Posts Tagged ‘ad-generated revenue’

Why America Hates Advertisers: Nevermind, They Don’t

September 26, 2007

As previously mentioned, this blog is a record of my thoughts on how to leverage social media for advertising purposes, which usually leads to the question of how to monetize free content. For now the answer has been: advertise, advertise, advertise. But what is consequence of simply transforming all space into ad-space?

Why Americans Hate Advertisers

For a wonderful and fairly in-depth take on the state of the recording industry, read What’s the Future of the Music Industry? from the NY Times Freakonomics Qourom. Really, I can’t stress how thought-provoking and informative this forum was.

One aspect of the aforementioned Times’ piece that relates to advertising is the question of how to monetize the free consumption of music content, especially when the consumer has become accustomed to this model. One author posited introducing advertising into free distribution channels to regain lost revenue. This is certainly a viable thought, but I don’t know how I feel about it as the end-all solution. I sometimes get tired of the unrelenting nature of capitalism (which is ironic because my job is to essentially add fuel to the fire). For instance, in the past week the New York Times has posted these three articles in the Media & Advertising section: Company Will Monitor Phone Calls to Tailor Ads; As the Fall Season Arrives, TV Screens Get More Cluttered; The View From Your Airplane Window Was Brought To You by… . The breakdown of each article (respectively) is this: an Internet phone company will offer free calls and offset costs by eavesdropping on the conversation and displaying ads relevant to the conversation; the next article bemoans the proliferation of ‘snipes’ (on-screen graphic promotions that run during a television show) during the fall season; and finally, a company is going to create billboard-type ads visible during an airline’s approach to the runway.

The Consumer Response to More Advertising (and more, and more, and…)

Consider the results from a recent survey: only 14% of Americans respect ad industry professionals. One of the major reasons? Possibly because “72 percent reported that they were tired of advertisers trying to grab their attention.” I can’t fault that 72 percent. Last weekend I visited Six Flags Great Adventure with some friends (I’m an adrenaline junkie) and by the end of the day I was exhausted from the advertising; it is no hyperbole to say every inch of that park is utilized as advertising space.

We, as ad industry professionals, may be doing ourselves a disservice by monetizing every centimeter of available space through advertising. Again, I’ll borrow an idea from the forum about the future of the music industry: because no one stepped in with a reasonable solution to the growing problem of free file-transfer, young consumers got used to the idea of music as disposable. Also, we live in a culture of mass consumption which consequently leads to the by-product of mass disposal, thereby reinforcing the notion of content as hyper-disposable. The evidence? One author wrote that it’s a terribly difficult decision to sign musical talent because they probably won’t be around in a year. Since advertising continues to increasingly invade every corner of our life, are we starting to see it as useless and, quite bluntly, akin to trash?

Wait, It Could Become Even Worse!

Because of the Internet, an easy and inexpensive means of distribution, and the drastically reduced price of production (such as recording an album with a Macbook Pro and one microphone rather than buying studio time), more content is available at a cheaper rate than ever. And in turn a lot of that content is being distributed for free. So how do businesses monetize that content? It seems to go-to solution for this issue is  to tack on advertising. And to further exacerbate the issue, my boss pointed out that it’s the advertisers who have the deeper pockets, not the publishers.

So here is the line we tip-toe: consumers want their content free, and we’re willing to  give it to them dependent upon their willingness to put up with our ads. But that can only last for so long, especially at the ever-increasing rate of transforming any space into ad-space. I think there could be a point at which consumers will actively seek means to be without ads: TiVo? Adblock Plus? Or, a personal example: I’m pissed that ’30 Rock’ may not be available on iTunes throughout its second season. Why? Because I’d rather pay $1.99 and watch it when I want rather than sit in front of my TV on Thursday night and live through the pain of enduring crappy commercials during such a great show.

But then again, people have always griped about advertising. Although some swear by their TiVo and Adblock Plus, we have yet to see a critical mass of fed up consumers leading to the death of the 30-second spot and banner ads (and as for the former, although many herald its demise, I believe it is only in a state of transition and will be around as long as television is around… but that’s a whole other story). As such, the transformation of any space into ad-space continues nearly unabated while consumers tell poll-takers they’re fed up… after which they promptly head home and enjoy Pandora. Thus, as long as 1) it’s easy, and 2) it’s free, consumers will sit through whatever pitch you want.

But We’re Not Out of The Deep Waters Yet

So it’s fair to predict that the ad-generated revenue model has staying power, and that despite polls which proclaim we’re a hated profession, Americans will sit through an ad for their free content. But therein lies the rub: where are the successful sites generating great margins solely from an advertising model? Most of the industry blogs I read (see the blog roll to the right) constantly reiterate the fact that most websites simply cannot afford to rely solely on advertising revenue. Which, and I truly apologize for this, puts us back at square one: how do you monetize free content? The quest continues….


Participation In Web Innovation

April 27, 2007

For all the hype about Web 2.0, Steve Rubel at Micro Persuasion points out that there are still many people who have yet to participate. Mr. Rubel posted a graphic representation of how an extraordinary number people do not take part in simple online activities such as blogging; this reminded me of a presentation I did a few years ago about “cool hunting,” which I first came across in the Frontline show Merchants of Cool, a journalistic piece about trying to market to the hard to reach Generation Y. This report mentioned an article about a company called Look-Look, which had been profiled in a New Yorker article about “cool hunters,” a method that is based around the field of “diffusion research.”

I believe this shows that although influential people on sites such as MySpace are central to word-of-mouth marketing (according to a new report News Corp. put together), the 52% of people considered “inactive” in the digital world may pose a large problem for generating revenue: currently most Web 2.0 business models are based on ad-generated revenue, so the more visitors a site has, the more clout it has in charging for ad space. However, if we are not expanding the base of users, most sites are doomed to failure without other revenue channels. Fortunately, one point of data shows that diffusion is happening, according to a report that broadband subscriptions are rising; this does not mean, however, that those users are using social networking sites. So, how do we convince people to start participating? What strategies do we implement to help people begin to engage with new media?