Over the past few weeks I've read a lot of articles like this one, which reiterate how hopeless it is to build a startup around ad revenue that can survive a downturn.  I was going to say "to build a startup with an ad-based business model", but really, is ad revenue a business model?  It might be a "revenue model", but is what you are doing a business if you derive all of your income from advertising?  I wouldn't say so.  A true business produces something, or provides a service that improves the lives of the customer.  Your "MySpace of pet owners who visit the library every Thursday" or "Digg for horitculturalists" might be a good web application, it might be a nice way for you to show the world your programming prowess, but honestly, is it a business?

This is not to say that ad revenue is useless.  Far from it.  If I had a product site (Basecamp?), or a social site where money was exchanged for some service or premium features (Flickr?), I would definitely supplement whatever money I made from the main product (dinner) with some ads (dessert).  That's a no brainer.  But building a business based on ad revenue leaves you exposed to downturns like this.

If you're struggling with developing a business model, there have been some good articles written recently that might help you on your way: Three Freemium Strategies and Make Something People Will Buy among others.  I also found JPMorgan's Internet Market Research Report to be particularly insightful.

Related posts:

1. 13 Years On The Web – A Retrospective, Part II