Startup Flight Checklist Item #4: Generating Revenue Through Advertising

As you set up your new company, you may or may not run across what sounds like a technical question:  “What’s your business model?”  Your “business model” is simply your answer to the question, “How is your business going to make money?”

Now, it’s OK to have multiple answers to this question – that is, to have two, three or more complementary ways of making money.  And they don’t all have to start at once in a “big bang,” either.  Let’s look again at our GemGuitars.com example:  Here, it’s obvious that, as Adam and I launch our company that our primary business model is buying and selling high-end, used guitars on the Internet, and presumably making a nice profit by marking them up those instruments.  However, just because that’s our primary business model doesn’t mean that has to be the only thing we do, or the only way that we make money.  We can have complementary business models.  (Indeed, having complementary lines of business and business models can often result in the whole being greater than the sum of the parts.)

Google AdSense

AdSense (www.google.com/adsense/) is Google’s ad serving program.  It provides website owners with an easy-to-sign-up and simple-to-administer way to generate revenue that is complementary to their other businesses or business models.  A given website’s primary focus might be anything from musical instruments to herbal cures to poetry to hotel reservations, but they can still generate complementary revenue through Google AdSense.  Once you sign up in the program, you can:

a) easily add a custom search engine to your site, and earn on a pay-per-click (PPC) basis from ads on the search results pages;

and/or,

b) display ads – text ads, graphical ads and/or video ads – on your site that Google automatically selects as being suited to your audience’s interests (and again, earn on valid clicks or impressions).

AdSense can also serve mobile ads as well as ads to your RSS feeds.  The nice thing is that once you register with the program and do a bit of initial set-up and website tinkering, it’s pretty much an autopilot kind of thing:  It’s an intelligent program that runs itself as far as you’re concerned.  You can go in and adjust the parameters to your heart’s delight, or just sit back, monitor
your dashboard, and collect your advertising earnings.

From my point of view as a veteran business-builder, one of the really cool things about AdSense is that it gives very-early-stage businesses a way of earning some revenue when they’re barely off the ground.  Additionally, it tends to provide a baseline of ad revenue as a buffer to a company’s other lines of business.

Ad Networks

As your business matures and your website traffic grows, you may choose to sell ad space on your site directly through an advertising network.  AdBrite (www.adbrite.com) runs the largest independent ad network, and it’s essentially a real-time auction that tries to optimally match advertisers – video, banners, rich media, and other formats – with publishers (that’s you if you’re a website owner).  If you’re thinking of going this route, other ad networks to consider are 24/7 RealMedia (www.247realmedia.com), Advertising.com (www.247realmedia.com), Chitika (www.chitika.com). ), and Burst Media (www.burstmedia.com).

Many publishers/site owners choose to hold off on approaching ad networks until their website has achieved fairly significant, reliably-documented traffic levels, since otherwise the CPM rates you can command (CPM = cost per mille, or cost-per-thousand-impressions ad rates paid by the network for your ad space) tends to be extremely low.

Site Sponsorship

Finally, we should mention getting companies to sponsor your website or certain key pages.  Just starting out, it’s probably not worth approaching companies about potential sponsorship.  Get your site up and running and let them come to you.  Extend the welcome mat to potential sponsors by placing an “Advertising” link at the bottom of the home page that takes them to a page providing contact information and the types of sponsorships and ads available.  Typically, sponsors pay a flat annual fee for their sponsorship.