Max Levchin’s Slide, a San Francisco-based startup that caught the Facebook application wave early, is making a strategic shift, refocusing its revenue efforts on higher-margin premium advertising that include brand sponsorships for many of its well-known applications such as Super Poke. As part of this realignment, the company’s advertising sales force will be slashed, though some members are being reassigned to new roles, we have learned.
The news of these pending changes was shared with the company in a brief email sent out earlier today. Slide has raised over $58 million in funding from Blue Run Ventures, Founders Fund, Mayfield, Khosla Ventures, T-Rowe Price and Fidelity Investments. The company is valued at half a billion dollars. Slide is focusing its attention on building a team that will focus on higher-end campaigns, ones in the $500,000 category range. When we contacted Levchin, he said that the company has had a good track record of building relationships with big brands. While these deals take longer to close, they are more lucrative for the company.
Smaller advertising deals that range between $30,000 and $50,000 have lower margins. Slide is going to add more people focused on “business development.” “Sure this is going to drive up our cost of sales, but so are the RFPs,” said Levchin, who co-founded PayPal. He described it as a “purely analytical decision.”
I can’t blame Levchin for making this decision. As we wrote earlier:
Advertisers are pushing more ad dollars online, but the number of sites to house them are growing even faster. And so there is more and more discussion this month that CPM rates are falling. (There remain optimistic exceptions, however.) The relatively balmy climate of Web 2.0 means more sites are looking for ad revenue just as mainstream advertisers are contemplating cuts in their ad budgets.
Of the folks I have talked to, most agree that there is a major advertising glut in the market. The increased usage of Facebook and Facebook applications is only helping to create advertising inventory out of thin air. This is putting downward pressure on the amount of money publishers can charge for their inventory. This problem is especially rampant in social networks, which are growing at a relentless pace. In this highly commoditized market, publishers including app developers such as Slide have to stand out and deliver larger brand experiences. It wouldn’t surprise me if more follow suit.