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The decline in Internet advertising - though paralleled by a similar trend in
print advertising - had more serious and irreversible implications. Most content
dot.coms were based on ad-driven revenue models. Online advertising was supposed
to amortize start-up and operational costs and lead to profitability even as it
subsidized free access to costly content.
A similar revenue model has been successfully propping up print periodicals
for at least two centuries. But, as opposed to their online counterparts, print
products have a few streams of income, not least among them paid subscriptions.
Moreover, print media kept their costs down in good times and bad. Dot.coms
devoured their investors' money in a self-destructive and avaricious bacchanalia.
But why did online advertising collapse in the first place? Was it ineffective?
Advertising is a multi-faceted and psychologically complex phenomenon. It imparts
information to potential consumers, users, suppliers, investors, the community,
or other stakeholders in the firm. It motivates each of these to do his bit:
consumers to consume, investors to invest and so on.
But this is not the main function of the advertising dollar. Modern economic
signal theory has cast advertising in a new and surprising - though by no means
counterintuitive - light.
According to this theory, the role of advertising is to signal to the marketplace
the advertiser's resilience, longevity, wealth, clout, and dominance. By splurging
money of advertising, the advertiser actually informs us - the "eyeballs"
- that it is here to stay, sufficiently affluent to finance its ads, stable,
reliable, and dominant.
"If firm X invested a million bucks in advertising - it must be worth
more than a million bucks" - goes the signal. "If it invested so much
money in promoting its products, it is not a fly-by-night". "If it
can throw money at an ad campaign, it is stable and resilient".
This signal is missing in online advertising. It drowns in noise. The online
noise to signal ratio was unacceptable to advertisers - so they stopped advertising.
When the noise to signal ratio tops a certain level - ads cease to be effective.
The readers or spectators become inured to the messages - both explicit and
implicit. They tune off.
The noise in online advertising stems from two sources.
A critical element in the signal is lost if the ad is not paid for. Only paid
advertising conveys information about the purported health and prospects of
the advertiser. Yet, the Internet is flooded with free advertising: free classifieds,
free banner ads, ad exchanges. The paid ads drown in this ocean of free ads.
There is often no way of telling a paid ad from a free one - without reading
the fine print.
Moreover, Internet users are a "captive audience". It is easy to
flip ad-besieged channels on TV, or turn the ad-laden leaf of a newspaper. It
is close to impossible to avoid an ad on the Net. Banner ads are an integral
part of the page. Pop-up ads pop up. Embedded ads are embedded. One needs to
install special applications to avoid the harassment.
This leads to desensitization and a revolt of the user. Users resent the intrusion,
are incensed by the coercive tactics of advertisers, nerve wrecked by protracted
download times, and unnerved by the content of many of the ads. This is not
an environment conducive to clinching deals or converting to sales.
There is also the issue of credibility. The bulk of online advertising emanates
from dot.coms. Even prior to the recent stock exchange meltdown, these were
not considered paragons of rectitude and truth in advertising. People learned
to distrust most of what they read in Internet ads. Scorched by scams, false
promises, faulty products, shoddy or non-existent customer care, broken links,
or all of the above - users learned to ignore Web advertising and relegate it
to their mental dust bins.
More about credibility on the Web here:
The In-Credible Web
Will the medium ever recover? Probably not. As the Internet is taken over by
brick-and-mortar corporations and governments, online fare will come to resemble
the offline sort. Online ads will be no more than interactive renditions of
their offline facsimiles. The revenue model will switch from advertising to
subscriptions and "author-pays". The days of free content financed
by advertising are over.
This does not mean that the days of free content are over as well. It only
means that new, improved, realistic, and clutter-free revenue models will have
to be found. There are some interesting developments in scholarly online publishing
as well as in the fields of online reference and self-publishing. But these
are early days and the medium is dynamic. Ad-driven content was a failure. The
next model may be a roaring success - or yet another dismal defeat.
Additional articles about Digital Content on the Web:
http://samvak.tripod.com/busiweb.html
http://www.trendsiters.com
Sam Vaknin's eBookWeb.org articles:
http://ebookweb.org.master.com exis/master/search/?q=Vaknin
Sam Vaknin's "InternetContent" Author Archive:
http://www.internetcontent.net/AuthorProfile.asp?AuthorID=14
Essays dedicated to the new media, doing business on the web, digital content,
its creation and distribution, e-publishing, e-books, digital reference, DRM
technology, and other related issues.
http://samvak.tripod.com/internet.html
Digital Content on the Web Study Modules -
http://www.blackboard.com/courses/digitalcontent/
About the Author:
Additional articles about Digital Content on the Web:
http://samvak.tripod.com/busiweb.html
http://www.trendsiters.com
Sam Vaknin's eBookWeb.org articles:
http://ebookweb.org.master.com/texis/master/search/?q=Vaknin
Sam Vaknin's "InternetContent" Author Archive:
http://www.internetcontent.net/AuthorProfile.asp?AuthorID=14 |
