I've always considered it one of those walking dead business-models, like printed newspapers, and it regularly surprises me the practice is still alive and well. I would be terrified to let my business depend on it.
My theory is that internet advertising is a zero-sum game (out of the left-hand pocket into the right-hand pocket sort of thing), but there hasn't been any serious, credible research to prove or disprove my intuitions.
And no, "serious" and "credible" do not apply to companies that sell internet advertising and point to their own (air quotes) reasearch as proof that internet advertising works.
AdBlock Plus and Ghostery for the win, by the way.
I own an ecommerce store, 10 years. I can tell you that internet advertising does more than pay for itself if you control the costs, track the sales that result from it, etc (which is standard practice in internet advertising).
That's why when GM said they spent 10m+ on facebook with a very poor ROI, it was big news. Advertisers will test new platforms like facebook, and when they fail to perform, they will abandon them very quickly.
Google has lasted this long not because advertisers are stupid, but because Google's Adwords has a positive ROI.
Yeah. I didn't think so.