Advertising’s ramifications for the internet industry are not academic. We routinely extol the virtues of VCs for bravely funding the creation of the internet, when, in fact, ad dollars have done most of it. Venture capital outspent ad dollars in funding internet startups for the last time in 2001. Since then, ad revenue has funded the development of the internet at a rate of about three to one compared to VC. Ad spending has shaped the very form of the internet, and yet we barely discuss it. The vast majority of people I talk to in the ad industry have no idea about this.
For each example, I’ll make assumptions about the various components of the LTV/CAC ratio (see below); some assumptions are based on publicly available data and others are just gut feels. If it’s the latter, I’ve generally erred on being generous to the startups.