I think a good rule of thumb at this point is to be extremely skeptical of anything advertising supported. If people won't pay you, are you really creating enough value to society to justify awarding yourself any warm fuzzies?
I suppose exceptions could be made for services like Google, which people would pay $1000/year for if that's what all the providers charged, but which happen to be advertising-supported.
"Make something people want enough to pay for." Now there's a terrifying heuristic.
> I suppose exceptions could be made for services like Google, which people would pay $1000/year for if that's what all the providers charged
Nobody would have paid $1000 a year for google. If they had started of trying to charge users then nobody would know about them.
Most classes of online consumer apps are dominated by advertising supported models - search, email, social networking, social news, forums, productivity, etc. The transaction cost/hassle associated with paying is too large for most users to bother with.
This was exactly the common wisdom in 01/02. And then the economy turned around, and ad-supported was all the rage again.
So you're right - now. But if you've got enough cash to wait out the downturn, ad-supported businesses could be very profitable. It's always a mistake to try and extrapolate the present out indefinitely...
I don't think the question is whether or not you can run a profitable ad-supported business. The question is whether your product truly matters if people wouldn't pay for it.
I believe there are ad-supported products that matter, but I'm tired of being advertised to. I will pay for good products.
When was the last time you first heard of a startup through a paid-for ad? (And then spent money on the service, or clicked on an ad shown by that startup and bought something there?)
I suppose exceptions could be made for services like Google, which people would pay $1000/year for if that's what all the providers charged, but which happen to be advertising-supported.
"Make something people want enough to pay for." Now there's a terrifying heuristic.