The takeaway lesson for me is that user-generated content is incompatible with advertising.
Now, as a caveat, I'm the sort of person who thinks that modern advertising is 99% toxic sludge in the mental environment: I am firmly in the Kalle Lasn camp. However, here's how I see it working: users come to the site because of the UGC, but advertising, by nature, has to grab attention at some level. You can't design for both "make the UGC, stuff users actually care about, primary" and "make sure that you get ad clickthroughs." Since the latter pays the bills, it tends to win - and users tend to leave because on one level or another, it's obvious that the site isn't about them (and if your site depends on UGC, your users ain't wrong to think that the site should be about them!)
The secondary takeaway is that advertising is not a long-term sustainable business model.
Advertising has a strong tendency to push startups into this insular turtles-all-the-way-down bullshit: social media with ads for analytics, analytics for ad-based startups, startups about how to reach demographics, and so on. They're as familiar an archetype around here as Punch & Judy. But it's all the tertiary economy, it's all flash: the fundamentals of advertising as a business model only get weaker over time. The effectiveness of advertising at all, in any context is debateable, and participating it is participating in an endless arms race. I argue that this should tell us that advertising is not the way to go if you want to build a lasting company: you need to take money in exchange for goods and services (real goods and services: advertising doesn't count, as I'm in the process of arguing).
That's hard! That's really difficult. PayPal, Square, and WePay should show us how ridiculously, gratuitously difficult the "take money for" part is, and taking people's money once you've convinced them that you've got something worth their money, is the easy part! Before you even get there, you have to build something good, and none of us should have any illusions that that's easy. Then between those two parts, there's "persuade users that your cool thing actually is cool and worth paying money for," and sweet leaping Buddhas that's a lifetime of work in itself (the lifetime of work, in fact, that advertising is doing in such a toxic and commons-destroying way right now).
But: you are a hacker. You are a hustler. You are an engineer.
Solving hard problems is your job.
Advertising is not a business model: advertising is a problem to be solved. Advertising is a bullshit legacy of past business models, here to be disrupted. The reason that I hang out on Hacker News is that I believe that its hackers, hustlers, and engineers are the people who can look at the way we do something now, think "that suck! I can do better than that!" and then do the difficult, frustrating, painful work to actually make something better, show people why it's better, and accept the monetary rewards that come from having made something better and proved it.
Your arguments about why UGC is incompatible with advertising seem like they could apply equally to all content.
i think a better argument is that unstructured UGC is incompatible with advertising. Pinterest, for example, seems to be doing all right, because their site is basically a repository of things people want to buy. StackOverflow doesn't seem to be having any issues using ads to monetize, because their niche makes their ad-space valuable to advertisers and relevant to users. Where facebook and twitter fail is that they have tons of data about users, but not about what users want at that particular instant. An ad for windows server hosting on ServerFault is not competing with the content, it's complementing the content. it's a natural progression that doesn't require me to refocus to be effective. Facebook knows what i like, but not what i'm thinking about. When i'm looking at pictures of friends, any advertisement requires me to refocus onto a different topic.
This is sort of inspiring, but until I see more legitimate businesses making money off of a better model than advertising, it just doesn't mean much to say it. If people didn't have to pay for costs for things like bandwidth and marketing, we would probably see a lot less advertising too.
Now, as a caveat, I'm the sort of person who thinks that modern advertising is 99% toxic sludge in the mental environment: I am firmly in the Kalle Lasn camp. However, here's how I see it working: users come to the site because of the UGC, but advertising, by nature, has to grab attention at some level. You can't design for both "make the UGC, stuff users actually care about, primary" and "make sure that you get ad clickthroughs." Since the latter pays the bills, it tends to win - and users tend to leave because on one level or another, it's obvious that the site isn't about them (and if your site depends on UGC, your users ain't wrong to think that the site should be about them!)
The secondary takeaway is that advertising is not a long-term sustainable business model.
Advertising has a strong tendency to push startups into this insular turtles-all-the-way-down bullshit: social media with ads for analytics, analytics for ad-based startups, startups about how to reach demographics, and so on. They're as familiar an archetype around here as Punch & Judy. But it's all the tertiary economy, it's all flash: the fundamentals of advertising as a business model only get weaker over time. The effectiveness of advertising at all, in any context is debateable, and participating it is participating in an endless arms race. I argue that this should tell us that advertising is not the way to go if you want to build a lasting company: you need to take money in exchange for goods and services (real goods and services: advertising doesn't count, as I'm in the process of arguing).
That's hard! That's really difficult. PayPal, Square, and WePay should show us how ridiculously, gratuitously difficult the "take money for" part is, and taking people's money once you've convinced them that you've got something worth their money, is the easy part! Before you even get there, you have to build something good, and none of us should have any illusions that that's easy. Then between those two parts, there's "persuade users that your cool thing actually is cool and worth paying money for," and sweet leaping Buddhas that's a lifetime of work in itself (the lifetime of work, in fact, that advertising is doing in such a toxic and commons-destroying way right now).
But: you are a hacker. You are a hustler. You are an engineer.
Solving hard problems is your job.
Advertising is not a business model: advertising is a problem to be solved. Advertising is a bullshit legacy of past business models, here to be disrupted. The reason that I hang out on Hacker News is that I believe that its hackers, hustlers, and engineers are the people who can look at the way we do something now, think "that suck! I can do better than that!" and then do the difficult, frustrating, painful work to actually make something better, show people why it's better, and accept the monetary rewards that come from having made something better and proved it.
We can do this.