The Problem with Online Advertising

17 Mar ’07

Scott riffs off of the NYT’s riff off of Jeremy Liew’s recent piece on how hard it is to generate $50M annual in online ad revenue (gist: very hard). Folks have had some legitimate critiques of Jeremy’s assumptions, but the point is uncontested – in an online ad world, it ain’t easy getting green.

If I’m reading Scott right his point is that the long tail can’t really scale in this way because it’s comparatively untargeted: “Compared to other media, online publishers are pretty much giving it away. Because the reality is that EVERY page view is in viewed by someone who has some value to some advertiser. The problem is when you DON’T KNOW who your users are.”

An interesting point, and no doubt true, but I think the real culprit is something else. Whether we’re at the head of long tail or at it’s … er … or not at the head, we speak of online “reach” in terms that suggest we think that reaching people with an online ad is the same as “reach”ing them with advertising in other media. And that’s just not true. I think one of the real problems for online media is low ad rates because online advertising doesn’t yield the same kind of engagement with a brand or the same kind of action as other media; regardless of how well targeted it happens to be. In short, CPM’s etc. suck because conventional online advertising sucks – it’s hard to “reach” people when they’re busy doing something else.

Personally, for example, I ignore online advertising. I mentioned back in June that in over 10 years of intensive web browsing I could count on one hand the number of times I’d clicked on an ad. Anecdotally, many other people have told me the same thing. And frankly, I can’t remember a single online ad now, off the top of my head (correction – I do remember the steamy video ads that Arianna Huffington ran on the Huffington Post some months ago as a trial). But I could easily describe right now a few dozen ads I’ve seen on TV, on billboards and heard on the radio over the past few years. It’s one of the problems with the Web’s interactivity and immersiveness – the immersion diverts your attention from the advertising. The average person watching TV more or less has their limbic system patched in to Madison Avenue (take me … I’m yours), and is an open receptacle for the power of suggestion (must … eat … hamburgers). Advertisers know this, of course. It’s why they’re so excited about YouTube – advertisers want the Internet to be like TV. Not just because they know how to advertise on TV (as my marketing-guru friend and co-meshie Stuart has observed), but also because they want the herd back, passively drooling for burgers and coke, rooted in front of the screen, switched to “receive”.

In the stampede of media online, I’m just not sure where that leaves your garden variety revenue model. But it sure will be a big incentive for every kind of publisher (newspapers, radio, magazines – whatever – a newsvideoradiozine?) to get religion fast on online video. And the folks who provide the tools to facilitate that advertising – now that’s a business that will scale.

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