As for LinkedIn, data is scant since it is a privately owned company. However it appears only a quarter of its revenue comes from ads, and the rest comes from other corporate services and subscriptions. I do think LinkedIn’s promise lies on more corporate services than in frivolities, which may not be an option available to Facebook or MySpace.

You can read some more on this link.

@ Alice: Thanks for your comment and the hat tip on your blog, putting me in the company of Guy Kawasaki and Hugh McLeod!

I think we may be in danger of self-referencing too much when it comes to assessing the utility of advertising. Many people do click on ads and even those, who are normally averse to doing so, do click in some specific situations. For instance, quants analysing ad-clicking data find that automobile ads are clicked upon more often than any other category of ads.

But on the rest, you are spot on. Business cannot live by advertising revenue alone, with apologies to Deuteronomy for the snow-cloning. Delusion too plays a role as those of us who lived through the late 1990s – such as Harini below – already know and remember.

@ Harini: Thanks for sharing your experience. And I cannot disagree.

Ponzi schemes aside, I continue to be surprised when even VCs cannot identify – or do not wish to identify – business models of their investee firms. There is such a thing called ‘non financial value add’. I cannot seem to locate it in the examples that I cite.

Oh and thank you also for the hat tip on your blog!

@ Prakash: Thanks for your comment. My intent in choosing that word was to conflate the current situation with the dot-com-bust that we all, or at least some of us, seem to remember too well.

You are right about creating something that is part of a bigger puzzle or problem. But I do not know how many Web 2.0 firms were established with that in mind.

I think there may be two ways to create such a business – one is more hi-tech, and the other is a blatant aim to be bought by a given incumbent in a space. For the latter, I could, I suppose, bring up Shelfari which has recently been sold to Amazon. From the start, it looked like it wanted to be sold to Amazon and now it has. The product I am afraid is rather poor, but better integration with Amazon’s catalogue and search may yet save Shelfari. It remains to be seen what Amazon does with its shareholding in LibraryThing that came with its acquisition of AbeBooks.

@ Romit: The denizens of Sandhill Road are feeling the crunch or is it just sand? Thanks for sharing that info though it does not surprise me.