Web 2.0 takes it on the chin

For some time there has been an uneasy feeling that Web 2.0 companies were having trouble making money. A number of the companies are private and not much is said about how their financials work. Digg.com does not issue quarterly statements.

But some of the new age companies like MySpace, which was bought by News Corp (NYSE: NWS) and YouTube, which was bought by Google (NASDAQ: GOOG), have enough of their financials available for Wall Street to get an idea of what is going on.

Based on comments from Google and News Corp, their huge Web 2.0 sites are not big money-makers. MySpace does well under $1 billion in annual revenue. Its smaller rival, Facebook, was recently valued at $15 billion. That number now looks very high.

According to the FT, "The shortage of revenue among social networks, blogs and other "social media" sites that put user-generated content and communications at their core has persisted despite more than four years of experimentation aimed at turning such sites into money-makers."

Facebook, YouTube and MySpace may draw tens of millions of visitors each month, but they can't make a dime. Marketers are not interested in amateur video and postings from people who spend 20 hours a day on PCs and are afraid to leave their homes.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 newsletter.