Investment Thesis: Andrew Chen Nails Why We Don’t Do Ad-Supported Deals

Since we announced Founders Co-op a few weeks ago I’ve taken over a dozen meetings with prospective entrepreneurs (and declined meetings with quite a few more). A handful of these meetings were with founders who hoped to rely at least in part on ad or sponsorship dollars to make their business idea work. My glib response to these folks was, “we don’t do online media deals”, which is shorthand for a much longer conversation to about how hard it is to build audience and monetize via ad sales.

As of today, I won’t have to tell the whole long story as often because Andrew Chen put out a great post that delivers the same message, only better. The title of his post is: “Your ad-supported Web 2.0 site is really a B2B enterprise in disguise“, and his message is that serious ad sales and enterprise sales amount to the same thing, in cost, effort and culture terms. His conclusion sums it up:

Of course, one way to completely sidestep these issues is to directly monetize your users – this is pretty hard, because you have to deal with transaction processing, coming up with something so compelling people will pay for it, and a number of other problems.”

These are the kinds of “problems” we like.