Talking of social network revenue models, Ethan Zuckerman talks about the funding models for social networks, and how advertising isn’t likely to be a panacea for funding internet ventures in general. It’s an involved article, but worth reading if you’re at all interested in the business and research of the web.
Internet advertising works extremely well in the context of a search engine. Many searches are intended to lead to transactions, so matching a paid ad to a query is sometimes a good user experience. Advertising can work well in the context of niche content – a website focused on cross-country skiing is a great place to advertise to cross-country skiiers, and there’s a decent chance they’re going to be interested in learning about your ski wax. Ads on sites like Facebook work much less well, and while targetting those ads based on demographics may make them more effective, that targeting doesn’t fix the core problem: people are using social network sites to communicate, not to consume content, and they don’t want to be bothered by ads when they’re communicating.