According to The Wall Street Journal we can expect a shakeout in the online ad-network market. While over 300 online-ad networks have emerged in the past couple of years, there are indications that many won’t see out the next few years, as online advertising slows and venture capital (VC) funding dries up.

Two ad-networks to close recently are JellyCloud, which closed this month after raising $11.5 million in venture-capital funding earlier in the year, and Adzilla, a similar operation. Meanwhile, AdBrite, which was founded in 2002 by Internet entrepreneurs Philip Kaplan and Gidon Wise and has raised $35 million in funding, recently cut 40 percent of its work force in an effort to become profitable.

Not only are ad-networks likely to suffer as advertising revenues continue to contract, but they can no longer rely on venture capital to keep them going. The Wall Street Journal quotes Dennis Miller, general partner at Spark Capital, a Boston-based venture fund, as saying that VCs are increasingly looking to invest in companies that are cash-flow positive.

Source: Emily Steel, “Shakeout Threatens to Thin Out Web-Ad Brokers”, The Wall Street Journal, October 28, 2008

To all those Internet entrepreneurs whose hopes of raising venture capital for their business have just been dashed, here’s how to grow your business regardless of the economic crisis (and a real business at that). And to all those Internet entrepreneurs who have other money concerns… this applies to you too!

Quick background: we started our first Internet company in 1997 (an IT security company) and survived and thrived through the dot com crash. We later sold the company in 2002.

Because we started our business with no money (we were young and didn’t have any) except for a paltry $45,000 loan from family that quickly ran out since we used it to pay rent, buy furniture and live on… and because our tentative approaches to VCs never got anywhere… we had no choice but to work out how to make money fast.

And funnily enough, we managed to do so. So here are five (5) tips for bringing in the money when times are tough, based on what we did just a few years ago:

1. Work out what you can develop and sell to customers ASAP. All those big, long-term projects that rely on huge wads of cash you don’t have? Either put ‘em on the back burner while you focus on getting customers (not VCs) to pay you, or break ‘em into components so you can start selling at least one of those components within the next 6 months.
2. Focus more on marketing, less on product development. When the going gets tough, the tough start selling.
3. Focus on getting products out, rather than getting them perfect. Don’t compromise on quality of course, but you can incorporate all the ‘bells and whistles’ into later releases.
4. Cut down on all the nice-to-have-but-not-essential expenses. If it means bringing the business back into your house or garage, so be it.
5. (Optional) Keep in touch with your current or potential VCs. Funnily enough, taking all the above steps will not only help you build a real (profitable) business, but will help you prove to VCs that you have a real business and that you can get through the tough times. It’s resilient businesses like yours that VCs will prefer to invest in going forward.

Love him or loathe him (or his company, Go Daddy Group, Inc.) Bob Parsons is a true character and undoubtedly one of the world’s most successful Internet entrepreneurs.

After a few previous ventures, Mr Parsons has built GoDaddy into the largest domain name registrar in the world, both in terms of new registrations and domains under management. Go Daddy currently registers or renews a domain name every second, has more than 5.5 million customers worldwide, manages more than 29 million domain names and employs more than 2,000 people!

As a private company, Go Daddy is not required to report its financial results, but its annual revenue is likely to be significantly higher than the 2006 figure of $240 million, which the company revealed in the lead-up to its since abandoned initial public offering (IPO).

Parsons is known for his risqué advertising (scantily dressed, buxom young women seem to dominate), his penchant for motorcycles, and his outspoken views about everything from domain name registration (understandably) to the treatment of war prisoners at Guantánamo Bay (less understandably).

What I don’t think anyone – certainly any entrepreneur - could question are Parson’s 16 Rules For Success. These rules range from “when you’re ready to quit, you’re closer than you think” to “anything that is not managed will deteriorate” to “never expect life to be fair”. My favorite? “Never give up”.

You’ve heard that elsewhere I’m sure… but it bears repeating, doesn’t it?

Parsons attributes his rise from rather humble beginnings to his current position as CEO of a hugely successful company to these 16 rules, and I have no doubt that EVERY reader of this newsletter would do well to internalize and follow them as well.

Personally, I recommend getting the Bob Parsons™ 16 Rules Poster. A few days ago my husband put up the poster, framed, above my desk. Whenever I glance at it, and read one or more of the rules, I get a renewed sense of purpose and excitement.

So yeah, I’m glad to have Bob Parsons watching over me…

Sources: Bob Parsons’ 16 Rules For Success, Paul Sloan, “Who’s Your Go Daddy?”, CNNMoney.com, December 19, 2006