In Steve Rubel’s predictions for 2006, he talks about what he calls Crash 2.0, which is basically that the 10% predicted growth rate of online advertising isn’t going to support the startups who are banking on advertising as their primary revenue source.
I think he’s partly right, but it shouldn’t be a big concern. First, if a new startup fails, it will probably be because they just didn’t get traction getting users. It’s so easy and cheap to start a good web company now that expenses should not be so high that you can’t rely on advertising for a long enough period to see if the concept flies.
In the long term, if advertising is all you’ve got for revenue ideas, you need to either have a lot of traffic, or very targeted content that attracts audiences that will get high CPMs.
And while I think predictions on growth rates are totally hit and miss, I also wouldn’t be surprised if that 10% Steve’s referring to was underestimating the money that will be spent as more brand money comes online from TV and print, and also as advertising companies and publishers get better at generating better online advertising ROI.
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