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Founders are adjusting to lost advertising revenue

Things are looking bleak. We built subscriptions for ad-free episodes a while back and now we're pushing that heavily.

The person who told me this runs a popular podcast about startups. They asked to stay anonymous here so as not to undermine ongoing negotiations with advertisers.

I've interviewed more than a hundred founders for stories like the one you're reading, and only two of them ever asked me to keep their comments off the record. For this post though? Three people asked not to be named. All of them are struggling with lost ad revenue. And all of them are fearful of jeopardizing sensitive ad deals.

It's a sign of the times. Last week the advertising trade association IAB published a report on the state of advertising revenue after surveying hundreds of ad-buying respondents. Highlights:

  • About 85% of the respondents had either lowered or suspended their ad budgets.
  • Virtually all buyers who were on the fence about ads in March (~16%) decided to suspend them entirely in April.
  • Among the reasons they gave for reducing spend: fear of coming across as too promotional in a crisis. (This is a problem affecting indie hackers as well, as I discussed in late March.)

IAB report

I managed to get a few indie hackers on the record about their struggles selling ads. Most seem to be doing what indie hackers do best: cutting back on expenses.

Sacha Grief (@Sacha) runs Sidebar, a daily newsletter for designers. His business model: once a week, one of the five links in an email will be sponsored.

Sidebar.io

Unless, of course, no sponsors are willing to buy a spot on the newsletter. Which has been the case for the last couple months, Sacha told me:

Yeah, barely any advertisers since February, I think. It sucks. But I figure things will go back to normal eventually. I’m working on a new version of the site in the meantime.

Does he have a Plan B?

Not really, but I want to switch to some different service providers for the new version, which should save me money.

Sidebar's a company of one, so Sacha can afford to wait and see what happens with ad spend in the coming months.

Ditto some of the other indie hackers I spoke to, like WhatSong founder Tom Andrew (@tomandrew).

WhatSong

WhatSong is a site for finding details about the latest popular television shows and movies, and it generates revenue through Adsense.

Here's what Tom told me about his ad situation these days:

Having a movie/TV-based website has meant traffic has doubled from 800k to 1.6M unique users per month. However, ad rev has almost halved. I guess I've been sort of lucky in a way that it hasn't affected my revenue too much.

Both Tom and Sacha are keeping a close eye on news of the slowly reopening economies of America and Europe while thinking about their next moves.

Other indie hackers are going more on the offensive. Sam Parr (@samparr) is the founder of The Hustle, an ad-funded newsletter for tech and business news. In a post in early April I wrote about how well Sam's newsletter was doing. But in a conversation Sam had last week with Courtland for an upcoming IH podcast episode, Sam revealed The Hustle isn't entirely immune to the larger effects of the economy:

We were going to grow advertising a ton. Now it's just going to grow mildly.

But The Hustle's ad-supported newsletter isn't their only product. Altogether, the company makes money in three ways: advertising, events, and subscriptions for a second paid newsletter called Trends.

Trends by The Hustle

How is business looking right now for Trends, according to Sam?

Booming. … Trends is a research content project, but it also has a community with thousands and thousands of interesting people. It's going to be an eight-figure subscription business by the end of the year.

Sam believes that if media companies want to make subscriptions work, they should put all of their paid content behind a paywall and avoid freemium business models at all costs. Of course, it helps to have a separate product like The Hustle to drive traffic to that paid content. But most of the indie hackers struggling with advertising revenue have already solved the traffic puzzle. For them, figuring out subscriptions might come down to launching adjacent products that their current audiences will pay money for.

So here's hoping that advertisers come back soon, and that the companies they come back to need them less.

Enjoy the read?

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  1. 5

    Thanks for the mention Channing - sam parr

  2. 5

    Only ~10% of advertising $ is spent on direct response.

    ~90% of advertising is brand advertising, with no immediate conversion as a goal. It's about slowly nurturing the creation of a STORY inside the heads of prospective customers.

    1. 3

      this is interesting. when trying to sort sponsors this point is a nightmare to convey. The majority want “direct” results ...

      Do you mind sharing any numbers / studies / articles on this?

      1. 1

        Read Alchemy: The Dark Art and Curious Science of Creating Magic in Brands, Business, and Life

    2. 2

      I am really skeptical about this data since SEA is driving advertising revenue for advertisers like Google and SEA primarily goal isn't brand awareness.

    3. 2

      That's really interesting to hear, because I've worked on direct response stuff my whole career. I could believe these numbers might make sense simply because large brands like auto makers spend so much money at once on branding but do you have a source for those figures?

  3. 3

    Nice post. It would be great if in this period of low advertising activity more startups and sites in general rather than shutting down use it as an opportunity to figure out better business models so they rely less on advertising. There's a lot of potential in everything from doing affiliate marketing, selling premium products, subscriptions, getting crowdfunded etc.

    1. 1

      It would be great if in this period of low advertising activity more startups and sites in general rather than shutting down use it as an opportunity to figure out better business models so they rely less on advertising.

      Trust me, many are — and frantically.

  4. 2

    Yes, businesses are definitely cutting the ad budgets to keep cash on hand. But I think they are looking for more performance-based options to do ads.

    Affiliate marketing is definitely the way to go since the sales cost is paid when an order is made.

  5. 2

    Related to this, if anyone wants a dashboard as a way to compare site visitors, revenue, conversion, marketing ROI, etc pre-COVID & post-COVID I'm happy to help.

  6. 2

    Why haven't I seen this before?
    Nice stuff @channingAllen... just the kind of article I needed to "understand" my own experience.

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