When You Rely On A Single Source For All Your Business, You're In Trouble

By donmc, 20 March, 2008

From: http://techdirt.com/articles/20080319/020719583.shtml
from the it's-that-simple dept
TechCrunch points us to a story that I had to triple-check wasn't an early April Fool's release, concerning a Canadian internet company named GeoSign that supposedly raised $160 million a year ago to fuel its Google ad arbitrage play, only to have it all collapse in a year, in part due to Google finally hitting back against arbitragers. The story is fascinating on a number of points -- from the idea of putting $160 million into what was clearly a fluke (though, it sounds like the VC probably pulled most of that money out of the company) to the fact that the company's collapse (and massive layoffs) happened just months after the $160 million was closed. However, the key point was that all of the company's revenue came from a single arbitrage play: buying Google keywords and sending people to landing pages with Yahoo ads on them. When Google pulled the plug (as it should have), the entire revenue line disappeared. While there are plenty of firms that rely solely on Google for traffic (and even sue when that traffic goes away), this should be a clear reminder to anyone: if you are totally reliant on a single company for your business to work out, you're probably in trouble. No good business is built entirely off a single supplier or revenue source.