• The Wall Street Journal, Tuesday, August 4, 2009 2:22 PM

The global recession is forcing Internet startups to rethink their business models, the Wall Street Journal reports. One example of this is Slide, Inc, a San Francisco-based startup that creates some of the most popular applications on social networking sites. Last summer, Slide hired an ad sales force in New York to sell standard online ads on its applications, typically selling ad campaigns for between $50,000 and $200,000.

However, now, with the online ad market slumping, Slide has decided to scrap those efforts, recently firing its entire ad sales team. It will instead focus on selling branded entertainment campaigns, where an advertiser is incorporated into games that are already popular among social networking users. The company is also ramping up its virtual goods business, which it hopes will account for the majority of its revenue this year. "Think of us like an e-commerce business," Keith Rabois, Slide's vice president of strategy and business development tells the Journal.

Slide makes up a group of Web startups-including RockYou, Zynga, and Meez-that are diversifying their businesses by selling virtual goods to consumers and branded entertainment ads to marketers. Last year, investors thought of these companies as primarily application makers on social networks. "Turns out, it wasn't such a good idea, the Journal's Emily Steele says. "A year ago, advertising was seen as the cool new way to create a great deal of revenue," says Sean Ryan, founder and chairman of Meez. "It turns out those applications didn't have enough engagement to deliver the advertising."

Read the whole story at The Wall Street Journal »