Yes, you read that right. Monetization does NOT equal revenue. I’m tired of hearing about Web “applications” that are promising venture capitalists that their ad-supported business model is going to be successful and yield that 15x return their looking for.

Monetization is…

Monetization, as I define it, is using advertising to make some money off of your Web site. It is not recurring revenue that results from users willingly paying for the service.

This is a dangerous model to put much faith in for a number of reasons. The first is the visceral reaction the general public has to advertising. When was the last time you thought to yourself, “Man, I really liked the annoying Flash ad. I must go see ‘Legally Blonde 7: Divorce Rules.’ ”

Advertising is effective as a brand awareness driver. If you’re letting advertising dictate your purchasing decisions, then that’s a separate issue. What advertising is not, however, is a model on which to build a business. Because the only one getting rich off of ads is Google.

Revenue is…

When a Web application is so valuable that people willingly pay a monthly or annual fee for the pleasure of its use, that is revenue. Revenue is profit. Revenue is a viable, sustainable model for growth and success.

When a Web application offers functionality that either increases my productivity or adds value to my life, I’ll gladly pay for it.

So, when I saw that LinkedIn recently completed a founding round of $53 million, I nearly choked. Not only does this value the company at $1 BILLION, but it also gives them plenty of ammo to fire across the bows of upstart SocNets. According to the LA Times, LinkedIn has been profitable for a couple of years. So, where does this revenue come from? I don’t pay for it. Nor will I.

Online Advertising

So, in the chart I’ve embedded from the Interactive Advertising Bureau, the growth rate of online advertising revenues has been astonishing. In Q1 of 2008, online advertising revenues were approximately $5.8 billion. So, why do these companies need so much venture capital? I think it’s because that “revenue” is only being realized by the ad networks and not the apps them selves.

It kind of pains me to link to Valleywag, but they did the dirty work for me on this. Time recently announced its 50 top Web sites and Valleywag made some quick and dirty analysis (really, is there any other kind?). Of the 50:

  • Ad-supported:36
  • Google ads: 18
  • Microsoft ads: 1
  • Yahoo ads: 2
  • In-house ad sales teams: 3
  • Sell goods: 2
  • Sell physical goods: 1

So, of “Web sites,” advertising is obviously a good way to make some revenue. But for businesses, it’s all about subscription models and real users paying real money.

How will you make your profit?

Back into the flow of things. Here’s what I’ve noticed lately.

What’s changed?

Not a whole lot. Innovation appears to be on a temporary hiatus. Yahoo is trying its best to be the belle of the ball, but is ending up only as the last-call cougar. I don’t care if it’s Googlehoo, Microhoo, Yahoogle or whatever mashup you want to call it, it’s still going to be “contextual” ads in the way of my Internet search.

I like Google not for its results, but for the fact that to search for something, I type it into my Firefox space and it gives me what I want. So, whatever happens, keep making Mozilla rich so I can keep using the quick search.

Social networking fatigue

I’m not fatigued of the act of social networking, I’m fatigued of the myriad Web sites I feel it necessary to register as /geekgiant or what have you. Here’s my proposal.

We all love Twitter (when it works). We’ve all settled on FriendFeed as a way to abandon RSS sharing. And we all seem to have a LinkedIn profile. Let’s call it a day. It’s time for the Web to be used for something useful. How about a network for managing emergency responses. Or how about a CMS that has a reality check built in for poor writers. Another idea I have is for a Customer Relationship Management that is usable by, well, everybody.

Just an idea.

Where to go

I think that what the IPO bubble was to Web 1.0, consolidation will be to Web 2.0. We’re going to see makers of widgets get absorbed into the social networks they serve. I think we’ll see some of the proprietary Web app creation tools such as Coghead or Bungee Labs dissolve and I think that some of the blogs will consolidate as well.

We’re in the birth of a new economy. The Web is the platform for innovation and I’m excited to see where we go.

I spent last week offline in Puerto Vallarta Mexico and realized that my world is very small.

Nobody was Twittering about the sun or the timeshare presentations. I had no IM, no email and no iPhone.

And I loved it.

Our world is expanding thanks to these tools, but there is so much of it we miss by chasing each other from social networking tool to social networking tool. The Web is going to change the world. But I think it’s going to change it in a way we don’t expect.

What’s happening

The world is actually going to get bigger because of our self-created isolation that these “social” networks strive for. Instead of going to see my good friend who is about to have a new baby, I sent him a message on MySpace. Instead of getting some friends together to watch the recent NFL draft, I went into a chat room.

We’re slowly eliminating human and social interaction from our lives by adding what we’re being told is being social. As our online presence continues to evolve and our Pownce/FriendFeed/SocialThing/Facebook/LinkedIn selves continue to spiral around the concentric circles, we are actually going to create a smaller world around us.

What it means

I’m not quite sure what’s going to happen in the next 10 years. There’s a lot of room for new technologies to bring us together. There’s a lot of room for technologies that bring niche communities together around a common theme. Unfortunately, that’s going to create a social world that is heavily divided within numerous microcultures.

I think that the social networking sites are innovative. I love Twitter and reading about the dynamic experiences of others. But I think that the future of these applications are in the enterprise. If somebody can figure out how to put Twitter to work or figure out how to increase productivity with these tools, a lot of people will make a lot of money.

I could be totally wrong, too. Or you can prove me wrong. Go introduce yourself to the person next to you and show me that our society isn’t going backward.

Being in the tech industry is far beyond a full-time job. We all quip that everything we do is work. Bowling? Get your neighbor’s card, twitter about it and then find them on Facebook. On vacation? Blog about it, post your pictures to Flickr then Twitter about it all.

Finding that balance between work and life is difficult. For me, I was a husband before I was a marketer. I was a brother before I was a journalist. And, I was a friend before I was a professional.

A realization

I realized on yet another flight home that I had not heard from a fair number of friends from high school or from college lately. This is a two-way street and I think I’ve been going the wrong way. I have been so involved in growing my tech-world social circle that my “IRL” friends have fallen off my radar.

I’ve made several acquaintances that are closing in on the “friend” label rather quickly from the tech scene and they’re great people. But I don’t yet have the history with them that I have with some of the people that I’ve pulled all-nighters with or the people I’ve played football with or the people I’ve barbecued with.

This realization made me kind of sad.

Find your balance

Finding your balance can be difficult at times. I’m feeling kind of lazy, but there’s some venture capitalists that take off-the-grid weeks quarterly to re-charge and to refresh. I’m getting ready to take a one-week break to Mexico and will be largely off the grid. The iPhone will be at home and the laptop will be mostly in the safe.

I think that going offline is a good start, but it doesn’t go far enough. I find myself leading two lives: One life is online and the other is offline. In my day job, I’m in marketing and PR, so why shouldn’t I market to my offline friends? If they were all on Twitter, it would be that much easier to keep in touch.

So, what do you do to keep in touch? How can I get everybody on IM or on Twitter or somewhere else? How do you find your balance?