Steve Rubel at Micro Persuasion points us to a new book called Money for Content and Your Clicks For Free: Turning Web Sites, Blogs and Postcasts Into Cash.

There seems to be this ridiculous idea going around now that web advertising will one day power all sorts of free web-based applications. Even Microsoft is getting in on the act.

OK, Google has made a lot of money with ads, but for most websites ads suck. Why? Because people are selfish. We only click on ads when they are useful to us. Google, Yahoo, Boing Boing have built great businesses out of this fact. But it isn’t for everyone. Not every website can make ads useful for their users.

Let me start with an example using Google. Today I needed to find a remote desktop service for our upcoming demo, so I google’d “shared desktop” and clicked on the first ad that came up. They way I look at it, anyone who cares enough to secure the top spot on Google page for their product, must have something at least worth looking at. Ads helped me get what I want. I found a product, a company made a sale, and Google made some money. Everybody wins.

Now let’s say Microsoft did put out a web-based word processor supported by ads. Would you use it? Of course! Its free! But would you click on the ads? Probably not. You use a word processor to write. Unless that ad is going to help you finish your writing project faster, its not very useful. In fact, ads would just distract you from doing your real work, so you will ignore them.

Ads are a great way to build a profitable business on the web if you can attract prospects that will find your ads useful. Otherwise, its a waste of time. No one will click on your ads.

This business model is not new, of course. There are a lot of failed dot coms that built their businesses around ad revenues that never materialized. Steve Rubel at Micro Persuasion thinks the growing proliferation of these same flawed business models is a sign of a new bubble. I don’t think that enough people are involved with this Web 2.0 thing yet for a real asset bubble to form. I must admit, however, every time I see a new unsustainable ad-supported business pop up, it feels a little bit more like 1999.