SitePoint has an interesting article on basic economics. When the economy goes bad (like now) companies cut on advertizing. Your revenue, following the logic, goes down. The average revenue per click has already been declining from 0.50$ (Q4 2007) to 0.27$ (Q3 2008). That is close to a 50% loss of revenues.

I believe that start ups must adapt to the upcoming hard times. Instead of offering a totally free model, perhaps a “freemium” model should be used. Having real revenue is vital in these hard days.