This story was written by David Kaplan.
As start-ups come to grips with the reality that the usual online advertising tools of banner ads and widgets won’t keep the lights on even if the economy gets better, a few companies are significantly altering their business models. The WSJ profiles a few, like Slide, RockYou and Meez, which don’t want to be identified as widget companies anymore and are trying to reposition themselves as e-commerce plays.
Although eMarketer has said that spending on widgets and apps is expected to grow 75 percent this year over last, a projected ad market of $70 million is a pretty flimsy foundation on which to build a business. evidenced Veronis Suhler Stevenson, meanwhile, in its latest media report found that last year for the first time, consumers spent more time with paid media, like books or cable TV, than with ad-supported media, like newspapers and magazines.
The changing revenue landscape is pushing Slide from a widget and app marketing purveyor to a “branded entertainment” firm, while RockYou is moving into virtual goods, away from primarily being ad-supported. Some other media companies have ridden out the recession nicely thanks to e-commerce. Linden Lab, the maker of Second Life, has forecast that users will complete roughly $450 million dollars of virtual transactions in Second Life this year, up 28 percent from last year. Now, companies like Slide and RockYou are looking to e-commerce to help them as well. If they can pull off the transition, they have a much better chance of a creating stable companies than if they try to hang on to ad-support as their primary means of income.
By David Kaplan