Skip to content

Summary of “Advertising is Failing” on TechCrunch

Like hundreds of others, I have to respond to Eric Clemens Why Advertising Is Failing On The Internet article on TechCrunch because it appears to be linkbait or flamebait, or worse. What follows is a summary and discussion of his arguments, most of which seem to ignore the past 14 years of internet evolution.

Summary of “Why Advertising Is Failing on The Internet”

For those who don’t want to read the whole article, here’s the main points summed up:

  1. The predictable drop in advertising revenue this year was not caused solely by the worldwide recession we’re having – it’s because advertising is failing. Read on.
  2. Pushing a message a potential customer has not requested will fail as a major revenue source for most internet sites.
  3. The internet is not replacing advertising but shattering it.
  4. Targeted ads (which works well for Google) will not work well for the average content website.
  5. People do not trust, do not want, and do not need advertising.
  6. There are other models of making money from content instead of charging a subscription, which serve customers better:
    • Selling real things (Amazon, Shoes.com, Zappos)
    • Selling virtual things (Content, Second Life, WoW, Facebook, etc.)
    • Selling accessories for virtual communities (Second Life, WoW, etc.)
  7. Selling access to customers (the “advertising model”) can be categorized:
    • Misdirection: Sending them someplace else than the one they’re searching. (Google’s business model)
    • Evaluation: Essentially, review sites. (TripAdvisor.com, Ratebeer.com)
    • Social Search: Which hotels do my friends stay at in Chicago?
    • Contextual mobile ads: Assuming a benevolent internet connected big-brother, recommend a Thai restaurant when your cell phone happens to be within 4 blocks of a good one in NYC.
  8. Some guesses as to how people can make money in the future (… now that Advertising is failing):
    • Selling virtual things. People will buy worthwhile content (Financial Times, The Economist, etc.)
    • Selling access will fail totally and completely. (e.g. Google will eveutally die completely?)

Let’s advertise the “Wharton Brand” … or not.

In the interest of giving a balanced response, here’s some positive aspects of this post:

  • The internet has absolutely shattered advertising. Pay-Per-Click, in particular, and Conversion Tracking tools, have changed the value of advertising.
  • Showing irrelevant ads to potential customers is a bad idea. Yes. On the nail.
  • People do not trust advertisements as much as non-advertisements (Duh!)
  • Advertising as the major source of revenue for a site is likely going to dwindle in the coming years, yes. Not that it’s been a major source for any site for years either.
  • Yes, people learn to ignore advertising. Same way you learn to ignore your third child’s whining and instead ask them to speak to you in a normal voice.

And let me say as another “computer science” guy: I wish he was right. His argument seems to be more wishful thinking than reality. Sure, it’d be great if we had awesome review sites for products which made money from micropayments. It’d be great to visit web sites without the annoying banner ads. But the market hasn’t created any popular sites without these elements in them.

Other than that, there’s not much reality in his argument.

First off, the article seems quite personal; Mr. Clemons quotes regularly about how “I would be willing to pay for …” and “I have never used the white earbuds on my iPhone, I purchased instead …” etc. While there’s nothing wrong with relating your own experience, it’s na├»ve to assume that everyone shares your financial bracket and your needs.

While his external sources are mostly opinion (Op Ed from the NYT, his own opinion piece on Forbes, other articles by Eric Clemons), I am surprised that such a poorly thought out and researched article could come out of Wharton Business School. I have two friends who went there, and they aren’t dummies.

It seems certain than TechCrunch posted this as, ahem, linkbait.

Where he’s wrong

At a base level, marketing is akin to egomania. It’s a “Look at me! Look what I have!” Last I checked, none of the species would not have sex without a little marketing. The swimsuit models have great marketing and advertising, and they sell themselves. Those … uh … lower on the scale have to rely on good products, a good personality, or other “real-world” qualities to find a mate. Perhaps the analogy stretches a little, but you get my point. Since not every company is a swimsuit model, they need to rely on advertising to get more customers.

The drop in advertising is likely because of the worldwide recession. People have been tightening their belts for the past year. Fiscal year 2009 planning has likely slashed tons of company budgets, not because advertising isn’t working, but because Advertising is the Canary.

Searching for a term is a request. Showing ads is, in a way, fulfilling that request for potential customers. Google made $6 Billion dollars in revenues last year. That’s not failing by any means. It’s because it is a better way to advertise, and is relevant to “potential customers.”

Calling Pay-Per-Click “Misdirection” is unfair. Overture, Google and the others have finally raised the relvance of advertising such that they advertise things I have requested. This is not a bad thing. This is the beauty of online advertising. I ask for “HP DL100 G2 parts” and I see relevant advertising on the right hand side. At times I want to see who is advertising because I want relevent vendors to a product I need.

People do not need advertising. He’s half right. (Or half wrong, depending on your attitude.) Have you ever had a “Hey … exactly what I need!” moment? Where you see an ad, it seems relevant, and the product/service you find is awesome? While it’s not often, it happens enough that I think some advertising is OK. Sure, billboards on the highway, in the subway, and in bathroom stalls can go, but when I search for “Gluten-Free Bread Mix” – to find an alternative to what I’m used to at a lower cost: It’s a welcome change.

People will be willing to pay for content. The business model has been tried since the beginning of the internet boom. One notable failure was Salon. There are countless others, and a lot of discussion about micropayments and their problems. While I think that mixing advertising and content can lead to a conflict of interest, it has evolved that way for a reason. People don’t want to pay for content.

He offers no solutions. Sure, the subscription model doesn’t work, but what does? Selling virtual things in “Second Life”?

Where he’s a little strange

Never tried the earbuds for the iPhone and instead bought an alternative? Why? This makes no rational sense, and as one commenter said, he advertised his alternate choice himself. (By brand name and model number, no doubt.)

Contextual Mobile Ads takes up too much of his mind space and of the article itself. He suggests a benevolent, GPS-tracking, Email-reading, Friend-knowing business which will charge consumers to recommend restaurants by sending SMS to then when they’re nearby. It’s advertising, regardless if the medium is SMS or the web. The problem is: People are unwilling to pay for this luxury to justify a business model. (Which he neglects to consider.) Plus, if you want Thai food, you can look up a review, for free, on your phone, type in your zip code, and you’ve got you answer. And you don’t have to share all of your email with big brother.

The prevalence of Second Life references and the SMS desires beg of a business nerd who travels too much and eats at too many expensive restaurants.

There are nuggets of truth in the article, just none worth reading in the context of the greater untruths and opinion. Read on, I say.

If you agree or disagree, please comment.

Be Sociable, Share!