Let’s say you’ve started a company and your product is one customers do not need to pay for but the gears of the business must be oiled and so you think of a way to generate revenue. Ads.
Here’s the thing, choosing Ads as a primary source of revenue in this part of the globe is a dicey model for a couple reasons: the stage of the market — businesses are still struggling to survive. There’s also the long road to building a sticky product before you become attractive to advertisers (which entrepreneurs forget when they cite Facebook as an example).
For Google and Facebook the chief revenue source is from ads but then in 2015, Apple added a feature to their phones and tablets that allowed users to block ads. Devices running on iOS were responsible for an estimated 75% of Google’s revenue from mobile search ads dealing a blow to online advertising. In 2016, the number of people blocking ads on a mobile device grew 102% from 2015. For ads to work, you need to get a good audience, high quality with high intent but whilst you grapple with that media consumption is moving from advertising to subscription-based models and it seems to be working. Netflix and Amazon continue to experience growth with their ad-free experience.
“advertising is a tax on the poor” — Scott Galloway
The leading reason for the embrace of subscriptions is the “tax” on our attention that we pay through advertising. Pausing to watch an ad is a speed bump and frankly, once you’ve tasted the smooth ad-free ride on Netflix or Spotify the ads on YouTube become even more irritating.
Also, consumer habits are slow to change but after they do it cuts across categories. For instance, people who subscribe to one media channel often start a subscription habit in others. As time goes on we choose to get our video on Netflix and music with Spotify. This ad-free shift is not just happening with content. The mobile games industry are with the movement as well. For instance, candy crush grew revenue by 35% by deleting ads.
All of the above is not to say that an ad-based revenue model is entirely useless and subscription is the way but to show that companies are moving on from this model and that before you decide to make it your first and/or primary source of revenue ask how you can make user experience and advertising compatible. Get context from the experience of ad-based startups especially those that have pivoted (like Iroko TV).
For the more people get used to an ad-free experience, the more painful those interruptions feel.
Gerocare and Mobile Forms were selected as a part of the Top 50 Africa Innovation Summit innovations to be showcased at the AIS Innovation Exhibition in Kigali, Rwanda. They’ll be at the Summit from the 6th — 8th of June.
Links from the Internets
- Know your enemies and know thyself. Eugene Wei on forecasting the bump in your growth curve and addressing it. [Link]
- It’s more likely that what you think will happen in the next five years will actually happen in the next three. [Link]
- If you want to understand the future of Tesla, and Elon Musk’s role in it, start here. [Link]
- Internet trends report 2018 [Link]
- Great startups come from everywhere and Founders embassy wants to give them their best shot at making an impact. [Link]
- Recommended: 15+ years learnings for businessing. [Link]