entrepreneurial models.
Publishers with targeted inventory are becoming increasingly empowered via new ad servers, ad networks, and exchanges to sell their own inventory and automatically deliver the highest paying ads. Ning is in the business of creating ad inventory, which means offering its customers the tools to generate page views. MySpace and other user-gen sites deliver such huge volumes of untargeted page impressions that they struggle to command the same CPM rates of more targeted media and entertainment properties. Thus a contextual ad program should definitely be part of the mix for a user-gen service like Ning. And at the moment Adsense is one of the best.
Comment by James — June 21, 2007 @ 3:37 am
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Pingback by Insider Chatter by Donna Bogatin » Benchmark Capital Snags Google Engineers — June 21, 2007 @ 2:27 pm
I like ShopWiki…
Comment by webmaster — July 5, 2007 @ 9:23 pm