The economics of online advertising affects online software publishers

There are many startups that hope to support themselves and their services through online advertising, through clicks and pageviews, in the same way as media companies.

About three years ago, when Jeff Nolan was working as a venture capitalist at the enterprise software giant SAP, he told me that SAP's research showed that online advertising could not support software development costs. That was an "aha" moment for me because Microsoft and others were rushing plans for online software services.

At the Office 2.0 conference last week, venture capitalist Dan Avida said something very similar, advising online software companies to push for subscriptions rather than online advertising. This is quoted from "5 themes from Office 2.0" by Mark Mader, the CEO of Smartsheet.

"Our research shows us that unless a company can achieve one billion pageviews a month, it will be a tough endeavor." To which he added, "do you know how few companies achieve one BILLION page views a month?"

Do you know how few media companies achieve one billion page views per month? And most media companies have far higher costs than online software companies.

You can't get there from here.