On July 30 I wrote a post asking whether we are reaching the saturation point for social media sites. The reason I wrote it is because it seemed to me that with the growing number of sites that exist that depend on ad revenue for profitability, there can’t possibly be enough advertising dollars to go around.
A day later a study was released by the University of Texas and Chitika that shows a different problem in the ad revenue business model: the top 1% of blogs are getting 20% of the revenue. In 2006, the top 15% drew in over 80% of the revenue. This means that the huge majority of monetized sites and blogs is fighting over a tiny piece of the pie.
Many are criticizing this report for its unprofessionalism and even bias by involving an advertising company in the study (Chitika), but even if these results are off, it still indicates that a disproportionate amount of advertising revenue goes to a small group of site owners.
Which yet again brings me to the issue I addressed in my previous post on this matter: how can new companies have brilliant ideas about how they’re going to build up a community, but have no idea how make money off of it except with advertising revenues?