The End is Neigh

The long stretch of ZIRP distorted the business world, and altered many people's views. Perhaps the pendulum swinging back will lead to more rational business models that don't rely on virality

The End is Neigh
Photo by Marek Piwnicki / Unsplash

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The 2010s were a heady time in tech. We saw the rise of the app economy, fueled by the dueling platforms of smart phones/tablets. Combined with that innovation curve is the rise of the mega social media platforms (Facebook, Youtube, Twitter, and many smaller niche players that come and go). Even the Crypto mania is tied to this.

All of this was accelerated by the lengthy stretch of ZIRP (Zero Interest Rate Policies). This made money essentially free, cut savings rates, and drove tons of investments to a wide range of startups. The only conditions that seemed to matter was growth. Grow the audience, grow the reach, grow engagement.

How to extract a profit was secondary. Looking at one sector, the Transportation Network companies (Uber, Lyft, Lime, among others) was particularly insightful. The metric tons of dollars that were showered on Uber in particular allowed them to subsidize the cost of each ride, ensuring that drivers were paid out enough to keep them driving, and the cost per mile/trip kept low for the riders that it was a no brainer to stop using the local cabs, or services like Super Shuttle. Finally, they needed to tweak the model to achieve positive cash flow, and their knobs are somewhat limited to raising the price per ride, lowering the payout to drivers, and further wringing out costs in their back end. Now, it is common to hear people grumbling about how it costs MORE to take an Uber than to hail a yellow cab.

But nothing is on as risky footing as ad-supported business models.

The way back machine

Google is a classic example. They began with a simple mission. To make the internet discoverable, and to do no evil. And for much of their early years that was sacrosanct. That said, their search engine and historical queries was (and still is) a gold mine. It allows easy sentiment analysis, deep connections to be unearthed, and thus being the high value nuggets that allow advertising to be hyper targeted.

And Google built a juggernaut of advertising technology, both organically, and by acquiring others in the then nascent ad-tech space. Today they are the 800# gorilla (Facebook/Meta is the 750# gorilla) in the market, and in truth they both hoover up ginormous amounts of data that they use to juice the value of the advertising that they sell.

And they sell a LOT of advertisements.

The tie in to the Tech boom in the 2010’s

The growth of Facebook, and how much it was able to make off of selling advertising was not something that others failed to notice. Countless startups that coveted that growth were started with the intent to get large enough that network effects would allow them to monetize via placement of ads in the service.

Users were OK with this because they got to select their favorite “app” and the ads, while annoying, weren’t too obtrusive. A tenuous truce was maintained, with value going both directions.

The unspoken reality is that there was a relationship between the VCs who fund start ups and these business models that really shouldn’t work. Yet a lot of sketchy businesses got huge amounts of seed and fund raising rounds as long as they showed growth.

Why was there so much money sloshing around in this space?

From our perch in 2024, looking back we can identify a few proximate causes, but one stands head and shoulders above the rest. The Zero Interest Rate Policies.

If you remember back to the Global Financial Crisis that took hold starting with the failure of Bear Stearns in fall of 2008, and then rushing through the economy like a California wildfire. The financial regulators (really, the FED) had limited tools to address the stresses on the system. One of them was to buy distressed assets (the bad loan books of banks) and the other was to cut the overnight funding rate to 0%.

It is the latter that really altered the investment structure of the VC world. Looking at Startups that have exited going back in time, the older generations had a lot of pressure from their funders (VC largely) to have solid business plans, with adequate potential to generate profitable growth, and to become solid businesses.

All that seemed to go out the window in the 2010’s. Everyone felt that they would be the next Facebook, and that after a certain amount of free growth, they would “turn on” an ad based business to provide the profits that a) make the VC’s happy, and b) allow a liquidity event (aka an IPO or an acquisition) letting their founders and early staff make bank and retire to being a boutique VC themselves.

So many pitch decks were virtual clones of either a Facebook, or Uber, and that once they achieved scale, somehow they would be able to turn some knobs and start extracting their rents (aka Profits) from their user base. And very often that first knob was to inject advertising into their product to turn eyeballs into cash.

This led to the rise of the “Creator” economy, essentially a revenue split to reward popular creators who get more people to interact with each item and to drive more subscribers and ever more eyeballs.

sidebar: If you are on Youtube now, you are no doubt seeing a growing chorus of creators who are quitting Youtube, because it turns out that cranking out enough quality content that a large cohort of people want to watch is a grueling grind, and now that Youtube is beginning to feel the pinch of interest rates, the revenue splits are less profitable for the creator (to be fair, there is a HUGE amount of spend for storage and infrastructure to operate YT at scale worldwide, and now there are interest payments on the CapEx investments that need to be paid) and that is increasing the burnout.

The Reckoning

As you may be aware, I have recently moved this site from Substack, where it was a Free offering. Free to you, just the cost of your email to add to my subscriber list, but also free to me. To get my content, and the network effect of my small-ish audience, they traded free infrastructure, the “platform” of the newsletter, and the back end goodies. Email services, analytics, and as time went on, they layered on recommendations, a smartphone app, and algorithmic flourishes that help your audience grow (and they worked, I will write about how my two Substack audiences fared in the year I was there).

But they also are incentivized to extract money from my efforts. Since I didn’t pay them directly for the service, they kept “nudging” me to turn on paid subscriptions. To sign up for a Stripe account. They added buttons to my emails to prod my readers to “pledge” to pay for my writing if I turned that on.

There are more that they do, but let me tell you, they are getting to the hard sale mode, and I expect that they will continue to try to extract revenue from the writers’ audiences.

I was happy with that arrangement, and I am pretty immune. I have less than 100 subscribers here, most that found me via Twitter, even if all of my subscribers chipped in $50 a year, that would probably not cover what I spent on guitars and musical accessories last year.

Going Forward

There are options. There are three good alternatives to Substack for the newsletter writers. Buttondown is a more skeletal newsletter platform, very economical, and probably better as an adjunct to a blog or web page. Beehiivis a pretty solid clone of Substack that seems to have a better “free” offer, but one has to wonder when they have to start diving into that free tier to plumb some revenue. But they do not skim off your subscriber payments to keep the lights on, instead charing a nominal, reasonable fee for service as your audience grows. You know, like a traditional business model. Then there is Ghost, originally a minimalist, clean blogging platform, they pivoted to the newsletter model shortly after Substack came into being, and the evolution over the last 5 years has been stunning. One can roll their own (Ghost offers a version as an open source package you can install on your own infrastructure) or a hosted version. The costs for the hosted version are transparent, and quite reasonable. You feel like you get a solid value for money.


I believe that the era where thin business models and no concrete paths to generating predictable, sufficient revenue to fund operation without punting and just threading in advertising to monetize the audience is in decline. It will not disappear, but the growth of awareness of the hazards of the surveillance that the majors in the ad-tech space do to fuel this is going to lead to more people moving to privacy focused browsers/plugins) and email services. The free rein of the gorillas is being nipped and tucked by rulings in both the EU and in the US. They won’t disappear, but even the purchasers of the ads are becoming far more discriminating in their spends.

I do wonder if the current creator economy can survive. From all the “quitting Youtube” vids I see, one has to wonder if the reduced payouts, and more scrutiny that is causing more demonetization will drive more creators back to more traditional sources of income, and to reduce their stress to keep producing.

Finally, the sugar rush of the ZIRP era is gone, leaving behind a grumbling Millennial and Gen Z cohort who never had to deal with interest rates that are rational. The days of sub 3% 30 year mortgages are gone for good, and will need to be internalized.

(I did not expect to write more than 1,650 words on this!)