Note to entrepreneurs, especially those whose plans I’m currently reviewing for the upcoming Colorado Capital Conference: if you still think that you can support any type of social media on ads, think again.

You can’t scan the RSS feed of a latte-fueled digerati without tripping over tales of low low low advertising CPMs for social networks. If you don’t believe this, see what the industry heavyweights at AlwaysOn’s recent Venture Summit East have to say; it’s not pretty.

What’s the nuance? From the perspective of a business whose primary revenue is not from developing online social media, a few things should be clear:

1. social media enhances your traditional business so well that it’s an effective marketing or business development investment
2. social media provides so much value to your target market that they are willing to pay for it in the form of a subscription or sponsorship (not a CPM model; more to say on this soon)
3. wastes your time and saps resources without generating any real benefit at all

It’s true that there are social media sites that make significant revenue from advertising. But they are the dramatic minority. They have professionals who have been selling media for decades, and focus all of their resources on maximizing the value of their offering. If you fit this category, you are hereby dismissed.

For the rest of you dipping your first toe in the social media revenue waters, here is a way to frame your thinking about social network advertising:

1. Average CPM (cost per thousand) for ads on social networks are below $.50. That’s 5% of a penny per ad. Takes a long time for that to add up, and your community is probably not that big.
2. MySpace is earning roughly $2 per user per year. And you’re not MySpace, in size or focus.
3. Google ads return a fraction of what you might think, and only in the rarest of cases, do they actually replace the costs of blogging, hosting, etc. They also clutter up a site, cheapen the product, get blocked by ad blockers, and slow page load times.

So, if ads are a small part of your overall revenue story, then they might add some value. But if you’re counting on ads to provide a major new revenue stream, or the bulk of a startup business model, it’s time to reconsider your strategy.