Whilst some software will be paid for by ad revenues I don’t believe that all software will go this way, in fact I doubt that anything other than a small percentage will be purely ad funded. Putting aside privacy, security and other issues there is a huge economic barrier.

Online advertising is pretty simple - is sold on a pay per click basis or per impression basis. In both cases the price paid by the advertising to the publisher is determined for the most part by yield (the % click through) and the market segment (some customers are worth more than others). If very few people click on an ad then the price drops accordingly, and if you’re outside of key verticals like financial products then the prices paid are very low. Consider the scenario – you’re working on client proposal due later that day - your propensity to click on the ad within the software is going to be very low, and even if this is the highly priced financial services or automotive sector if no one clicks one the ad the price will drop, actually if no one clicks on it then you’ll also see the percentage of available ad slots unsold rise as well. It a vicious circle.

If you’re not familiar with the types of rates received for online advertising then they are low. Most display ads are sold on a per impression basis and a lot of the internet inventory is sold for $1-$2 per thousand impressions, less if your small and sell through an ad network. This is a volume game. Compare this with the $50 per license you’d perhaps expect to earn for a useful piece of desktop software then you can see the economic gap if you’re looking to pay the mortgage as a software developer.

Of course here I’m looked at software through a traditional lens – personal & enterprise productivity / automation. Where software is a means to an end – say the the engine powering a media site then things shift, but it is still a volume game, it takes millions of ad impressions to generate a reasonable income.

regards
Al

Al- 1. i think you’re wrong
2. what if the ad is the solution

the model is working. requires lower margins but workable for volume.

1) I don’t see how enterprise software can be funded by ad-based models, ads are about diverting attention to something else..

2) Good software/services monopolize attention, engaging the employee, not diverting it, businesses don’t want distractions surely?

How do you see the model working in this case?

regards
Al