I recently talked to a VC, who focuses on consumer Internet plays. I asked him: "What is the critical mass for a consumer site to get solid advertisers?"

"It's about three to four million unique visitors," he said.

"That's definitely a lot."

"Yes, it's a tough world out there."

It certainly is. While companies like Facebook, YouTube and MySpace can monetize traffic, there are thousands of sites that are struggling. If anything, the major sites are sucking-up a lot of the online advertising dollars.

Take the case of Judy's Book, a local advertising site. Recently, the company's CEO, Andy Sack, wrote a blog post about the challenges his company faces.

Some of the issues: attracting/keeping users, getting users to contribute reviews of local businesses, getting merchants to spend money for traffic, and getting strong placement on Google (where it seems most traffic comes from nowadays).

I talk to a lot of startup companies in the consumer Internet space and these problems are fairly common. In other words, building a franchise is incredibly difficult - and rare. But, when it works - such as with Google's $1.65 billion purchase of YouTube - it provides motivation for others to keep trying.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.

The sham of online advertising originally appeared on BloggingStocks on Thu, 12 Oct 2006 19:11:00 EST. Please see our terms for use of feeds.