Uncommon Wisdom

May 26 2009   10:16PM GMT

Tech IPOs show need for monetized online services

Tom Nolle Tom Nolle Profile: Tom Nolle

The IPO success of OpenTable last week may be an indicator that the Internet advertising bubble is bursting. There have been a host of ad-related IPOs this decade following up on the ever-popular “you don’t have to pay for…” theme that was briefly tried for Internet services in the late 1990s.

The economic downturn is blamed by many for the fact that nobody seems to be able to make the ad model work, but we believe that the initial bad experiences of advertisers with things like click fraud created a skepticism that manifest itself in demands for better metrics. That, in turn, has made advertisers wonder if they get what they pay for even where there’s no fraud involved, and that’s not an easy issue to resolve. More people are now stepping up and suggesting that people are going to have to start paying for stuff, something people actually resist less than the VCs do. Pay-for-service models look an awful lot like a service provider business model, after all.

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