A host of presenting companies -- Mixxer, Ripl, Smilebox, Treemo and Yodio, to name a few -- discussed different ways in which they hope to take a sliver of the online advertising pie.
But for the first time since the dawn of the Web 2.0 era, some have started to wonder whether there's really enough ad money to go around. Of course, Mark Anderson of Strategic News Service set the tone during the opening panel discussion at the 14th annual event in which he questioned the viability of ad-supported Internet businesses.
"Ask yourself who is making real money," the technology pundit said. "This is not a real business story. ... It only works if money is involved. ... But if there is no money involved, it is just bogus."
Throughout the day, other concerns popped up.
After listening to three digital media startups make their presentations, Voyager Capital's Bill McAleer said that some companies are taking for granted that they will generate online ad revenue. That type of logic reminded McAleer of the failed business-to-business exchanges that arose during the last bubble.
He went on to say that there are only so many "advertisingsupported models that can survive."
Paul Bialek of Frazier Technology Ventures asked a simple question that went deep into the heart of the issue: "How are you going to monetize (the business) when you give it away for free?"
For the past few years, the entrepreneurial answer was online advertising. Now, it seems that investors are taking a more cautious approach and not just accepting that every Internet startup that gains an audience will be able to transfer those eyeballs into dollars.
Could this signal the peak of Web 2.0 and the online advertising business models that go with it?
It is probably too early to say, especially since the amount of money flowing into the so-called Web 2.0 category more than doubled last year to $844 million, according to VentureOne. (A fair number of Seattle area startups that intend to make money through online ads -- Farecast, Mpire, Shelfari and Atomic Moguls -- raised venture capital in the first quarter.)
But with the pointed questions Wednesday coupled with the lack of Internet startups at the University of Washington's business plan competition Tuesday, one has to wonder if both investors and entrepreneurs are starting to hit the saturation point.
Geoff Entress, an angel investor and principal at Madrona Venture Group, said it was tough to predict which early stage Internet companies would break out. That's why he is trying to wait and see if any of the startups gain traction and actually grow meaningful audiences. At that point, he said, they may be best suited for angel investors rather than the deep pockets of VCs.
Anderson of the Strategic News Service said that investors and entrepreneurs should proceed with caution, noting that if they want to "play the eyeball game" of attracting big online audiences they should "be very, very careful."
And some Internet entrepreneurs are already giving up on the idea of building businesses around online advertising.
That was the situation for Trumba co-founder Jeremy Jaech, who recently moved his Seattle online calendar startup away from the consumer ad model. The serial entrepreneur noted that the traffic requirements necessary to drive significant sales were so high "that we had no hopes of getting there."
Despite the newfound skepticism, not everyone is giving up on what some believe is a trillion dollar advertising market.
Larry Orr of Trinity Ventures said there is still a lot of room for entrepreneurs and venture capitalists to make money in the sector. That's because the Internet as a marketing channel has only been around for a short period of time. And even if the big players like Google, Microsoft and Yahoo gobble up 80 or 90 percent of the market, Orr reasoned that "10 to 20 percent of a trillion dollars is a lot of money."
"There are markets that are big enough for venture firms to make hay in it" without disturbing the incumbents, he said.
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