Yesterday I gave some excellent tips on how (not) to pitch your startup, good stuff! One of my points was it’s better to say that you haven’t quite figured out your business model instead of saying advertising is your business model. Internet addict Okto, better known as @labanux, asked me why. Why is online advertising as a sole business model so bad? Google, Facebook, Twitter, Kaskus, Detik and many many others run on online advertising so is it really that bad a business model?
Ever been to a restaurant where one waiter welcomes you and another waiter tells you the neighbors have great Japanese food? Ever been to a boutique where, before you bought anything, the sales person tells you two blocks down you can get 20% discount on an iPad? Well, chances are slim that this happened to you in a brick and mortar store but it happens online. Entrepreneurs on one hand do their utmost best to get more people to visit their site or use their app to then show them the way out with a banner or ad. Though this is a black and white interpretation of something that has more shades, it’s basically the paradox of using online advertising as your business model.
Everyday Internet entrepreneurs, bloggers and other experts discuss and write about the success stories of online companies like Facebook, Groupon, Google and others. But never someone mentions one of the best monetizing industries: online gambling. Just to give you an idea on how well these sites are monetizing, in 2009 Pokerstars made stunning $ 1.34 mln. per day resulting in a yearly profit of $ 1.4 bln. Even though Pokerstars is the biggest it’s one of many so the total yearly earnings of the online poker industry are close to $ 10 bln.
Because these companies are mostly off-shore companies operating from places like Isle of Man, Malta or other places where the law and tax regulations are in their favor regulations are somewhat shady. Some of the bigger sites are regulated by the Kahnawake Gaming Commission, though it is not clear what level of scrutiny the commission applies to its licensees. By now Pokerstars is listed on the London stock exchange even though the absence of clear regulations and monitoring.
Weird, wednesday checking our traffic and I found a new traffic source giving us 14.000 visits that day, mind you, with an average of 1.4 pv/visits. Seems that this traffic comes from adf.ly, a url shortening service owned by X19, a UK company residing in London. So why is this interesting? Well, besides the traffic they bring us Adf.ly seems to be the first URL shortener that actually pays people to use their service, and that made them grow fast, really fast up to the point where they’re bigger than for instance ow.ly. So, did adf.ly crack the code on big time monetization of URL shorteners or will they be nothing more than a one day f.ly?
One of my favorite business quotes is one from Donald Trump “As long as your going to be thinking anyway, think BIG!” Evidently the guys of a bold and brave Indonesian startup going by the name of “Sitti” agree. With their localized contextual advertising system they’re aiming to throw Google Adwords of its thrown, at least in Indonesia.
A (translated) quote from their blog:
We challenge Google inc to compete. We are sorry. Again, really sorry. I am afraid of Google. Google has 1 million servers. Sitti has got 6. Google has 20,621 employees.Sitti has got 20. Google has 1000 PhD’swho work for them. Sitti has got 1, and even then not really after 6 years of trying. Google brings Rp 230 trillion in one year.Sitti bring Rp 630.000 from sales of bottled tea in the cooperative Udin, the OB in the office Sitti. Google has the world.Sitti has Indonesia.And just Indonesia.
Don’t apologize and don’t be afraid guys, you’re heroes in my book. All the great companies started small once facing seemingly undefeatable competition but at least tried and made it. No guts no glory!
Whatever anyone might say, despite having all odds against you we give you guys the big thumbs up! It’s challengers like you guys that make the Internet better. Word! Semangat!