We Are Social - Advertising 2.0

Robin Grant

Was Publicis's Levy right when he said that "far too many people are building plans based on advertising and they may well be disappointed because there is not enough money for everyone".

If you've been reading this blog for a while, you should already know the answer (and Mr Mayfield, it seems you don't). So what is the answer? Read on...

Levy is right. Although perhaps there won't be a crash, the traditional media industry faces a slow and inevitable decline. Those investing in new businesses based on online advertising revenue, as in the first dot.com boom and bust, need to face the fact that most of their investments will fail (for example, at recent Mashup Demo event I met a gentleman trying to get funding for a social network for gardeners). Of course, if you work in advertising rather than media, you've nothing to worry about, right?

Well, maybe you do. I think Jeff Jarvis hit the nail on the head in his recent piece for the Guardian:

As the media become more dependent on advertising, so advertising becomes less dependent on the media. With the recent death of the New York Times' pay service, TimesSelect, and the rumoured razing of the Wall Street Journal's pay wall, any final hopes of readers paying for content are fading. We prophets of free content are being proven right - whether we like it or not. Advertising is all we'll have to support content and media.

And that's fine. Advertising has long paid for content and made it free. This year, ZenithOptimedia says, advertisers will spend $448bn worldwide, much of it supporting media. Online is the one medium where ad revenue continues to grow, though at a slowing rate - 19% this year, says eMedia. There's lots of money still to be had.

But, of course, there are now more media properties to fight over that money. Scarcity no longer drives the media market, as it did when advertising was limited to the time of broadcast and the space of print. Now there's always another page view. This will drive down the price of media and that could reduce total ad spending. It doesn't help that Google is commodifying media as it scoops up, according to one estimate, 40% of the online advertising market.

But the real threat to the advertising gravy train comes not from any change in media, but from a fundamental shift in the relationship between companies and customers that has been made possible by the internet.

Advertising is no one's first choice as the basis of a relationship. For marketers, it's expensive and inefficient. For customers, it's invasive and annoying. And targeted advertising is only slightly more efficient and slightly less annoying. Clearly, the direct relationship between a customer and a company is preferable. But that direct connection cuts out the middlemen - that is the media.

The Advertising Age media critic Bob Garfield dubs this the "chaos scenario", arguing that total advertising spending - which long stayed stable and merely shifted among media - will now decrease. Blogger Doc Searls contends that on the internet, "supply and demand will find each other . . . Advertising will still be part of that picture, but it won't fund the whole thing." Beth Comstock, a digital exec at NBC Universal, complains that every business pitch she hears is ad-supported. "It's just not going to be possible," she said recently. "There are not going to be enough advertising dollars in the marketplace - no matter how clever we are, no matter what the format is."

I've chopped a lot of the meat out of Jeff's piece, so as usual, read the whole thing...

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