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SpiralFrog Croaks; a Warning to Other Ad-Supported Sites?




SpiralFrog, the music download service supported by ads, has finally croaked. The service publicly launched with a bang back in 2007 but needed $9 million in funding just to keep the lights on in 2008, and now CNET is reporting the web site is no more.

In SpiralFrog’s situation, the company couldn’t overcome “a macro-economic perfect storm” says a source close to the company. The sagging global economy, combined with “the collapse of the capital markets” and rapid compression of the ad markets,” led to the company’s demise, said the source.

Part of me feels vindicated that the freemium model isn’t the holy grail that everyone predicted. After all, if a service offers free music downloads–with the user only having to endure a few ads–and still can’t survive, what comfort does that give to other ad-supported consumer sites?

The other part of me is now concerned for related services, such as YouTube. It’s a well known fact that YouTube is hardly making buckets of money from its user-created videos and the demise of SpiralFrog doesn’t offer much in the way of comfort that the Google owned site can earn its keep from displaying ads alongside videos.

Of course, YouTube has the benefit of displaying ads from the world’s most sophisticated ad network, and SpiralFrog had more issues to contend with than just ad-revenue, but it does make you think about the future of businesses that rely on ad revenue to survive. It seems that we have those that charge for their offering–Amazon downloads, iTunes, etc–and those that are still burning through VC cash because they have yet to decide on a revenue model.

There’s not much in between. It’s hard to find a company that provides music or videos and is actually raking in the cash from their ad revenue. Know of any?

  • http://www.debtfreescholar.com/ Nate @ Debt-free Scholar

    I have always wondered how sites could run entirely off ads. I rarely click them. Great post!

    Thanks,
    Nate

    Nate @ Debt-free Scholar’s last blog post..Why Take CLEP Tests?

  • http://www.brickmarketing.com Nick Stamoulis

    That is too bad! Spiral Frog was very good site…tough to seem them go!

  • http://botipton.com Bo Tipton

    I used Spiral Frog and they will be missed. For the consumer show me some ads and get something for free is not a bad deal.

    If a business like this cannot make it by showing ads on their site. What does ti say for the much publicized and advertised business model in Internet Marketing to build a mini-site and fill it with Adsense ads and become wealthy.

    There are a ton of information and templates for those types of websites being sold everyday as the way to build a Internet Business. Will anyone notice that if Spiral Frog and other sites with millions of dollars invested cannot make it that it might mean that a website depending on ad revenue as the only source of income might not be a good idea.

    Oh no! Will people wanting to market on the Internet actually have to sell a product or service that the consumers needs. That just putting ads on a site will not work. The horror of it all!

    So long Spiral Frog you will be missed others pay attention to what this says about ad supported websites.

    Thanks
    Bo Tipton
    The Ornery Marketer

    Bo Tipton’s last blog post..Can I Make Money In The Next Thirty Days

  • http://www.sbmteam.com George Bounacos

    Yes, good site. Yes, difficult model to survive with.

    Major props to whoever created the photo. I smiled for about 5 minutes (not at the people who went under, but at the creative Photoshopper back there)

  • http://socialmediavision.com/ JustinSMV

    2 words….Net Zero

    JustinSMV’s last blog post..Twitter Spring Clean Up