Whether you characterise economy 2.0 as being nodal rather than hierarchical, collaborative rather than competitive or giving rather than taking will all be fairly arcane if the business model doesn't work. The questions are well rehearsed but far from being answered.
Can the inherent tension between user-generated content and business-imposed advertising be overcome? What proof is there that web 2.0 eyeballs welcome the intrusion even of targetted advertising? Why do so many geeks decry advertising's effectiveness (rightly in my opinion) and yet assume that their revenues will derive from this source?
Now, another element that has been nagging the back of my mind, namely the sanctity of advertising spend, has found voice in an interesting post discussing the relative profitability of marketing 2.0. I'm still digesting the argument and the comments but this statement obviously found favour with me.
"Ceding control to consumers was the dominant theme of the Association of National Advertisers conference — but if consumers are in control of your brand, the best way to increase sales is not by advertising in the traditional sense, but by making better products and providing better service."
Synchronistically, I also found the New York Times taking up my question about Friendster's failure. Apparently, it was due to technological deficiencies. VCs and the executives they brought in weren't actually using the site. Their focus on land-grab, new territories and product extensions ignored the basic functional deficiencies and users clicked off.
Advertising assumptions. Community loyalty. New paradigms. They should all come with a profit warning.