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Web 2.0 is awash with advertising-driven revenue models. Answers.com (NASDAQ:ANSW) has grown quickly on the back of numerous trends: meta-dictionaries, blogging, aggregation and what I like to refer to as the Google (NASDAQ:GOOG) Effect: stand back in awe and watch the after-effect of some good Google love. For the uninitiated, Answers receives much of its traffic from the ‘definition’ link where Google currently links (in an informal, non-contractual way) to Answers’ pages for definitions based on a list of trigger words.

Looking at average daily queries growth (the average of how many searches are conducted on Answers.com), we see impressive numbers. Traffic has grown 88% when comparing Q1 of 2007 over Q1 of 2006.

Web publishers tend to use the RPM metric (Revenues per thousand web pages served) as a measure of success in monetization effort and Answers is making good strides: 35% growth in RPM this quarter versus first quarter 2006. Things are looking good. While RPM growth is strong, it’s clearly lagging query growth. I’d like to see this catch up.

And that’s the rub.

The interesting thing here though is that while Answers.com’s content model is very much Web 2.0, its revenue model isn’t. Ad sales models are built on old-school principles: buy low, sell high. Admittedly, Answers needs to ramp up its sales efforts and execute. Managing a sales team is good for the business but is definitely not sexy. It costs money to hire good talent and takes even more time to manage them efficiently.

I won’t even get into the reliance on Google for traffic and monetization efforts. Google has Answers by the proverbial short-hairs and perhaps may eventually take them out. Until then, I’m nervous that Google plays such a crucial role in bringing the eyeballs and then monetizing them.

I love Answers’ service. My kids and I use it for book reports, science experiments (my daughter wanted to put an iPod in Coca Cola), and just good research. From my perch, Answers is now a show-me stock dependent on the good graces of Google and the execution of a sales team.

ANSW 1-yr chart

ANSW

Source: Searching For Answers Corporation