With the ad market in free fall, many young businesses are are finding subscriptions, events and commisions attractive options for funding their businesses. But it wasn’t always that way.
When online real estate brokerage Redfin received funding a few years ago, the site’s business model was a bit untraditional. Redfin uses its agents to negotiate with real estate sellers and shares the commission with buyers.
Glenn Kelman, CEO of Redfin, tells the Times that when the company
received its venture capital: “it was a little bit like being in the
twilight zone, just because everyone expected us to have a different
But as ad revenues have become increasingly unsteady, Silicon Valley is perking up about businesses that earn money from
Kelman says that the tech industry used have a “swashbuckling attitude
that we were going to change every industry and make it more efficient.
Once you become more like Madison Avenue, you become acutely sensitive
to what’s going to annoy your clients.”
That’s why Redfin doesn’t have advertising on its site — real estate ads would compete with its realtors.
From Apple’s app store to our own Econsultancy site, companies are
increasingly finding revenues derived outside of fickle trends of online advertising more appealing.
But is this working for the bottom line?
In Redfin’s case, not yet. The site only earns revenue when a property
gets sold, and only 100-200 out of every million visitors becomes a
But Redfin earns $7500 on average from each client. And Kelman thinks
that profitability is closer to their reach without ads: “The number of people
who have to visit for $1 million in revenue is less than if we were