<i>Advertising has always been a way to make otherwise losing propositions profitable</i><p>Or you could, you know, be the guy paying for the AdWords.  I sell a product to consumers over the Internet.  Stop the presses, I know.  I have many competitors who do free versions essentially the same product, monetized by ads.  My ads, since if Google polled the entire world saying "Hey who of you would pay cash money to speak to an elementary school English teacher currently making Reading Rainbow bingo cards?" I'd be up in the front row shouting "OOH OOH PICK ME!"<p>Since I know what Google charges me and I can estimate what Google keeps, I can ballpark estimate the CPMs for their sites.  Its in the $2 a month range.  The effective CPM for my site is more than twenty times higher than that.<p>Ads also have a pernicious effect on your product design.  A core skill for B2C products is optimizing them so that the user gets through the workflow successfully.  We optimize for success, because successful users pay us money.  If you have CPC ads on your site, you have to <i>optimize for failure</i>: the ad has to be more enticing than your application/content or <i>you don't get paid</i>.<p>Granted, there are some audiences who don't pay money for anything (why hello, students) and some applications whose users will not pay money for them (why hello, URL shorteners/social networkers/anything starting with the letters Tw), but <i>you don't have to make these</i>.  There is literally infinite need for solutions to problems, even in B2C (C stands for consumer, i.e., one who <i>buys products</i>), that you could deliver profitably.  And then spend a portion of those profits tossing nickels to sites without business sense so you can steal their users and charge them dollars.