At the WSA Investment Forum on Wednesday, numerous companies pitched their ideas on how they were going to get their piece of the online advertising pie.
According to one report, for the first time since the beginning of Web 2.0 venture capitalists are starting to question whether there is enough advertising money to go around.
Mark Anderson of Strategic News Service started things off by saying, "Ask yourself who is making real money. This is not a real business story. ... It only works if money is involved. ... But if there is no money involved, it is just bogus."
Another potential investing representative Paul Bialek of Frazier Technology Ventures asked: "How are you going to monetize (the business) when you give it away for free?"
These are interesting and provocative questions that anybody putting up their money deserves to have answered.
The one thing to keep in mind concerning these types of investors though is that they think in terms of very short-term, high-yielding investments. So their questions are generated from that way of thinking.
The truth is that unless there is a more long-term outlook concerning investing in online advertising models, it probably isn't a good thing for someone to invest in. Online advertising will take a while to get its bearings and grow.
While the getting eyeballs thing has been hyped by a lot of big-name online pundits, I think that it's vastly overrated as well. Basically it's presented that we should just get eyeballs and then afterwords figure out a way to monetize them.
That sounds exciting, interesting and pioneering, but unless someone has really deep pockets or large financial backing, it really won't work. Even YouTube (GOOG) is losing huge amounts of money monthly. That's the reason they're starting to monetize their videos.
What I would do is from the very beginning have some type of monetization in place. That way the alienation factor won't come into play as much as those that do everything without any monetization, and than are fearful of doing anything because they might lose some of their audience.
That doesn't mean that we shouldn't listen to feedback, but the idea that everything is going to be offered for free is an illusion. All that can be is a temporary holding pattern at best.
As far as the online advertising model disappearing, that's a fiction. It's going to continue growing for years. It's just that it will take patience and long-term strategies, not a quick surge that everybody can cash out on, whether it's creating long-term value or not. Online advertising is here to stay.
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