Name, say.. 10. That are actually MAKING money, VC rounds and such don't count.
1. GitHub 2. eBuddy 3. Dogster 4. StyleDiary 5. ThisNext 6. Kaboodle 7. Stateless Systems 8. RedBubble 9. Wufoo 10. NationMaster
Although I have no idea if it's even classed as a 'startup'.
I wonder if some of the reason for the recent backlash against advertising supported models is that some techie types install adblock, and perhaps assume everyone does? In my measurements only 6% had adblock installed, and that's for a very techie early adopter crowd.
The truth is, there are millions of websites out there, making millions from advertising. It's so much more scalable than charging users.
If facebook+digg etc cut back spending, they'd be making millions in profit from advertising. I expect they have bigger plans though.
Plenty of startups are making money.
(Quick caveat: I haven't actually read the article yet... so it might be talking about a totally different kind of startup.)
The way I see it social sites need to climb a very steep peak before they have any chance of making money from ads - how many facebooks (which is still a long way from profitable) can the web ecosystem support? - If you do reach the top of that peak which only has room for 2-3 big players you have a chance of banking millions.
B2B services on the other hand are much safer. Business people understand that products and services cost money - and they are used to paying for the services they use.
My advice to developers looking for a product is to forget about the 1 in a million chance that they will develop the next great social app and cash out rich. By focusing on customers that are willing to pay, your venture has a much greater chance of becoming profitable and sustaining itself.
I know I was TERRIFIED of charging money 2.5 years ago. What if it breaks?! What if there is a bug?! What if no one cares about what I'm doing?! But charging money is the BEST MEDICINE for this fear because people will pay you money. And after that happens a few thousand times, you start to lose the sense of "zomg, I am totally unworthy of being compensated for improving people's lives, perhaps I could put out a tip jar in a suitably discrete location and hope some money falls into it."