Ad revenue on the web and my thoughts on Twitter

Here’s a link to an interesting article on the decline of online ad revenue that appeared in the Business section of the New York Times yesterday:

 http://www.nytimes.com/2009/05/25/technology/start-ups/25startup.html?hpw

 According to the author, Claire Cain Miller, overall spending on online ads is going to inevitably decline over the next couple of years. She argues that because of this decline Internet companies (especially start-ups) are going to have to consider alternative revenue generating streams to reduce their dependence on ad spending.

The model she suggests will be the way of the future (especially for start ups) is the “freemium” (a service that offers free and premium software). Two examples of this type of service that she gives are: Pandora’s new model which allow and customers to pay a small monthly fee to hear their music without ads, and digital provider Wetpaint’s new model of charging larger clients for services such as moderating reader forums and website promotion.

Althoug I see the potential for “freemiums” being successful for sites such as Wetpaint where a company ultimately pays for the additional service, I can’t really imagine this “freemium” model is going to gel for consumer entertainment sites such as Pandora. Sure $3 (the monthly subscription that Pandora just started charging) isn’t a lot of money, but I just don’t buy that consumers are going to all of sudden be willing to pay for this service when you get the virtually the same product for free by sitting through an ad for free.  Does Pandora expect to start playing more ads to make the subscription more enticing? Surely they know that would just annoy a lot of their customers. So how then do they intend to convert a significant number of free users into subscribers?  And is this model really the future of web start-ups?

 On a completely different note, this video kind of sums up how I feel about using Twitter for personal use:

http://www.youtube.com/watch?v=PN2HAroA12w.

While I am slowly adopting the notion that Twitter is something that could be a useful marketing and media relations tool for businesses, creative professionals and entrepreneurs, I am still unconvinced that there is a reason that I need to know that “Sally was five minutes late to work” or “that Michael is wearing shorts”. Seriously, Twitterers, isn’t there something more productive you could be doing with your time?