In the previous post, I reference the first three reasons why Wharton Professor Eric Clemons thinks online advertising is doomed to fail. Ironically, his fourth reason for failure is the key to avoiding his grim vision of the future.
4) There is no shortage of places to put ads
It’s true. It’s fragmentation. And when a middle man gets fragmented, they are in trouble.
The more fragmented you are, the less power you have. Here’s what I mean. Consumers fifty years ago were massively fragmented. A sea of individuals. Changing a status quo on behalf of consumers would have been extremely difficult. The Internet changed all that as it has become simple for consumers to unite around a cause, using the web to spread the word and communicate with like-minded people. Enabling consumers to aggregate themselves 50 years ago was impossible. Today it’s more than possible. It’s happening every day.
Now think about media. Fifty years ago, a few companies owned it all. A small united front of like-minded competitors controlled an entire industry consisting of a huge number of fragmented advertisers and an even larger universe of fragmented consumers. On the Internet today, thousands of publishers look to generate advertising dollars. Trying to get them to agree is, to borrow a phrase from “Curious” , like herding cats. It has become far simpler for consumers to unite, coincidentally at the same time that media is hyper fragmenting.
Professor Clemons ends with a final prediction. “The Internet is about freedom, and I suspect that a truly free population will not be held captive and forced to watch ads. We always knew that freedom comes at a price; perhaps the price of Internet freedom and the failure of ads will be paying a fair price for the content and the experience and the recommendations that we value.”
He’s so close but I don’t think he sees the forest through the trees. It’s true that we are becoming a free population and won’t be held captive. (i.e. united, not fragmented). But why is the suggested solution that ads go away and consumers start paying for content and Internet experiences? We’re already paying for DVRs and satellite radio to avoid ads as I talked about in this post. If we’re that valuable, make us an offer…we might be interested in seeing ads after all. I’d rather be paid to be a consumer than charged not to be and I bet I’m not alone.
4 comments ↓
Fragmentation creates the opportunity to better target because you can reach smaller groups of like-minded consumers. Thus, fragmentation is the friend of targeting efficiency. What’s wrong with internet marketing is not publishing; it is the lack of buy-side resources and efficient processes to buy and manage across all of those micro targets. What is lost is the capacity to REACH easily. The small company with a niche product can win big with a precise marketing strategy. The large company selling a commodity will have to settle for waste as they spread their massive budgets across less targeted media and sacrifice precision. The bigger you get, the harder it will be.
Tony is correct: a significant downside to the glorious 1-to-1 future is that it doesn’t scale well. And, most large advertisers are scale businesses.
Re-aggregating micro targets into a meaningful-sized audience is a significant challenge, and one I think we’ll have to find a way to manage.
But I think even when we get there, we will learn that the idea of precision targeting, aka “selling only to those with a demonstrated interest” won’t work nearly as well as we hoped.
Human behavior (and interests) are far sloppier than our mathematical models. More often than we know, we don’t realize we want something until we bump into it accidentally. And just as often, we think we really, REALLY want something and then when presented with the chance to buy it we silly humans shrug and say “eh, I’m just not interested in that anymore”.
I’m the biggest booster for digital that you can imagine, as I have been since the earliest days. But as the future comes into focus I am seeing that in some ways the impersonal scale and sloppiness of old media has real benefits for advertisers and consumers alike.
Some of the randomness in old media works.
I predict we will need to leverage the strengths of both the old way and the new way, if we hope to succeed.
Ihe problem with 1 to 1 marketing is that the data set is weak. Much (not all) is driven by tricks, assumptions, old registration data, deception… all with the consumer completely on the outside. It’s better than nothing for advertisers, but just barely. And for consumers, it’s scary and seems like we’re having something taken from us with nothing in return.
The current way is to get as close to knowing everything about the consumer as possible without actually asking them for it, telling them why, or sharing the booty (we wouldn’t want to bother them), and then we wonder why people are nervous about their personal info. Improve the data set by including consumers into the value of their information and the world looks very different.
“4) There is no shortage of places to put ads”
This fourth point states a truth about internet advertising, but I don’t think it has any meaning. In the “real” world, there is also no shortage of places to put ads.
The significant factor is traffic. If I put an ad in my shed, no one will see it. If I put it on I-85, people will see it.
So, to me, there are two important questions:
1. Is there limited traffic on the Internet?
2. Does that traffic concentrate?
I think the answer is clearly “yes” to both of these. So, in theory, one could still make money by advertising at the congested areas of the Internet. However, the other two facts that Clemons raises (lack of want and lack of need) prevent the type of profit that advertising could once generate.
I agree with what you’ve said about consumer fragmentation. It speaks to a fundamental change in the consumer’s power, though I think the Internet’s primary change has been the consumer’s switch from captive to active.
Leave a Comment