Is the ad-supported business model for web sites dead again? The Economist thinks so in a short piece in its latest issue . According to the article the naïve hope that eyeballs would attract advertising revenue led us to the dot.com crash. Now the fact that there aren’t enough advertising dollars to support websites is helping to crash Web 2.0 as well.

Here’s my take. For one, there’s a big difference between the dot.com crash and what’s happening now. The dot.com bubble resulted from massive collective delusion over the value of web-based businesses. A lot of these businesses didn’t know how they were going to make money but operated on the wishful thinking that if they got a lot of traffic quickly it would all work out. And many investors thought so too.

The current hard times follow from the typical results of a recession-albeit a really serious one. Business has been slammed and advertising revenues are way off. But it isn’t just web-based businesses that are being hurt, it’s anyone that counts on advertising revenue. The decline in ad revenue will result in the closure of lots of advertising supported media businesses both online and offline; it has already accelerated the extinction of the newspaper industry. But there’s no internet bubble being burst here like we had in 2001; just ordinary hard times.

Nevertheless, the decline in advertising revenues should be a wake-up call for web-based businesses that have counted entirely on making money from selling eyeballs to advertisers. Some may just have to adjust their expectations; selling advertising inventory may result in a nice living but not necessarily gargantuan fortunes. Selling advertising inventory is highly competitive and it is hard to differentiate sites from each other from the perspective of the advertisers who just want particular demographic groups. Others may have to start considering moving to the traditional print media model in which subscribers pay part of the freight. Only those with special content that can’t be gotten elsewhere are likely to be able to pull that off though. The fee to the viewer/paid by the advertiser model isn’t likely to die on the web in part because it doesn’t really require much advertising revenue to make free web sites profitable (just not obscenely so). But we may very well, as the Economist suggests, see more businesses charging subscriptions or otherwise supplementing their advertising revenue.