So You Want to Build a Big Ad-Supported Web Site? Think Again

Today the New York Times points to an excellent blog post by Jeremy Liew of Lightspeed Venture Partners who details 3 ways to get to $50M in annual revenue with an ad-supported web site.  The bottom line is that it takes a lot to achieve it.  He thinks it is hard, but doable.  Jeremy says in the comments he thinks that a niche site is most feasible, but would still need to achieve 200 million or more page views every month in order to hit the goal.  If you’re building a site with more general appeal, you’d need to have in excess of 4 BILLION page views per month to hit those kind of revenue numbers, according to Jeremy’s calculations.

Unless you really think you’ll be one of the handful of players to achieve these numbers — and you may well be — then you need to either set your revenue sights lower or you need to come up with a different model.  Just about a year ago, Fred Wilson raved about his favorite business model, which includes a mix of revenue streams sitting on top of a free service. 

To me, though, it also points to the need to think through revenue models before you start your business.  I know that it is fashionable to argue that with low startup costs today, you can just start your web site up and figure out how to make money after you get traffic.  Baloney.  You should have an idea as to how you plan to make money because how you structure the site may change based on your plans.  Now, you need not stick with that model as time passes if you have a better idea — and in fact in most cases how you make money 12 months into the adventure will not be the same as what you predicted.  That’s fine and expected.  But don’t subscribe to the “build it and revenue will come” school of thought.