Comment by socialist_coder | Hacker News Reader

Comment by socialist_coder | Hacker News Reader

socialist_coder

I think one reason why there is so much negativity towards advertising in these comments is because user acquisition via buying online ads is fairly expensive, and unless you have very good conversion/monetization, these purchased users will come at a loss.

So, this makes it pretty tough for small startups or 1 person projects to acquire users via ads, since they need to do it on the cheap, which isn't really possible. It's one of the few startup related expenses that has gotten more expensive over time, rather than less.

And why has it gotten more expensive? I believe it is because there is a bubble in this space, but not what the original article is claiming. The bubble is from the boat loads of investment capital in online startups. They take their 100m round and have no issue paying $5 per user, losing money with every one.

Companies that need to be revenue positive (or just don't want to waste money) can't compete with the high ad prices that this creates, which I think leads to a lot of hostility towards the whole space.

I believe another reason for the negativity is all the fraud related to online ads. It's hard to not be negative when there are so many accounts coming out about just how much of the paid advertising traffic isn't even real.

I think a distinction on revenue-positive in a given period vs. ROI-positive on LTV is an important one.

Many SaaS products cannot hope to be ROI-positive off of initial revenue when their plans start at $10/mo, CPC's are $1+ (and that's being generous), and conversion rates are <1%. But if a customer sticks around long enough or generates enough LTV to be worth substantially more, and you have smart data on that, suddently your ROI calculation changes dramatically, and you can be more aggressive where less-savvy/more conservative competitors cannot.

Now, startups who spend all of this with high CAC and no business model other than "we'll monetize someday" are a different story, and inherently more risky. But that is certainly not everyone.

It has nothing to do with how much ads cost. Modern ads are not helpful to society. They exploit human psychology for profit. They slow down the web. They collect vast amounts of personal information. They divert resources which could be used to actually improve the world.

I understand that ads are a necessary evil for some businesses, but scroll to the bottom of a news article sometime. Is this really what we want our world to look like?

I came from a B2B agency background before my consumer startup gained a little bit of traction. I was, philosophically, anti-ads / push marketing for the most part. Then the curtain was pulled back for me on how startup acquisition machines really work. Two points here: 1) the flooding of VC money and subsequent aggressive push for "high growth" essentially funnel cash into online ads. 2) A bit more to your point of ads not being helpful to society, what about the many thousands of users I've acquired through ads who have stayed with my subscription service and have reaped the benefits of what my startup does (not gonna use this space to self promote the actual company)? These are not high-churn users, they are not bots (well, most anyway), and I've personally spoken to many of them who have expressed the happiness we bring them each week.

There's a lot of cool shit out there I may not find out about directly from friends or organically through social media (which is a horrible discovery engine anyway). This begs the question: If the ad is relevant to me, why is it "bad"? Now, I can absolutely get on board with an argument against poorly targeted ads or bulky designs that clog up space/speed or simply an overall surplus of them everywhere you go online. But that doesn't mean ads cannot be useful to society.

That's just market forces at work. If what you say is true, you can just as well say it's a startup bubble where they are willing to lose money on customer acquisiton. Inflated costs to advertise is a normal effect of increased demands. That's not an advertising bubble.

We're mostly saying the same thing. There is too much money flowing into startups, causing them to spend it less efficiently than they should. Part of that spend is in buying ads (increasing demand), and being willing to pay higher prices than they would if they had to be a little tighter with their capital.

But anyways, all I was trying to explain was why I think there is a lot of negativity towards ads here- because HN'ers are sick of being outspent on ads, and they're being outspent in a (perceived) unfair way.

You make some valid points but... Complaining about a $5 user acquisition cost?

If you think that's expensive, try a field sales team.

Well, the context here is user acquisition via advertising. You are talking about user acquisition via field sales teams. So, apples to oranges when compared directly.

But anyways, in both cases what matters is the LTV of the customer vs the acquisition cost. The scale of the number doesn't matter.

I doubt this same scenario is happening with field sales teams anyways. It's much harder to scale up your field sales team than it is to just raise your online ad spend.

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