Death by advertising, according to the Economist
So the Economist has an interesting article up on how many large consumer web sites are having problems monetizing their audience’s usage. The point being that advertising isn’t ramping up enough revenues so these services now have to start charging for their services, which is difficult since barriers to entry are low and the user’s will then flee to some copycat service providing the exact same service but for free. And this service will do this for a while and then they will have to start charging and people will flee to another service, etc. etc. etc.
The article is somewhat ironic considering that it’s available for free, on a page surrounded by ads ;) Put that aside, I think that the article misses the mark somewhat since it assumes that Google AdSense is the the be-all-end-all approach to online advertising. And if that didn’t work, nothing will.
But AdSense only caters to the part of the marketing budget that is focused on channeling existing demand, and most advertisers (regardless of the economic climate) still want to invest the majority of their budget into creating new demand, driving new behaviors etc. And we still have no AdSense for that. But for whatever reason, there has been very little innovation in terms of ad technology since AdSense was launched, and most VCs and startups have been focusing on increasing usage, not improving technologies to better monetize that usage. The “solution” lies in enabling a more creatively driven approach to advertising, making it easier for agencies to leverage all that technology that we’ve created over the last few years. Much like what we’re trying to do with Burt.
My guess is that this downturn will lead to a surge in companies that focus on how to better monetize usage. And that the end-result for driving revenues will be a hybrid model, that charge money from both end-users and advertisers. Hum… where have we heard that before?
