Update 3/29/09: Danny Sullivan correctly pointed out to me that he is a publisher and an advertiser. I’ll disagree on the idea that he is a “real user”, by which I meant “regular user”, because he is not nor I am. We study websites, traffic and human behavior – we notice and ignore and react to things very differently than a user just flying by to get the latest news and views. I do agree with Danny that my argument mostly matches his… thus, I’m only calling out Clemons argument.
Update 3/28/09: Techcrunch keeps stirring this up. Now Danny Sullivan replies…
The most damaging part of both of their arguments is that neither one is arguing Clemons original argument and rebuttal mostly fail to convince his claims about the death of Internet Advertising. He’s conclusions don’t match actual data and experience from the perspectives of an advertiser, a publisher nor really a regular user.
These points are not defensible without real data:
Users don’t trust ads
Users don’t want to view ads
Users don’t need ads
Ads cannot be the sole source of funding for the internet
Ad revenue will diminish because of brutal competition brought on by an oversupply of inventory, and it will be replaced in many instances by micropayments and subscription payments for content.
There are numerous other business models that will work on the net, that will be tried, and that will succeed.
In fact, let’s consider some counter examples:
Someone sold 4 million Snuggies based on ads. Did the people who responded to those ads not trust the ads? Their behavior shows they did enough to fork over $15 bucks for a blanket with holes in it. The better statement is some users don’t trust some ads.
Users do want to view ads. Millions of people love superbowl ads and actually seek them out online and on their TIVOs. Online only ads that people do want to view include the millions of mini games they play, youtube videos they watch, contests they enter. A better statement is that some users to want to view some ads, especially when the ads are not engaging, useful or catchy.
Users do need ads. Search engines and social graphs can only show you information about things that are already popular/reached tipping point. They cannot show you stuff just coming out of the labs. Users need ads to learn about new and different products and services. And the only way to introduce people to new things is put new things alongside already known things.
Ads are not the sole source of funding for the internet. Anyone who is claiming this is what web companies think clearly has not really studied the industry or worked at a web company and/or companies that extensively use the web in their business models.
Ad revenue will continue to grow in the long run. As long as businesses need to sell more product, more ad revenue will go into the market. The difference is that the ad spend is spread among more and more entities, so individual businesses will get less ad revenue.
Many other business models already work. and more will be created. Selling apps, selling computer time, renting server space, selling subscriptions, donor models, barters, licensing, premium access…. I mean, gosh. I don’t think we lack for business models that work. The media is simply pointing to the high profile failures of big media companies that haven’t figured out to how to shoehorn it’s model into the internet way of doing things.
Once again we see that pundits rarely represent the real story. They don’t know the price of milk. Just talking to people in the industry and summarizing the conversation is not enough to predict the end of online advertising.
See below for rest of my original response.
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Despite the impressive length, a recent TechCrunch guest feature on the failure of internet advertising fails to reveal what’s really destroying the ad model online. Clemons neither states what he claims is actually failing and doesn’t really prove it is. Alas, I will still attempt to refute the possible implications of his claim.
It is not a particularly insightful observation that “The problem is not the medium, the problem is the message, and the fact that it is not trusted, not wanted, and not needed”. Of course people don’t like being distracted with ad messages. That’s always been the case, that’s why marketers have to pay for ad placement. Nothing new here.
Advertising itself is not broken nor will ever go away. As long as companies have products they need to push into market, they have to advertise, regardless of nature of the medium. Play with the language and state definitions all you want – advertising will always be a part of our lives and media experiences.
What’s wrong with the business models of sites that rely on advertising is the pricing, not the actual idea of advertising. Spending in terms of dollars is down in all mediums, certainly. However, the amount of advertising we’re exposed to is likely still growing. I have a long post on all sorts of data points on this topic here. The short of it: marketers have a growing number advertising impressions out there, everyone know’s how well they perform and thus the pricing is coming way down from the relatively overpriced “older” advertising models in print, radio and tv. This shrinking pricing model puts pressure on the business from a margin standpoint and so the less efficient businesses fail.
Yes, I generally hate banner, text, billboard ads and neon signs like everyone else. Except when I don’t. And when I don’t that’s valuable to the company that paid for that placement and it’s valuable to me to be notified of something I might have missed. We’re just arguing price.
Social Mode 
The whole post is fairly evident of someone extrapolating a trend on bad data. Most advertising sucks, web or in print. When it doesn’t, it can be very effective.
I’m not quite sure what his point was frankly or how he thought he proved it.
The article does have some validity. I think online ads have reached the point of diminishing returns, as peoples’ senses have tuned them out when browsing the internet, even the flash ads. But I don’t see them going away. Ads will just take different forms as technology changes; i.e. mobile phone ads, talking billboards, and, ads showing up on peoples’ GPS systems.
and the point proved is????
I once owned the largest ad agency and the largest billboard company in the UK. My experience was that many brand ads were of a prestige nature nurtured by ad agencies to extract large amounts of expenditure from their impressionable clients on phony measurements of ROI. The beauty of mobile devices is that ad responses are 100% measurable. They can also be used in a time sensitive and location based way with direct response interaction with a targeted consumer at far less comparable cost to traditional media if used as part of the media mix. My latest company offers one stop shop multi platform free entry games campaigns with imbedded brand images and a points win system to reward consumers with instantly redeemable rewards using electronic barcodes at local retail outlets. The consumer has fun and opts in to give data. This is the future of cost efficient ads to pull in targeted consumers.
[…] No, really, why advertising is failing online […]
It’s true that the status quo has shifted and consumers are now in control. It’s also true that media companies have moved from a cartel-like perch atop the ad economy to hyper-fragmentation which is causing an erosion in their power. That’s what’s broken. What isn’t broken, as you poitn out, is that advertisers spend $300 billion per year to buy consumers’ time, attention and loyalty. Yet that’s what everyone is trying to fix. Is the only solution to reduce how valuable consumers are? Charge us to hide…DVRs, satellite radio, paid Internet experiences. Is the best option to cripple the ad economy and make consumers pay the difference?
The status quo that needs replacing is the flow of money in the ad economy. Media companies have been selling what belongs to others. Our time, attention, personal information. It’s a flawed economic model that has been maintained by the historical reality that consumers were fragmented…a sea of powerless individuals. The Internet changes all that. The only value media companies provide to the ad economy is audience aggregation. We can aggregate ourselves now. I address this concept as it relates to Professor Clemons’ on my blog http://www.OurSeatAtTheTable.com. Consumers provide the goods and services that advertisers are buying. Give them a slice of the pie and the question of consumers wanting/needing/trusting advertisers goes away.
Russell, I am a publisher, and I mentioned that specifically as part of my arguments. I’ve also been an advertiser. And yep, I’m a real user, too. Reading your points, you actually seem to agree with things I was saying, so I guess I’m not sure how I got lumped into having a damaging argument 🙂
Danny, thanks. After rereading the whole thing and my own argument, I’ve unlumped you. I still don’t consider you a “regular user” as you and I (and most the people reading these arguments too) study, research, play in… all this stuff and our behaviors are very different than most web users (the ones that click on all the ads!).
I am glad that someone of your authority took this argument on. And I saw Matt Cutts come in on the argument too. As a consultant to many large publishers and advertisers I was sent his argument at least 10 times in the last week. I’d rather not be defending the false notion that internet advertising is dead when it’s far more valuable to publishers and advertisers to be thinking through internet advertising that does work. Having your rebuttal has been very helpful to me. so thanks on that level.
Anyhoo. Good, healthy debate. onward.