Building an Ad Network

Brent Simmons and Lex Friedman threw out an idea for someone to make a new Podcast ad network:

My advice is that someone should do The Syndicate for podcasts. Roll up small shows, and charge on a CPM model. (Small-reach tech shows should think $20 for pre-rolls that are shorter, and $30 for mid-rolls that are longer.) Insist that all shows measure downloads in the same way (SoundCloud?), roll-up the rates accordingly, and take a 20% cut. Pay shows on a percentage basis according to their downloads.

Marco also shared why direct ad sales rarely work. Namely, it’s a lot of work:

I tried selling the sponsorships myself in the early days of ATP, but was quickly demoralized and jaded by the reality of that job. It takes a lot of email, some long phone calls, a lot of paperwork, and a lot of nagging to get past-due invoices paid. It’s common for sponsors to ignore your payment-due dates and pay months after you actually do the sponsorships. Most big sponsors have their own way they “need” to work, blaming “the accounting department” or “policy”, and these arbitrary accounting rules and policies often mean that your ad salesperson has a lot of work to do and you’re not getting paid for a long time.

Running an ad network is something I know a thing or two about, and Marco is right: selling ads is no small job. I started The Syndicate expecting it to be some passive income I could run on the side: a sort of “build it and they shall come”. I mean, Jim Coudal has shared that The Deck has an 80%+ renewal rate for advertisers.

But that’s not sales, especially online ad sales when you have no existing relationships. I found myself having to schedule calls at the strangest hours, and I was hustling 20-30 hours per week outside my 40+ hour per week job. Sales also came in waves. One day I’d be scraping to get the next week’s sponsor booked, and the next I’d be booked out two months unable to serve everyone emailing me. There was even a day that I was away from my computer for my day job and my entire URL redirection platform went down for over 6 hours, meaning no sponsor links worked.

Advertising is a hard business.

So to the aspiring entrepreneur who wants to get into this business: there’s probably nothing more ripe for the picking right now than a mid-sized Podcast ad network. But know that the income is very far from passive. Don’t get into this if you have a 9-5 job to pay the bills. Advertising is about scale, and the big names in advertising won’t be interested in your $200/week network. It’s not even a blip on their ad budget. You need to be able to grow it to something sizable that delivers a lot of traffic, and then get them renewing on a regular basis. There’s a reason why you always hear Squarespace or Igloo sponsoring every podcast.

I personally decided to move on from The Syndicate when my wife got pregnant with our first child at the end of 2012. My family was too important. BuySellAds has done a fantastic job of running the network and have some big plans for this year. But most of all, they have the experience, the scale, and the advertising relationships to grow the business in a way I would have never been able to as a side project.

January 22, 2014