Advertising may seem like an obvious

There's no question that photos are among our most precious possessions. But while they were once thought to be irreplaceable, that's really no longer true — if you have them backed up in the cloud. What a feeling it will be when we all have the peace of mind that every photo that's important to us, even those taken years ago using film, are safe and sound in the cloud and can be reprinted, reframed and re-hung, anytime we want. That sense of security is easily worth tens to hundreds of dollars a year, in my opinion, and that's why consumer cloud services like Dropbox, iCloud, and Microsoft SkyDrive are sure bets for being profitable. For photo and video startups looking to compete with the larger horizontal cloud players, the key is focusing on the user experience, since that's much harder for larger players that need to focus on other types of files in addition to photo and video.

Advertising may seem like an obvious way to monetize online personal photos and video clips, but it's actually a very tricky business model for a pure-play online photo hosting and sharing company. The challenge is scale and context. First, you need a lot of page views or large news feed volume for an advertising business to work. So even if your business does intend to use advertising, it's not the appropriate focus for the early days of your company, since Job Number One should be getting traffic. Second, if you're lucky enough to get to scale, then it's very difficult to implement an ad model that doesn't freak out your user base. The issue is that people don't generally want to see ads next to their cherished family photos.True, the hope of being acquired is a far cry from building a sustainable business model. But this long-shot approach is the most common I see from the dozens of photo and video-related companies that launch each month.

There are enough high-profile acquisitions for companies with no business model that it doesn't even seem that weird to have a photo business with no contemplated business model these days. However, for every Instagram — or even SocialCam — there are hundreds if not thousands of shelved photo and video companies.To make money off of digital photos and video clips, you can either monetize the photos by selling tangible goods, digital derivatives or peace-of-mind cloud storage, or you can use the photos as currency to monetize your community through advertising. If none of those will make you enough money to sustain and grow your business, then you should hope that your technology, user base or scale will be strategically complementary to an acquirer that can gain revenue in one or more of those ways. The long-term industry winners will have a blend of these business models but, interestingly, there aren't many examples of such companies today.