Google proves that everyone else executes online advertisement strategies poorly

A few posts drew my attention this morning. First, Nick Carr points out that Google is changing the way the web appears, depending on whether or not you are using the Google search engine:

First Click Free allows publishers that restrict access to their sites (to paying or registered customers) to give privileged access to visitors who arrive via a Google search. In essence, if you click on a Google search result you’ll see the entire page of content (your first click is free) and you will only come up against the pay wall or registration screen if you try to look at a second page on the site.

[stuf deleted..]

At the very least, First Click Free provides another boost to the web’s centripetal force, as Google further strengthens the advantage that its dominance of search provides. Google doesn’t like to think of itself as locking in users to its search engine, but if you get a privileged view of the web when you go through Google, isn’t that, as Lenssen suggests, a subtle form of lock-in? Isn’t Google’s web just a little bit better than the traditional unmediated web?

Mathew Ingram disagrees with Nick and takes quite a different stance:

As Matt Cutts notes in his comment, there’s nothing preventing publishers and websites from providing exactly the same service to anyone who comes in via search, whether it’s through Google or not. There’s nothing proprietary about it, nothing restrictive or exclusive. In fact, publishers would be dumb not to extend the same policy to anyone who arrives from a search engine. It’s an easy way to give someone a sample of what you’re offering to entice them to pay. I think Nick was just looking for a nice, fat stick to beat Google with, and First Click Free seemed to fit the bill.

I agree with Mathew on this one. Google has already changed the way we use the web. We browse less and search more. The web has already been Googlified as it is the most dominant search engine. We look at what Google presents us. What First Click Free does is provide publishers a nice way of providing potential customers a first glance at what is available in a paid environment.

It’s a smart business model, and resembles Freemium. Google is executing the advertisement model really well. They will, unlike other web services that try to leverage advertisement in their on business model not be hit as hard by the financial crisis. Henry Blodget has a good article on that. He writes about the current financial crisis and concludes that online advertisement will take a hit.

It’s time we woke up and faced reality. Online display-ad spending will fall in 2009, probably sharply. It will probably fall again in 2010. Hundreds of startups counting on advertising as a business model will be flattened. Yahoo, CNET, AOL, and other big display-ad properties will  get hammered. Legions of me-too video sites will croak.  Ad networks, the “hey, let’s just start an Internet company!” flavor of this second dotcom boom, will get decimated.

The reason for this is not just the current financial crisis. Henry shows that the slowdown has already started before the crisis. The underlying reason is that the advertisement business model is severely flawed. In most cases it adds no value to the user experience. I already mentioned this in many different posts, the latest one entitled “How 475Bln customer views can lead to ZERO value”, and another one called “A shakeout of unhealthy advertisement sponsored web 2.0 businesses”.

I do not object to advertisement or a business model based upon advertisement revenues. But this model is misused in a way that doesn’t add value to the end user. And I only believe in business models that provide the end user value. The FREE ads based business model has become a “standard” in web 2.0 thinking, but it hardly ever pays off, not for the startup or the user.

Google continuously proves to be an exception, but they have taken care of the most important aspect to make advertisement work. They have provided a context in which the advertisement itself contains value to the user. The context being search of course. But advertisement as a means to sponsor free services hardly ever provide the user value. They have to put up with the advertisement in order to get a free service. Hardly a sustainable or value adding model. It’s a lose-lose scenario at best.

This business model only has one purpose and that is to attract old school media companies to invest in it as they don’t have a clue of on-line value either. If anything the current financial crisis will force advertisers and media companies to rethink their strategy and simply look at the value that is being generated with online advertisement. And while the transaction and distribution costs are near-zero they will have to conclude that their value and the value for the end-user is also zero. There are better ways to spend your money. And honestly, Google may have startd once without a clue of a business model. But now they are simply so much smarter than anyone in this advertisement business. They keep on innovating the whole model making it better all the time. Working on the context to make sure there is value. Who is going to beat that?

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6 Responses to Google proves that everyone else executes online advertisement strategies poorly

  1. Kanupriya says:

    Hi,
    Very nice post, I really liked it! As a consumer I sometimes think what would life have been without Google :-). As a marketer I know not everybody is as smart as Google as far as ad business is concerned. Infact many people have been starting internet companies or social media portals mindlessly assuming that ad revenue will be their only business model…Well, making money online through ad is not that easy when you do not have a core revenue strategy or a unique product.

  2. davevideo says:

    Great post. It just underlines how quickly the web changes. Was it only a year or so ago that we were all lambasting the few newspaper sites that were keeping paywalls up? ‘Tear them down and bombard us with ads’ we said.

    I don’t agree that the advertising model has been all bad or lose-lose though. Looking at it purely from a business perspective, of course, there are flaws, but aside from that so many companies have managed to get great content and wicked ideas off the ground by virtue of small advertising streams during the web 2.0 bubblet.

  3. Great insightful post! Adding value to the end-user is a more viable and long term thinking business model than just plainly serving display ads (mileage varying of course), the good part of this shake out is that in the end everyone wins.

    It’s also interesting to see how this will affect the hype around mobile; guess some people are going to have to take a careful, second look on the developments there and really cater for the users.

  4. Pingback: AniBlurbs [Column] » Curriculum Vitae #2 met Internet Strateeg Jim Stolze (Interview door Joris van Heukelom op BlueShots.TV) [UPDATE]

  5. hazydave says:

    If you think about it, search was inevitably going to replace browsing. If Google hadn’t done it well (eg, made it functional past a key but undefinable threshold), it would have been someone else.

    But it’s all about scale. When the web was tiny, Yahoo’s directory or my bookmark collection was a decent way to find one’s way around. The problem is, neither of those things are scalable to the size of the modern web. This was starting to become clear in the days of Alta-Vista and other search engines, but Google had worked so much better, it really put the final dozen nails in the coffin of other methods as predominate.

    And at least one endpoint of this whole “give it away” strategy for Google is the simple thing: when I turn on my “DROID”, there’s that Google search bar, front and center. I can even talk to it, and the speech recognition is uncanny.

    And the thing is, I’m really happy to keep it right there.. web search done right, today, is the closest thing we have to a brain amplifier to date.

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