This post is part of a 5 day series where we lay the groundwork for a startup to generate advertising dollars from agencies or brands. Note: while this is focused on startups, it could apply to any company of any size. The first post that sets up the series is located here and it’s based on this presentation. Day 1 post is here.
Today’s topic: Where do I start?
As a startup looking to generate advertising revenue, you have a few options on how to ramp up your initial revenue. Keeping it simple, you can hire your own internal sales staff, outsource to a rep firm, or integrate with ad networks and exchanges. Depending on which you choose, you will end up keeping a larger percentage of the dollars (your own sales team being the ultimate).
Based on slide 5 of the presentation, hiring your own sales staff generally proves to allow the start-up to keep the highest amount of gross revenue but isn’t the simplest to setup. Hiring your initial sales person is one of the most important jobs you can fill at your organization. All too often, I see startups using their first “sales” hire as a Chief Revenue Officer or SVP, Sales. I generally am against those initial hires and would rather put someone inside of the startup who isn’t afraid to roll up their sleeves and has 3-5 years of experience within a competitive or tangentially related organization. This way, you leave open a very senior role to fill after you’ve gotten your feet wet with your initial sales… which should impact what your senior sales job descriptions are.
Outsourcing your sales to a rep firm is an interesting option as well. I’m generally not for this as no one knows your product better than you do, but this has worked for certain companies. I’ve heard that Living Social is working with AppSavvy in this type of setup. As agency person, I’m not a big fan of this because an outsourced sales rep or firm is generally working with a few different companies and when they come in and meet us, they are basically trying to sell us on everything and not everything is relevant. It can work however. Depending on how you structure your deal, you might pay an outsourced representative a monthly fee + commission or straight commission only. What’s worked well for me in the past is to hire an outsourced rep in an area of the country that I didn’t have a direct sales force in. There are quite a few reps in Detroit – as much of the automotive budgets are siloed up there because of the auto industry and these reps have great relationships.
Lastly, you can work with ad networks and ad exchanges if you have standardized units. This is probably the easiest way to turn on the revenue spigot since it’s passive selling and there are other companies out there purchasing your inventory without any work on your part. You can get fancy with how you optimize your networks and exchanges with SSP’s (or supply side platforms such as Rubicon, Admeld, Pubmatic, and PubGears, amongst others). Sometimes, ad networks will guarantee you a floor in which they will sell against and potentially provide you a guarantee payment depending on how popular your startup is. As a startup, you can use this to your benefit by shopping around to multiple ad networks or SSP’s and seeing which want your business the most by the amount of guarantee they give. Overall, I’m not bullish on ad networks, but as a startup, they can generate some dollars for publishers generally off of the bat.
Note: the easiest ad units to sell that have scale behind them are IAB standardized units. While not the most unique or custom, billions of dollars are transacted in them each year and their performance is going up based on all the targeting data. More on the data side later in the week.
Anytime there is a middleman in the middle of the advertising dollar and ultimate publisher, there is friction in the ecosystem. The friction represents a rep, network, exchange, or some other intermediary. To most, friction is bad, but to startups, I think most can put up with some in the short to medium term. The rationale for this is because friction allows startups to focus… having someone else handle non-core work allows the core team to focus on what they do best: build a product, vision, etc. When the revenue becomes significant or it’s time in the startups life to build a larger team (Series A funding, etc), then one can remove friction.
To recap, friction is a tradeoff to focus.
To recap, we covered slides 5-8 of the presentation.
I hope you found this insightful. We’ll focus on on “size” tomorrow.