Looking toward life beyond advertising

Terry Heaton, TV consultant extraordinaire, writes:

I just moved into a house, and the nice fellow from Verizon came yesterday and installed FIOS, which is the new 800-pound gorilla in this whole TV/Internet thing. Everything’s available on-demand. There’s a button you push that shrinks the screen and reveals real time weather and traffic information, provided by some distant company (why not a local media company?).

Everything is IP-driven, so the system is two-way without a phone line. Viewing metrics won’t be based on panels or algorithms or statistical analysis or any formula-based guesswork.

If you can do it online, you can do it on your TV. Widget development has just begun. The thing is absolutely amazing, and Verizon makes everything customer-friendly. (BTW, My internet is lightning fast, although not up to what’s advertised.) I mean, I hate to sound like a commercial, but you cannot imagine the difference until you have it. I’ve been writing about Fiber To The Home (FTTH) for years, and it lives up to its potential.

I have never been more convinced that the business model of television is at serious risk and that broadcasters who continue to believe that their real competition is the guy across town (see Steve’s excellent piece below) are on a one-way path to the tar pits. It is not a time for same-old, same-old, and reaching for revenue in a multi-platform delivery paradigm alone is not going to produce enough revenue growth to offset losses to our incumbent businesses.

Local information is rapidly becoming commoditized, and that’s our core competency. You can’t scale a content business in such an environment; the economics have to come from elsewhere. This is path two of our Simulpath™ strategy for local media.

He also points to Jeff Jarvis, responding to this report, which says online advertising will be bigger than newspaper advertising by 2011:

The report also says that our total media usage is declining, though what’s interesting to me is that part of this, they say, comes from efficiency and that’s an important concept in the morphing of media: The internet exposes the inefficiencies of old media for both “consumers” and advertisers. The internet makes direct connections. Note also in the report that we are taking in less ad-supported media because there is more media without ads and also, again, because we can connect directly to information around advertising.

The vector here is not toward more advertising online. It’s toward less advertising overall, and a less “mediated” world.

This is a world where The Media will only be part of the mediated picture. Consumers will always be legion, but with producers and intermediaries becoming legion as well, what makes the rest of the picture? The short answer is anything. This should be good for the economy, as well as civilization, even as it threatens every institution that ever called itself “media”.

What inflates the Web 2.0 bubble is not the technologies and practices it encompasses, but the belief by businesses old and new that advertising will sustain everybody as a “business model” (a term which, along with “content”, became buzzvogue during the Web 1.0 bubble). Free money is a huge reality distortion field, but that’s how too much business looks right now from downstream in the tidal flow of advertising money from many old media to one big new one.

But, to mix metaphors, trees do not grow to the sky.

Advertising has always been woefully inefficient. Improving targeting and making advertising accountable by counting click-throughs does not solve the problem that advertising has always been an exercise in guesswork. At some point the guessing ends — not by absolute improvements in targeting, but by the creation of new methods by which demand finds supply. These methods will be anchored in better tools for customers, and better means for sellers and intermediaries to satisfy demand by connecting to better-equipped customers.

The Net revolution has always been about radically improving the connections between demand and supply, and about equipping profusions on both sides of the relationship — while reducing intermediary costs and frictions in the direction of zero.

As a term for describing this development, “commoditization” is a misleading failure. Roles are changing far more than “content” — a term which itself misleads by reducing the informing of people to deliverable commodities. People still need to inform other people. More ways to do that will emerge. There will be business models there. Supply and demand will find each other. We need to figure out how to make new and better money with new and better roles. Advertising will still be part of that picture, but it won’t fund the whole thing.

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18 Responses to Looking toward life beyond advertising

  1. Great piece!

    Here’s my prediction: When the new tools for measuring come about, advertisers are going to realize just how little their advertising dollar goes towards sales. They’ll then work to optimize that, eliminating the wasted dollar that falls on deaf ears and blind eyes.

    From this, we’ll see a significant decrease in the amount of advertising spending and the market that defines itself as an advertising marketplace will practically disappear.

    That’s my story and I’m sticking with it. 🙂


  2. Jim Bursch says:

    TV is on the same trajectory as print.

    One of the premises of MyMindshare is that advertising dollars should go directly to “consumers” (I prefer to call them people) and they in turn will purchase their media for themselves. Given those dollars, will people buy as much media as is produced today? Or will they use those dollars to buy something else?

    I suspect in a world of people-controlled media, there will be less of it (measured in dollars), there will be a greater variety, and there will be greater quality. In other words, we the people will get more for less. Today’s media-types will glom onto the fact that there will be less and call it the end of the world, just like today’s print journalists bemoan the decline of print and cannot fathom the idea that they are being replaced, and that they were overvalued in the first place (by advertisers and in their own mind).

    Doc, have you seen this?
    “Advancing Evolution: The dis-intermediation of Media”

    and this:
    Adriana, superhero?

  3. Tish Grier says:

    When last I saw you, Doc, at Supernova, I had just been overloaded with pitches from a variety of outlets and widget makers–when I asked how they were planning to support their efforts (the old “what’s your business model?” question) the answer I got about 99% of the time was “oh, through advertising.”

    I’d known for awhile that we were in trouble–in part from the proliferation of cheap ads across the long-tail–but hearing this from the widget-makers just confirmed my worst fears: that there may eventually be far too many places to put cheap, niche-oriented advertising, thus driving down the ability to sustain any effort (widget or whatever) through ad revenue.

    One of my new concerns, however, is that people begin to value what we produce–value our content and our expression–more than we already do, and not give it away to outlets that want to sustain themselves from our generosity (I’m working on a post about this.) The idea that advertising can still sustain ventures comes, I think, in part from the current tend in the generosity of others. Once this, too, shifts–when outlets cannot make money off the free content of others–coupled with the bottoming-out of advertising, then the model may shift. Just a thought.

  4. Well put. If the demand side has the tools and services to connect to the right parts of the supply side when required, then advertising market and the industry’s dependant upon it will disappear.

    The economics will be, take Company A, an old adverstising model brand business. Company B open to all demand conversations, nil adverstising. Assume sales for both are the same, then Company B will be more profitable. To get to a nil advertising world, will go hand in hand with business opening up and making transparent to all what they can do. This is could be said to be the complete opposite of the incentive structures that exist in business today. In short more openess will equal higher profits in the future. That’s where we need to head for.

  5. Carlos Leyva says:

    The relentless push for efficiencies that “globalization” and enabling Web 2.0 technologies are driving will indeed continue to turn the economic world upside down–producing unexpected winners and losers.

    Advertising as we know it will not be spared and neither will any other industry, especially ALL pure knowledge-based industries. The legal industry, for example, is in for a rude awakening and it is already starting to feel the early tremors.

  6. James Smith says:

    Outside on our roof deck overlooking Elliot Bay in Seattle, there is a tug boat pushing a barge back and forth along the waterront with advertising painted on cargo containers.

  7. Damien Riley says:

    Absolutely amazing piece of information doc, thanks so much!

  8. James Joyner says:

    I’m getting FIOS just as soon as I figure out what to do about the fact that they don’t offer NFL Sunday Ticket like my current provider, DirecTV.

    As to the limits of advertising, you’re certainly right. I’m not sure what the alternatives are at this point, though. Virtually all the revenue I generate from my blogs are from advertising or variants like selling links. For some sites, there’s probably money to be had in selling merchandise but I doubt that’s the case for most political blogs. What else is there?

  9. CJ says:

    The guys that are going to still be making the most money in all this for the least amount of risk aren’t the actual mediums with ad space, nor the advertisers that pay to place their ads on these mediums, it’s going to be the middle-men who do the best job lining up the two (i.e. connecting ad-suppliers with ad-demanders), and establishing themselves as the necessary link in the middle that all ad relationships go through.

  10. Here’s a thought, largely from Tom Gruber’s awesome presentation on where “Semantic Web meets Social Media” if I remember rightly: the endgame is

    where user-generated content,
    editorial content, and
    advertising content

    offer the same value to the consumer of that content.

    I.e. personalisation. Fundamentally, I really don’t mind advertising, if it’s relevant to the problem I have at hand.

  11. As a local business owner, the shift to geo-targeted search is empowering and allows the local business owner to compete on a very targeted level with accountability and tracking vs. print. Thanks for this post and I believe accountability and ROI will determine the winners from the old media dogs.

  12. I have seen a change myself as a business owner. My people ask me about who I would use for a particular service or business. I tell them who I would use.
    I see this form of Viral Marketing replacing the need for traditional advertising. Those advertisers who offers a form of feedback service that allows consumers to learn more about the advertiser will previal in this market.

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  14. Pingback: Life Sayings: ADVERTISING | Life Sayings

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