The Financial Times has an interesting article about how Web 2.0 startups have so far managed to generate a lot of buzz and behavior changes, but thus far very little in the way of actual cash.  This has been a constant wonderment to me for a long time, as it seems that people are looking for cool things and assuming it'll make money somehow down the road.  Like Twitter.

The shortage of revenue among social networks, blogs and other “social media” sites that put user-generated content and communications at their core has persisted despite more than four years of experimentation aimed at turning such sites into money-makers. Together with the US economic downturn and a shortage of initial public offerings, the failure has damped the mood in internet start-up circles.

Don't get me wrong, I love many of the sites, and several of them I would actually pay money for if they asked.  But others I suspect will either be abandoned completely or scaled way the hell down.  Twitter is cool and all, but it really should be either open source or it should be somebody taking donations to do it.  Eh, I know I'm probably the only who thinks this, but it just doesn't add much value to me--it's more a diversion than anything.  (I'd be interested to hear if anyone out there would actually be willing to pay for Twitter?)  Maybe they could actually charge people to use it now that it has this many users, but I'd bet half their users would leave instantly. 

Advertising is getting to be pointless, it's so in your face on every Web site that people are numb to it.  It's also the lazy way out, where you add so little value to your users that the only way you can conceive to get money out of the interaction is to take advantage of the fact that they won't walk away from you.  It's like a street performer who juggles advertisements or something.

“If you look at some of the valuations, you wonder what fantasy of revenues they’re based on,” said Mitchell Kertzman, a partner at Silicon Valley venture capital firm Hummer Winblad.

Agreed.  With the economy screeching to a halt, these companies will need to start making real money, real fast.  The VC money will dry up.  They must either produce real value and get paid for it or take their ball and go home.  It will be interesting to see if the last few years are later seen as one big industry-wide "try before you buy" period.

(Sorry, I found that hilarious.  I don't mean to demean your favorite buzzword ;)  Found via Giles Bowkett, so go yell at him if you're offended :)