Start-Up Dilemma: Ads vs. User Experience
November 30th, 2006 | Categories: marketing, strategyFrom a recent debate came the following question: should an advertising-dependent start-up incorporate ads into the initial product or wait until the site has reached a critical mass before introducing this model, thereby creating a more enjoyable, initial user experience? Phew. That was a mouthful.
In simpler terms, here’s the dilemma:
- ads + medicore experience; or
- no ads + more enjoyable user experience
Both strategies have their positives and negatives. The former helps prove out your business model, especially for potential investors. This process may help VCs and angels visualize an ad model, especially with ads already in place. The downside is that the user experience may not be optimal. In addition, with such low levels of initial traffic, minimal revenues will be generated from the get-go.
The latter stratgy may help in developing a more solid, loyal userbase in the early days. Because no ads are lingering and distracting the user, a more enjoyable visit is experienced. And as mentioned above, with low traffic levels, revenues are negligible - thereby making the opportunity cost low. The downside of this strategy is the inability to initially produce a revenue model.
Now, I am extremely biased here as I come from a marketing background. I definitely think that the latter solution is by far the best. Build up a solid, loyal group. Then eventually, when traffic levels hit a critical mass, slowly integrate ads into the appropriate areas without disrupting product use and taking away from the experience. Furthermore, if direct ad sales can be accomplished, this is optimal as well. Direct ad sales not only drive much higher CPMs, but usually provide targeted, relevant ads that the user may want to click on and explore further.
For these very reasons, I would choose to sidestep ads initially, provide a quality user experience, and build a strong following… then crank out an ad model later on. If investors or VCs don’t agree with this model or see value, then I would move on to someone who does.
November 30th, 2006 at 8:24 pm
Interesting question. One factor you might be underestimating though is the ill-will your loyal users might have when you switch from no-ads to ads. They got used to the no-ad experience, and might not adjust well to the change.
November 30th, 2006 at 8:38 pm
Hey Anderson,
Very good point. I tried to address this problem in my post by noting that a company should “slowly integrate ads into the appropriate areas without disrupting product use and taking away from the experience”.
I know this is a difficult task. There is a very fine line to be drawn. But if it can be done carefully and in a skillful manner, I think that both the company and user can be satisfied with the final product.
In addition, most users understand that a company needs to generate revenue somehow, in order to survive. For this very reason, I think that the creative placement of ads is a strategic move and will not produce an overly disgruntled group. We’re not talking about plastering five flashing banner ads per page here.
Cheers,
Aidan