Advertisement holds web 2.0 in a death grip

Scott Karp has written a good post on why traditional advertisement fails on the web. I am not sure if I agree with all of his observations/explanations, but I do like his take on it. In the end it boils down to something I have written many times too, advertisement just doesn’t provide the user with any value.

The only example where advertisement works right now is in search. The difference there is that the advertisement itself provides the user value. If I’m already looking for something then advertisement can actually serve a purpose. It’s what Google has perfected.  There isn’t a single other example thinkable where advertisement is so effective. It is also the main reason why I believe that the true value of social advertisement lies outside of social networks. Advertisement should never, ever, interfere with social interactions between friends. It doesn’t belong there, it merely trespasses. Or as Scott puts it “Get out of my face!”.

A quote from Scott’s post:

Why do traditional advertising formats fail on the web? Because people have no patience for them, as they did in traditional media, where we were habituated to looking at print ads or watching TV commercials.

What strikes me most about the comparison between advertisement in the “traditional” media and on the web is that the behavior of users really hasn’t changed much. Just think about that for a second. What do you do when there are commercials on TV or in a newspaper? Right, you ignore them or even take action to avoid them. It is one of the most common uses of the remote control for a TV. It isn’t really to switch channels, it is used to get away from commercial breaks.  The same thing goes fro printed advertisement, I can easily read a newspaper and not notice a single advertisement within it. My brain just doesn’t register them anymore. It isn’t any different on the web. Just like on TV or in a newspaper, I’m in control. When I surfe the web I decide what is important for me. I never register advertisement. It might be there, but my brain filters it out for me. Technology helps too. I use Firefox with two of my all-time favorite add-ons: AdBlock+ and FlashBlock. These two block probably 90% of all advertisement on the web for me, with the additinonal bonus that my browser becomes faster. It doesn’t need to load the useless stuff anymore.

What I just don’t get is why we keep this dreaded web 2.0 free but ads based business model alive. It’s probably the biggest advertisement scam on-line. Over $ 16 Bln is spent on-line trough advertisement networks and there isn’t a single user interested in them. There have been a few reports of on-line advertisement boosting off-line sales, but I doubt the numbers are that positive across the web. It is pretty amazing that web entrepreneurs and investors have the balls to stuff $16 Bln in harassment down the throats of the user. It is by far the worst business model you can choose. BTW over 75% off all advertisement spent goes to Google! That leave only 25% to be divided across the thousands of web 2.0 services out there. You can easily calculate that that is not nearly enough to keep all of these services profitable. There are so many flaws in the business model that I could go on for a while. Just read my post entitled  “Would you be willing to pay for a web 2.0 service that provides you value?” . It’ll tell you about the flaws but also about possible alternatives.

The free but ads based business model holds web 2.0 in a death grip. If you want to be successful, you need lots of users. If you want lots of users, you need to provide a free service. If you provide a free service you need someone else to pay for your server costs. If you don’t have an investor that gets you ready to be bought by another company (that’s a web 2.0 business model too), you need another sucker to pay for your costs. And that would be the advertiser. And he would be harassing your own users, the people you really, really need to become successful in the first place. See the flaws in such a business model?

Off course marketeers are idiots. They won’t get this and will pour gazillions of dollars into this hole without actually creating any value with it. BTW, I didn’t mean you by that, I meant that other guy🙂

Does all of this mean there isn’t an room for advertisers on the web? Sure there is. But in the current state of the web, when it comes to traditional advertisement keep it with search. That is the only place where advertisement makes sense. The rest of the web should be off limits for advertisement. Just think of this simple rule when you are thinking about deploying advertisement. If the advertisement itself provides value within the context of the user then it’s ok. If it doesn’t, then don’t do it. Instead, try a business model that leverages user value. BTW, I’m not talking about branding activities here, just bannering, display advertisements etc.

Tim O’Reilly is already looking one step further than the current web. He writes very smart stuff about the web 2.0 operating system. It is the system that combines all web 2.0 applications. It is the place where the next search battle will take place. Google is the king of search of the current web, but the question will be if they can become the king of search within the web 2.0 operating system.

Facebook wants to be the next king, and so do all the other services that try to get a grip on user interactions and user content (take Friendfeed for example). But the dilemma that each of these services has to face is how to commercialise all that user data and interactions without violating the trust of that very same user. It’s a Catch 22 that they all have to solve. The only viable solution to this is that they make sure the commercialisation doesn’t take place  within their own application. In that way they could keep the trust of the user and still exploit him. It wold mean taking down all advertisement on social networks like Facebook and making sure the value gets created outside that network.

But I doubt any of them will or can do that. They are all in a death grip forced upon them by advertisement.

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11 Responses to Advertisement holds web 2.0 in a death grip

  1. Pingback: Experience is Everything » Advertisement Holds Web 2.0 in a Death Grip

  2. Alexander – I find myself both agreeing with you and disagreeing. First, agreement. I also bypass ads. To a fault frankly. I rarely see what’s in the newspaper, I fast forward my Tivo or I look at my computer during a TV commercial.

    On the web, I never click banner ads. I rarely click the Google search ads, although I have on occasion done that.

    But I disagree that no one’s clicking them. They are. DoubleClick has a booming business in these types of ads. Have you seen the number of ad network start-ups getting funded? It’s huge right now.

    Once upon a time, I was an assistant buyer at department store here in the States, called Hecht’s (now Macy’s). We’d run those newspaper ads. And people responded. Overall sales increased during the advertised promotion, and items that were specifically advertised saw a really nice boost.

    So I’m with you in terms of my own personal response to ads. But you have to remember it’s a big world full of people who do respond. If they didn’t, we’d stop seeing these ads that fuel the Web 2.0 world.

  3. Hutch, ad networks get funded, but Google takes it all. If you aren’t Google then chances are it is pretty difficult to earn a living using the advertisement model. There are counterexamples of course, but the majority fo the services won’t make it that way. If investors back up advertisement networks I think it is more because they assume someone (Google?) will buy the network in the end. Not because the advertisement network creates its own thriving business. And remember, the advertisers are throwing in 20Bln advertisement spend into this market, without knowing exactly what it provides them in terms of extra sales, branding, etc. etc. It’s a pretty big gamble imo.

  4. Robin Cannon says:

    Mark Dykeman over at broadcasting-brain.com had a good comment on this today. Basically highlighting the idea of a sponsorship model vs a traditional advertising model.

    Sponsorship doesn’t rely so much on click through rates and active participation, but rather on the development of brand recognition and a positive link between the sponsor company and the medium its sponsoring. On the web that can further be developed because sponsorship isn’t merely a passive activity (you’re not just looking at a logo on a team shirt) but also have the potential for active involvement in terms of click through hyperlinks etc.

  5. I agree that sponsorship or more broadly endorsement can be a simplified business model for many sites becoming the product placement of the web. Product placement, when done intelligently and unobtrusively can benefit the user, like innovative contests. I think the problem isn’t that advertising isn’t effective – it’s just over done. Even television and print ads, when truly entertaining, like Super Bowl ads or fashion magazine print ads, can make consumers take notice, remember the brand, and best of all, share the content with friends. Crappy flash ads are just more noise distracting me from my Twitter feed.

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