Editor’s note: Last Sunday, we published a guest post by Wharton Professor Eric Clemons on “Why Advertising Is Failing On The Internet.” The post questioned a basic assumption that many of us in the tech industry hold near and dear. It sparked a blogstorm and 600-plus comments, most of them filled with rage. Even Danny Sullivan, the normally unperturbable editor-in-chief of SearchEngineLand, couldn’t believe that Clemons could be serious, and let loose in his own post. He even offered for us to republish it here (and he wasn’t the only one champing at the bit to write a response).
Instead, we invited Sullivan to present a more concise counter-argument, absent some of the raw emotion that fueled his initial response. It is presented below, followed by a rebuttal from Clemons, and then another round. We instructed both to fight clean, but fight hard. In his rebuttal, Clemons offers this startling long bet: “In five years revenues from internet advertising will constitute less than 20% of internet business revenues, excluding revenues from the sale of physical goods. Winner buys the loser lunch and gets to gloat.” Danny counters with his own wager. These two can’t even agree on what to bet on.
Danny Sullivan Believes In The Future Of Online Advertising:
Eric Clemons caused a stir earlier this week with his assertion that advertising will fail on the internet, that “it is going to be smaller, not larger, than it is today.” I disagree. In particular, I disagree with his position that search advertising is “misdirection” where companies like Google are “diverting” customers to places other than where they wish to go unless advertisers pay them. Search advertising, in the way he describes it, sounds like some type of protection racket you might see on The Sopranos.
Clemons provided no proof for the allegations he made against search advertising. He linked to no research nor any studies showing that any of the things he asserted were actually happening. Despite this, he made broad statements such as “misdirection frequently takes the form of charging companies for keywords and threatening to divert their customers to a competitor if they fail to pay adequately for keywords.”
I’ve covered the search space for nearly 15 years now. I’ve covered Google since it first existed. This type of misdirection is what Clemons called “Google’s business model.” But somehow in all my years of covering Google, I’ve never heard of any company being “threatened” in the manner he describes. Not once. If this were commonplace, I think I’d be able to dig up a story or two from over the years that supports the business model he asserts. I cannot.
Certainly there have been lawsuits over the years about Google showing ads that appear in response to terms that are also trademarks. These have produced different rules for different countries. For example, in the United States, you can be prevented from using a trademarked term in the ad copy, but the term can “trigger” an ad to appear. In France, you can be prevented from buying an ad on Google that appears in response to a term that someone has claimed a trademark on.
Somehow, Google has struggled on in France. That it continues to earn money there underscores an important point — not all searches involve brand names. Searches don’t always have the “one answer” that a searcher could potentially be diverted from. Search for “apple,” and what did you want? Apple computers or information about apple the fruit? Search for “fixing a Macbook,” and did you want official advice only from Apple or perhaps third-party resources. If you wanted third-party resources, which among them were the “right” choice that Google might have prevented you from going to by showing an ad? Search for “financial crisis,” and does anyone know which “one” resource was supposedly threatened not to appear unless they bought an ad?
Only a chunk of all searches involve a “one source” answer that would fit into Clemons’s characterization. What percentage that is, I don’t know. I don’t recall stats like this being published, nor did Clemons provide any to base his assumptions on.
Let’s assume it is a large chunk. Let’s further assume that perhaps Google doesn’t need to tell brand owners that they need to buy ads or risk exclusion — they just know that’s how the “game” works. From those assumptions, let’s then look at how it breaks down.
Search for “Yahoo” on Google. No ad, but you get Yahoo at the top of the “free” listings. Search for “American Airlines,” and the same thing happens. So, too, for “Target” or “TechCrunch” or my own site, “Search Engine Land.” Same for “Proctor & Gamble,” “NFL” or “Taco Bell.” Are these companies all ignorant of Google’s shakedown scheme and lucky? Are they carefully crafted pre-positioned exceptions in case this type of debunking was needed?
Search advertising is not misdirection. Search advertisers themselves can attempt to misdirect consumers (and have faced lawsuits and legal actions when they’ve tried). But to say, as Clemons did, “Misdirection, or sending customers to web locations other than the ones for which they are searching. This is Google’s business model,” is a gross mischaracterization that should be obvious for anyone to see.
This also brings things back to his overriding assumption — that internet advertising is failing. Search advertising is the strongest segment of internet advertising, and it has continued to grow. In the midst of the worst economic recession the US has seen in decades, search spending looks to either grow only less slightly than in the past or perhaps have a small single digit contraction. That’s not a failure, not in my book.
Moreover, the downturn in internet advertising seems far more a failure of the economy right now than a failure of existing advertising models. Ironically, while Clemons argues that no one wants to view advertising, there’s plenty of evidence that they will do so in return for things provided for free.
TV viewership is down, yet millions still flocked to watch Battlestar Galactica last weekend because they wanted to see it live — as it happened — and endured the commercials as a result. If they shot over to Hulu to watch it because they lacked a DVR, they again endured commercials in return for the convenience of seeing the recorded show.
Elsewhere on the web, more and more are encountering overlay ads, those ads that appear before you can proceed into a web site. They interrupt the viewing experience. I don’t like seeing them myself. But as a publisher who has used them, I can also tell you they are amazingly effective — nor do they result in mass numbers of people abandoning your web site, where they get good information, free of charge.
Advertising, especially offline, has an issue in that people will avoid interruptions if they can, nor do they particularly trust interruptions. In addition, offline ads are poorly targeted compared to those online and tracking performance is laughable compared to metrics for internet ads. But that advertising still works. On the internet, which continues to grow its audience, advertising is smarter, more targeted, more measurable and ultimately will find a place to be more successful, in my view.
Clemons’ Rebuttal:
Great response. I disagree with parts of it, but it is well-reasoned and in places quite convincing. Mr. Sullivan presents no data and no studies, but some very persuasive stories. Nicely done.
What is the strongest point of disagreement between us? Mr. Sullivan argues that in all his years thinking through and working through issues in internet advertising he has never heard any company or any individual complain about paid search. In contrast, I have been hearing this complaint from senior vice presidents in travel companies for years, and this year the chorus has been joined by retailers and manufacturers.. I am not suggesting that Mr. Sullivan is deaf, out of touch with reality, or in denial; he just does not work with the same executives I do.
As for others who believe that some types of paid search are a form of misdirection, I suggest that interested readers check out the website for Alliance Against Bait and Click, which is funded by several companies, all of them large household names, all of them major players in their industries, and all of them quite angry. Although it did not pass, Utah House Bill 450 sought to criminalize part of Google’s current business model—specifically the selling of trademarks as keywords to trigger paid search ads. Readers interested in more detail on the subject of abusive search advertising can review the blog of Professor Ben Edelman at Harvard; Professor Edelman has a law degree and takes a more formal legal and regulatory stance in his blog than most readers of TechCrunch might enjoy.
I am convinced that at least some major corporations view sponsored search the way I do, in part because my views were informed by discussions with them. Their principle concern, and mine, is not solely the abuse of corporate trademarks in sponsored search and trigger ads, but the entire nature of sponsored search and Google’s monopoly power in the area. And, of course, Google mostly does not misdirect; it is too clever for that. If most sponsored searches were unresponsive to consumers’ needs, sponsored search would fail.
Google’s business model is to threaten misdirection on sponsored search, but actually to engage in it as infrequently as possible. If the company consumers really want (Marriott, Continental Airlines, 1-800-CONTACTS) pays enough then it is listed in the top lines of sponsored search. If it does not, then Google places a competitor there. Obviously, if the sponsored search links never got consumers what they wanted, sponsored search would not work either for consumers, or, ultimately, for Google. Google does not require that the top companies bid top prices, but it does require that they pay. Google knows who to place on top, but will not do so unless the companies actually bid sufficiently high prices for relevant keywords. This was all treated in considerable detail in my previous post.
All of this really has little to do with the main argument of my original article. Regardless of what Google does or does not do it is not the business model that the rest of the net is going to follow. The New York Times, BusinessWeek,, and LinkedIn are not going to fund their Websites by operating search engines. This should not need to be stated. I am arguing, based on discussions with editors, that they are not going to fund themselves with ads either. This is the essential takeaway of the first half of the post.
So, what is left to discuss? Where else do we disagree? I stand by my earlier points:
- 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.
The last point, actually, seemed to be the most important. It was really the intent of the article, and the original title was “Business Models for Monetizing the Internet: Surely There Must Be Something Other Than Advertising.” This point got lost in the fury over the title of the article and in rage over the idea that online advertising might lose its importance.
I’d like to offer Danny the following wager: I bet that in five years revenues from internet advertising will constitute less than 20% of internet business revenues, excluding revenues from the sale of physical goods. Winner buys the loser lunch and gets to gloat.
Sullivan’s Rebuttal to the Rebuttal:
Many searches are ambiguous about what should be the “one true answer” that Clemons seems to believe exists. If you search for “is Coke better than Pepsi,” who is wrong for buying an ad that appears in response? Coke, Pepsi or both? Trademark owners have reserved rights to a word, not all uses of it. And in a search for “Are diet colas bad for you,” there’s no trademark usage involved. Who is Google supposed to “threaten” about not getting placement, in that case?
As for the bet, I won’t take that one. That’s because I agree, many sites cannot sustain themselves solely on advertising. Mine certainly doesn’t. Our revenue comes from online ads, paid memberships, lead generation and conference attendance. As a veteran web publisher, I know that in my particular space, online ads alone don’t cover the bills.
There are plenty of other examples. Right now, some newspapers are reconsidering whether they should have “opened” their sites to non-paid subscribers, since ad revenues are plummeting. But even when ad revenues were high, the ads alone weren’t covering all the costs that go into producing the New York Times. Other streams such as print ads and print classifieds were helping to keep the online site going.
But that also reflects the fallacy in Clemons’ argument. In the offline world, do advertising revenues generate more than 20% of total revenues outside the sales of physical goods? I don’t know. I suspect not, and I suspect they never have. Even before the web, the New York Times was not covering its costs 100% through ads. In its pure bricks-and-mortar life, it was using multiple revenue streams.
So yes, I agree that many sites need to diversify their revenue with alternatives to display ads. Some of these methods will be alternative advertising models. Some of them won’t be advertising at all but still generate revenue. Ads certainly haven’t been the sole source of revenues for many web sites in the past, and there’s no reason to think that will change. Similarly, there’s no reason to assume that ads would be the sole source of “real world” revenues for a company.
I also agree that ads cannot be the sole source of funding for the internet. Of course, I never said that this was the case. Nor do I know of anyone who has ever seriously suggested this. Clemons seems to be arguing against an idea few people have had.
Just because many web sites on the web or many companies in the real world don’t earn the majority of their revenue through advertising doesn’t mean advertising is failing. In terms of the internet, I think internet advertising will continue to grow as more people come online and the space continues to mature. And I’m happy to bet this will happen with a far better wager.
Clemons wrote that internet advertising revenues will never be as high again as they are now. I disagree. In five years, let’s look at internet advertising spend reports from some commonly accepted sources, such as the IAB. If advertising is above today’s levels, I win. If not, he wins. The loser pays $1,000 to the charity of the winner’s choice.
Clemons’ Final Reply
I offered Danny what I thought was a pretty clear wager, based on the degree of outrage he expressed in his original post.
It appears that Danny actually agrees. That was the real point of my original article. It looks like we have agreement after all. Internet advertising will be a small percentage of internet revenues. The other business models will become more important. At less than 20% internet advertising must fail as the main support of the internet.
Now we can move on and develop those business models.
Hmm….
Advertising is the 800 lb elephant/dirty little secret in tthe room. The vast majority of sites using advertising will l never succeed. Adwords/Adsense, or any of the other advertising networks won’t/don’t generate enough rev to really do any good.
But yet people scream/clamor that they don’t really want to pay for the “thing” that they’re interested in, be it music, news, or whatever… Which is why people scream that sites should be advertising based…
Google and others play into this by continuing to say that advertising will work, and that publishers should sign up to their programs. This is what you’d expect from the ad networks.. The fewer publishers, the fewer dollars into their coffers…
So.. the real interesting issue will be just how the people of today.. who want free things will adapt to having to actually pay for the thing that they want to acquire.
I suspect that over time, security of digital things will evolve to allow the owner to be able to generate the revs that they feel make the business worthwhile.
Time will tell….
What is your argument based on?
The world is full of mixed models of paying for things and seeing advertising.
It’s lazy to just say that people (a) don’t like advertising (b) don’t like to pay for things. What people say and what they do are very different.
Point: Do you not go into a bar or restaurant because the coasters have a beer ad on them? Do you walk out of the grocery store because the store manager has a food sample at the front that distracts you from the diaper aisle?
No.
People spend money, view/click on ads, reward businesses that create value. Many publishers don’t create value, many web 2.0 companies don’t create enough value to support subscription, many ad campaigns aren’t very good.
This does not mean the entire model is broken. Far from it. In fact, the difficulties we’re seeing are signs of a maturing market. The market is price setting, just like TV and radio and print did decades ago. Yes, this price setting disrupts the assumptions of many executives and pundits. However, let’s not fool ourselves into thinking their will be any sustained contraction of advertising dollars or products to advertise.
Please see my post at http://socialmo...failing-online/ for more of my research and arguments.
Point: Do you not go into a bar or restaurant because the coasters have a beer ad on them? Do you walk out of the grocery store because the store manager has a food sample at the front that distracts you from the diaper aisle?
=================
I *do* end up driving by stores that have people collecting money out front, or selling Girl Scout cookies or some other similar distraction. How do I get measured as specifically avoiding those locations because of their distractions?
Yes and I do like to kill people for fun. How do I get measured?
The girl scout example is one of an less valuable interruption. It doesn’t suggest all interruptions are less valuable. And for the girl scouts, they might tolerate a low conversion rate.
This super ridiculous argement can be broken down into two salient points that few would argue with
1. there are new, more profitable, and as of yet underdeveloped (and unknown!) business models that will ultimately become much, much more profitable than advertising, as internet usage becomes more ubiquitous.
So: the internet is in its infancy. We don’t know what we don’t know yet.
2. Online advertising will still be around. Companies aren’t going to stop advertising online, but the increasing
“supply” of ad space and automation of online campaigns will drive down prices, ultimately making it less profitable.
So: Ads aren’t going anywhere, dumby. But they’ll get cheaper, and won’t be as profitable in the future.
I don’t see how you could compare going out to a bar and using a web service.
Most people who view this site WOULD actually pay for a good service, mostly because we understand the hard work that goes behind it. But what about the other 99% of the population? Think about how computers are being associated with the way to acquire entertainment, for free. Anything digital, people can’t see much value for.
Facebook is a good example. It reconnects old friends, provides a means of constant communication with peers. Now if facebook decided to charge a monthly fee, how many people do you think would still use it?
That would be friendsreunited.com, the original Facebook. ITV claims friends reunited has been profitable for the last five years with considerably less members than facebook.
I would like to see Facebook try that experiment. We can’t argue with counterfactuals.
Is Facebook valuable enough to enough users to make it a viable/profitable business? Great question and one that should be tested.
and Alec East seems to have some nice data.
Classmates.com is also profitable… and it is subscription only.
@Russell Foltz-Smith
AWFUL example. I’d like you to find more than a company shill who actually likes classmates.com. The site succeeds as subscription based because of its manipulative ads. Of course don’t get me wrong, I love net advertising and support their ads. But most of the time the ‘You have 10 classmates looking for you’ ads trick a lot of common folks into signing up.
Classmates would not be profitable were it not for its online advertising.
Subscription models will, for the most part, fail.
People simply cannot afford to, nor do they want to, subscribe to countless sites and services for content… especially when good search skills can yield the same material free of charge. Obviously, there will be some who pay, but the number will decrease, as compared to total market share, over time.
Get used to it… online revenues are going to be smaller than terrestrial revenues for the same product (i.e. newspapers, music, movies). The potential market, however, is much larger, so advertising done in “the right way” can keep the boat afloat. Having adjacent physical product tie-ins will generate more and sometimes even the lion’s share of income. So far, the vast majority of advertising online is poorly realized and horribly positioned. That will change. In the end, advertising will be a major source of revenue in the world of digital content.
So… I guess I disagree with everybody… at least a little.
I wrote a follow-up to this too “Why Internet Advertsing Will Not Fail”
Feel free to check it out @
http://bit.ly/14QZwY
Interesting..By the way who are the wrestlers in that image(on the home page of this article). I m eagerly waiting to know
http://www.smartbloggerz.com
I was amazed with clasilistados.com
They have done an incredible job with the Spanish speakers’ advertising industry.
Jess
http://www.clasilistados.biz
ROOOOOOOOOOOOOOOOOOCKSSSSSSSSSSSSSS!!!
Speaking of paying for something you value, I was wondering…If tomorrow facebook suddenly comes out saying each user will have to pay $1 a month to continue using the service….I wonder how many will pay and how many will leave. I have a feeling they won’t do too bad.
I think you would lose a large amount considering the growth is international. The problem with ads is the moment you take a user to a bad url, a spammy url the ad interface that took them there loses value in the users eyes. I use to click adsense all the time but I lost faith as the sites it took me too sucked so what was once useful become unuseful quickly. Facebook was the same way. These companies go for short term profit which degrades trust in the interface over the long term because they don’t have a higher standard of use, of the interface. Furthermore the human brain ignores ads to the point you don’t even see them. I don’t see TC’s ads. This is why people try popups but there is something fundamentally wrong with annoying people into buying your services.
This seems to be a shortcoming of technology rather than the business model. If i am looking for – lets say ‘a 1 ct. solitaire diamond ring’ and i get presented with an ad for an undergarment with just the name being ’solitaire diamond’ – yes i would certainly get wound up. ‘the human brain’ is trained to explore and be attracted to context and if the context is there, online ads DO work.the phenomenal success of google is a testament to that – i guess the disucssion should be about technology rather than the business model
Your right… but as soon as you click to a bad link the business model fails because it depends on being useful and as long as bad links still appear it loses its usefulness. It is more than the wrong type of website it is bad looking websites to.
Free to Pay doesn’t work well…
HotorNot.com tried to go pay, and it did not work well.
Facebook had a great 5 year run; however, it is clear other social networking sites are becoming more important to power users–mainly twitter, which looks to advance social communication further.
sixdegrees/college club to friendster to myspace to facebook to
???
HotorNot is a terrible counter example. There is a huge value difference for the information and connections on HotOrNot and Facebook. HotOrNot is, well, we know what it is. It’s a commodity experience that you can get at any beach, thousands of websites and most nightlife scenes.
Facebook may be less valuable/more valuable than other social networking sites. Who knows. But on the whole social networking sites contain deeply valuable personal information and a very big network effect. How this can be converted to profits is a work in progress, but no doubt it is valuable.
There are plenty of substitutes for facebook, and more entering the market quickly, and people are perfectly willing to maintain multiple profiles.
Further top users have shown a willingness to jump to the next network (six degrees / college club -> blackplanet, friendster -> myspace, bebo -> facebook, fubar -> twitter as communication)
The dating “network effect” of hotornot is similar to any other social network “network effect.” In fact, dating sites have a larger advantage — larger barrier to entry b/c it has a network effect based purely on size rather than internal relationship networks of the members.
FB/myspace etc.. the internal network of members make it EASIER to pull users into systems in large chunks.
Thus, HorN is a very good example of how the users will defect to alternatives when charges are introduced.
Okay answer my point. If display ads are not enough for websites then which second revenue stream are we talking about exactly? And what about the blogs?
All blogs run on display ads, do you want us to charge the visitors in order to view our content? Do you want us to put some Paypal donations button? Do you want us to use the absurd paid print method?
In my opinion, Display Advertisement will GROW, the formula behind it might change, but overall it shall grow since it is the only method 98% of the bloggers and webmasters earn.
Just because bloggers use this model does not mean it will grow. This sounds more like wishful thinking than an insight into the marketplace.
What else model do you want bloggers to use? This is the question.
Good question. I think one way to think about it is who reads you? What is the niche that you are filling? Then how can you blog about something with FULL TRANSPARENCY that a sponsor would be willing to support.
An example of how this model is being used in TV today is with reality TV shows. Have you noticed how they’re working advertisers into the actual content of the show? Some do it elegantly (Project Runway on Bravo) and some do it poorly (The Biggest Loser on ABC).
My take is that it’s about figuring out the synergies between your audience, your content and your advertisers. When you can align these three things, everyone wins.
It’s a mistake of thinking of what will happen with internet advertising from only a blogger perspective.
The internet is a rich, diverse place. You have online merchants who sell real world items. They have web sites that generate revenue that way. You have virtual services being offered, and these earn as well. You have content sites that carry ads. Some of these sites also sell access to premium content or services. You have co-marketing campaigns, lead generation, affiliate sales and much more that’s going on.
Frankly, the amount of revenue generated online has never been well defined that I’ve seen. Hence the issue of whether internet advertising is failing or not, as it relates to what “percentage” of online revenues it is supposed to be. Some blogs don’t carry ads at all, nor do they want to, as they are personal efforts — not businesses. Failure they don’t have ads? If I’m a merchant site, doesn’t make much sense for me to carry ads. Actually, I probably buy them to get people to my site.
There’s a role for internet ads; they do contribute to online revenue and sure, some bloggers will help support their efforts with them. But thay may do other things as well (such as blog that generate “real world” consulting, for example).
@ Danny Sullivan
Respect your work, but your statement, “If I’m a merchant site, doesn’t make much sense for me to carry ads” tells me that you’re misinformed as to the way online retailers are fully monetizing their sites.
Most online merchants are selling someone else’s products – not their own. Well when you sell 10 different brands of product type X and have decent traffic streams, you can bet your paycheck that those 10 brands all want to get in front of your customers.
Banners, product positioning, sponsored portals, email blast – even SEO services are all becoming strong revenue streams for smart online retailers. It’s the online equivalent of point-of-sale advertising that is big in the brick and mortar world.
Danny, just look at Amazon. Sure they’re light year’s ahead of most online retailers, but they sell products, sell others, allow others to sell, sell ads, services, etc.
Just like content sites and bloggers need to diversify their revenues streams, so to do online merchants…we’ll that’s if they want to maximize their revenue streams.
Garrett, I was speaking generally. I almost mentioned Amazon as a good exception. Or take Southwest where they upsell you on car rentals after a purchase. But if your more selling your own particular product or products, you probably aren’t counting on ads on your site to be a major revenue stream, that all.
@Danny Sullivan @Clamon
All I can say is that …. blogs are the new online media. And since most blogs are about news, tips, and reviews, they have no other choice to earn except display ads and CPC ads.
Let me give you a clear example. Suppose my blog is about reviewing electronics products, and therefore the visitors that come to my blog are searching for a good electronic product. Now wouldn’t Samsung, Sony, etc advertise on my blog to connect with the customers? Indeed they will, since they have no other way of connecting with the customers.
I disagree where Clamon says Users don’t trust ads and Users don’t want to view ads. It shows how misinformed he is. If I am looking for a Digital Camera from Sony on a blog and I see an advertisement from Nikon. I will indeed click on Nikon digital camera advertisement and then compare both Sony and Nikon models myself.
Trust have some limits too, if I get a ‘You have won a lottery’ ad, then indeed I won’t trust it. But otherwise if the ad is from a good brand then obviously I will trust it.
Y’all are forgetting about the advertisers. They will ultimately decide what media to support. And they’ll do that by figuring out the ROI of the individual medium and pricing model thereof. Just because “blogs are the new online media” doesn’t mean that advertisers “have to” support the banner advertising revenue model. That is what newspapers have essentially been saying for years and look what that has gotten them.
Whatever is said here, we have no idea what technology or revenue models will appear over the next 5 years. Newspapers didn’t know Craigslist was coming to take away their classifieds and AOL didn’t know that they would lose their dial-up business… Looking at my crystal ball, I see search continuing its upward trend, with banner advertising holding its own and growing among local advertisers (a huge portion of all advertising dollars is local). Then, we’ll get a new technology that will stand it all on its ear… maybe it’s mobile? Maybe it is implants in our brains…
Bravo to Clemons. Well reasoned, well thought out, well said. Sullivan sounds like a new version of the old guard offline world holding on to dogma about the relationship between advertisers and consumers.
The web means that consumers are now in control and advertisers must fundamentally change the way that they engage and communicate.
Bye bye banners, bye bye paid search. Hello integrated content sponsorship and other new models that align user goals with business needs.
Jeff, as someone who has championed the revolution that has been search marketing period, no, I don’t think I’m old guard at all.
But if paid search is going away, why on earth is this one of the chief things that your company Sentient Interactive currently pitches?
http://sentient...e.com/services/
Seems like if you’re in charge of strategy and think it’s going away, you ought to be dropping that now rather than wasting time on it for you and your clients.
BURNN
SEM is a component of the online marketing mix today. However, as companies continue to develop marketing strategies that directly engage consumers, display and search will become less important over time.
If there is anything that we should have learned over the last 10 years about marketing, it’s that things are constantly changing and evolving. The pace increases as new technologies evolve and consumers embrace them.
Our clients leverage search engine marketing but that is only one component of the overall online marketing mix. We have diversified our business. Others would be wise to do the same.
Whose opinion do I value more… the guy who studies internet businesses and pontificates from a classroom or the one who has run a successful internet business, that utilizes advertising, for the last 15 years?
My money is on Sullivan.
you used ‘pontificate’ in a way that makes it seem like a bad thing.
Betting on something that might happen in the manufacturing, box store retailing, farming industry might be easier to do than betting on something that will happen 5 yrs from now in regards to the internet.
There is too much evolution ahead for the internet. We are probably only at the beginning of its useful life cycle.
As for the wager, that is a suckers bet.
Too much wiggly room.
I enjoyed reading both sides of the discussion.
Thanks.
Not really, those industries aren’t any easier to examine then the Internet, in fact I’d say technological disruption is much more likely in those areas.
For example, in agriculture we can look at renewable energy sources such as biomass / ethanol and consider the global trade-offs between renewable energy needs and food costs…. and that’s just one tiny sector of agri-biz.
Someone could argue that the Internet is proving to be more and more cyclical in nature of development around a few key applications…
Search — is still search.
Social Networking — still social networking (six degrees, college club, community connect etc…)
E-mail — fundamentally still email
Advertising — still pretty much the same.
So, due to the cyclical nature of the net, I’d refrain from trying to exempt it from general patterns in other industries.
Internet can still go insane in the next few years. Clemon’s bet is a suckers bet and he knows it. What a jackass. What if a few major newspaper and mag companies go online? That could potentially on its own add a billion+ in subscription revenue to the internet. Clemon’s is trying to act like internet advertising is going to become less important for the common man. Oh contrare, in five years and even ten years I’m willing to bet my life that any regular person not in charge of a multi-million or multi-billion dollar company will make the bulk of his net income from advertising.
My business, click my name, is going to launch a product in a little over a month which will eliminate most online advertising forever.
Parasites be afraid, be VERY afraid. I have the server power, the people and the band width to pull it off this time.
I give you server tower 1, code name doodoo.
http://picasawe...et.com/Servers#
and 2 brand new simcom 6 gigabit pci-x cards to boot for and LVS install on one of the servers to do true layer-4 routing. The kind you have to buy a 100,000 $ USD nortel alteon machine to do.
This is the first of 2 towers. One in LA and one in NY. These will power the solution that will bring mobile and advertisement free CDN to the masses.
Kiss adwords goodbye, in a few years anyway. They are currently being configured with custom coded linux based software.
1. Change the look of your site. It looks like one of this old-school xanga/angelfire pages from the early 90s.
2. doodoo? really?
3. You’re starting to sound like that mylocator.com guy. He’s already lost all credibility.
1. That is just an under construction page. I made it with a default Dreamweaver CS3 template. Sorry you don’t like it. Perhaps it is time that Adobe does something about their default templates ???
2. Yes, really.
3. I’m sorry for the mylocator guy.
My domain will be offline for a little bit as a move my server to my ISP roadrunner’s network until these new servers are online.
But that just means that the under construction page will be off line, so no big deal. Unless you are really in love with our under construction page.
you have the ugliest design ever. My eyes burn.
I think there is a far more fundamental issue that is the problem with online advertising. It always for almost complete information for advertisers. That is a good thing, but it wrecks advertising rates to know when someone sees your ad, when they engage it, whether there might be click fraud etc. Offline advertising for things like the NYT was based on page placement, size and subscription numbers in large part. Page placement is still relevant as most online advertising wants great placement and much else goes to remnant ads. Size has been crushed because user are mostly irked by ads that are too large. But subscription numbers are the real problem. Before it was an inexact science how many people were reading each page of the NYT and papers could profit off of the lack of knowledge, and the small gains add up. The poor engagement numbers and sales number combined with the discounted take on views and engagements for fear of click-fraud now work against publishers and for advertisers. The fact that advertisers now have far more publisher options with much more precise demographic breakdowns also hurts publishers. The fact that the Internet allows everyone to be a publisher is killing general content publishers. The current crisis will end with more publishers, less bloated publishers and more target publications. There will also be a settling of the online advertising market in time which will decrease volatility.
I apologize for any mistakes in the above, it was typed rather quickly without a proofread and it also glosses over a lot of things, but after all it’s only a comment.
I’m very interested in the general discussion of online advertising, but not so much in the specific issues being argued in search advertising.
I’m thinking about display advertising on non-search, content pages. I think we’ve all been mislead by the counting of clicks, we’ve been looking at the wrong audience.
.05% click-thru rate is considered reasonably successful, but rather than look at the effect on the very small minority who clicks on a display ad, I think we need to look at the effect display ads have on the other 99.5% who don’t.
It could be that the effect of display ads on the majority audience is negative. We don’t know, but we do know they don’t interact with the ad.
Do they see it at all? Are they distracted from their enjoyment of the page content by the ad. Does this make them annoyed? This seems logical, but truth is, we don’t know.
As in off-line advertising, fuzzy behavior studies, focus groups, opinion poles are the only insight we have into how people react to advertising.
Offline, particularly TV advertising, uses very shaky metrics to justify very high ad rates. Online, the low click-thru rate is used to value the ads at very low rates.
If advertisers used their display ads to effect the large majority of a page’s audience, they would not count the clicks at all, but look to other indicators to gauge effect. Very fuzzy, very difficult to quantify, but they may look at reputation of their brand, the loyalty customers show he company.
Without research, I think a way for advertisers to start serving the majority audience, would using display ads for supportive, underwriting-like messaging: “So&So, Inc. proudly supports the content on Such&Such blog”. To link the brand to the content in the reader’s mind.
Perhaps we’d be well off placing display ads that do not call attention to themselves, that use supportive design in color, contrast, to blend into the page, to not distract, that bring a gentle, almost subliminal display of the company’s logo.
We would then judge success by looking to indicators of the general public’s awareness of the brand, its reputation, the loyalty shown to the company.
Remember why QWERTY keyboard’s keys were arranged that way? It was to slow down typing. It didn’t succeed in slowing down people’s typing. In fact it has gone that far that people cannot take any other keyboard now. People work around obstacles.
Many see online advertisement as obstacles to the contents they are looking for. People will slowly learn how to ignore it totally. So I agree online advertisement is having diminishing return.
Good thing people didn’t say that about all other advertising forms in history! Oh wait….
Sullivan – sorry man, you got owned.
I agree. The prof really stakes a claim.
I agree.
The prof got badly brutalised in first article because he stated what could have been one of the uncomfortable truths from the well in today’s xckd (http://xkcd.com/561/).
People like advertising where it is contextually relevant, ask the magazines, hell ask Oprah and Martha.
Online is no different and a large audience around a particular vertical will always generate double digit cpm’s becase it’s worth it for the advertisers compared to the alternatives.
This I agree with this. I will also say that mobile will be a bigger advertising space than the general internet in 5 years. This will include mobile versions of Oprah and Martha, as well as search. In terms of search, I bet we see contextualized searches where the mobile versions will be about lighter results and awareness, and desktop versions will include more in depth results.
The problem with web advertising is that the context is limited to the channel rather than the need. A billboard serves a different function than a magazine ad. Interesting times for sure!
The bottom line is that companies feel so beat up by Google that they don’t even bother trying to make a competitive product or service any more.
They accept that Google is simply better than them and will beat them up at anything they try.
Google won’t venture into certain areas of advertising. One of them is adult advertising, and the other is what the company I work for after hours represents. If you can beat Google there you can reverse market back to their sector from a strong position rather than a weak position. Everybody tries to attack Google from a weaker position and they lose.
You don’t need to read the text. Just check pictures and you will know who to follow / trust. Its ridiculous the whole thing.
That was a disappointing cage match.
Clemons went from “advertising will fail” to “advertising will make up less than 20% of revenues.” I agree with him on this revision, but it’s a definite step back from his position in the original article.
Sullivan at least held his ground, but his main argument was on a supplemental point, on the “misdirection” of search advertising, in which I tend to agree with him. When pressed about advertising, they both seemed to find a middle ground pretty easily.
Good article, and I thought both sides presented their arguments well, but far from a steel cage debate. If it was a boxing bout, the crowd would have likely booed at the end.
Actually, Clemons (that would be me) did not change his position. His original title was “Monetizing the Net: There Must be Something Other Than Advertising.” He then listed 8 alternative business models. Nobody gave a damn. When Danny was offered a chance to accept that fact that advertising would fail to fund the net and would amount to less than 20% of non-eComm revenues. Turns out everyone agreed in the end. So … yeah … not much of a fight. But … perhaps … a little more clarity. As discourse it was fine. As blood sport … it turns out the debate was more interesting than lethal. I think Danny did a good job and ended in a rational spot. Danny can now go back to his blogging and I can go back to mine.
I’m going to leave off further comments with this last one, because much as I’d actually like to talk more with people on the subject (and I do), I also don’t want to be seen as extending an argument we’ve already had above.
We understand the original headline of Eric’s article was changed. But the premise was not. I’ve read through it several times. He’s got two subheads that say “advertising will fail” that I assume were not changed. He’s got point after point about why he thinks advertising will not work online. The entire premise is that ads themselves won’t work. From that, he then argues people should look at other forms of monetization.
Internet advertising does work. People buy ads in various ways and drive traffic to gain successful conversions. There is a difference between whether ads work as an exposure/traffic driving mechanism versus whether they work as a revenue model for sites. Those are two different things. In his original article, he just argued over and over that ads don’t work, period. He did not distinguish between the two aspects.
After the debate, I feel like more clarity on this front has emerged. As I said, I have no disagreement that many sites will not be able to support themselves solely on advertising. In fact, I think that’s already been the case for years, so it’s not exactly a news flash.
I have a big disagreement that advertising is “failing” if you decide to define it as some percentage of online revenue, given that from the advertisers perspective, that’s not their definition.
For an advertiser, trying to decide if ads are failing, their definition will be whether ads get them qualified prospects. If they do, they’ll keep buying. If they don’t, they’ll stop. And if it’s really failing, all ads will go away.
I don’t think ads will go away. I think ads will continue on the internet and that ad spend over the years will continue to rise, not decline, as Clemons argues.
As for my emphasis on search advertising, it’s so large because I felt Clemons had so grossly mischaracterized it that it undermined anything I wanted to believe about his knowledge of internet advertising. He didn’t shift my viewpoint on that in this debate. I think he has a narrow view that paid search is all about search engines, mainly Google, trying to fleece trademark holders out of their “rightful” place in search results. I’ve already addressed that I’m both aware of the issues around this but that paid search also involved many generic searches where there are no trademark issues involved.
Any last words, I’ll leave to Eric.
Take it easy Danny its all good
Clemons is technically incorrect. I have done advertising for known brands – global and national. I spend up to $500k/month on behalf of some brands. I pay keen attention to where the money goes.
I will take a long standing example from 2004. Expedia/Thomas Cook/Travelocity/etc. An advertiser using the keyword “thomas cook” (or “expedia” or “travelocity”) *without* the use of the trademark name in the advert copy, faced a 1% CTR or so. At the same time, the brand owner would face a minimum 20% CTR, and up to 60% CTR. This would drive the Quality Score of the competitor to the level that Google *would not show the competitor advert*; with a consistently low Quality Score, adverts simply aren’t shown. The Brand Owner would be paying around $0.01 per click and the competitor could bid $100.00 and still wouldn’t show.
Google makes the bulk of the money not from trademark names, where the “misdirection” argument has any play, but from keywords related to the function – for a travel advertiser, that would be “cheap holiday”, “flight to new york” and so on. What “misdrection” can be offered on these?
I’m afraid that Prof Clemons has merely cemented himself in my mind as a fool. He doesn’t understand his subject and pontificates at length with little knowledge of the area.
It’s sad that he teaches at one of the best business schools in the nation.
Danny has incentive-caused bias (whose bread I eat his song i sing). The professor fellow seems to have no skin in the game, and hence may be more credible
That’s not really sound logic. Both have skin in the game. they both blog and depend on an audience to read what they write.
Russell, I can assure you that Professor Clemons isn’t writing to generate blog income. You can trust that what he’s written isn’t driven by ulterior motives.
Background and disclaimer: I’m a former PM at Google and one of the few who worked on both Search Quality and Ads Quality. I don’t speak for Google but this is stuff I used to think about all day every day.
Short version:
Advertising on the Internet is going to grow, not shrink. Advertising is not for every business and certainly should not support 100% of the Internet, but most business that rely on advertising today do a poor job of it because they show bad ads. Most advertising on the Internet today lacks relevance but that doesn’t mean advertising will fail. It means advertising must become more relevant, and as companies make their advertising systems focus on relevance, ROI increases for advertisers, users become less ad blind, and publishers make more money. Clearly non-advertising models will evolve, but advertising will evolve as well.
Long version:
The thesis is built on bad ads, not good ads
————————————————————–
All of Prof. Clemens points about users (which then form the basis for the bigger thesis) are based on irrelevant, untargeted advertising. Of course users don’t want to view those and don’t want to see them. None of them hold for highly targeted, relevant, timely advertising. If I’m in the market for a new laptop, I want to see all of Dell’s offerings, HP’s offerings, Apple’s offerings, and be able to interact with highly commercial content.
Think about the Super Bowl. People watch the Super Bowl FOR THE ADVERTISING. If advertising is inherently evil, why would people do that? Super Bowl advertising is great because it’s entertaining — one of the ways to make an ad more relevant to users.
If you tell someone that they’re going to see advertising they have a negative reaction to it because the overwhelming majority of advertising they see is bad and not targeted to their interests or needs. If you tell someone that they’re going to see content highly targeted to the areas they’ve shown interest and the purchases they are considering in the next 3 months, people will be far more receptive.
I think Professor Clemens spoke with only half of the people he should have spoken with in coming to his conclusions. By only speaking with advertising executives who have an incentive to spend as much money as possible to gain brand recognition and who are used to taking this approach in the offline world, you get a skewed perspective of how Google operate, how advertising should work, and how users interact with advertising. I’ve worked with many executives at big brands, online and offline, and many of them try to apply ways of thinking that go against what Google is trying to do, and they think that there’s some group of people at Google making arbitrary decisions based on sales numbers about which ads to show and which companies to threaten to cut-off. You see this happen even more internationally where a lot of advertisers aren’t used to producing highly relevant, targeted ads and complain that Google is trying to price gouge them. I’ve had dozens if not hundreds of meetings with salespeople, advertising executives, and marketing firms explaining how Google’s systems work and once people understand it they often have a much different interaction and experience with SEM as a channel.
How Google works and why it matters
————————————————————–
Some very important background on how Google works: Google’s advertising systems are groups of engineers purposefully separated from salespeople and advertising executives. These teams of engineers have 1 purpose: to create an advertising system that produces the most relevant ads for Google users. The team is called Ads Quality for a reason, because the singular goal is to increase the quality and relevance of advertising for Google users because in the long term this maximizes Google’s revenue.
How much you big on an ad is only a portion of what goes into determining where an ad shows, and the decisions are made in an automated fashion by large machine learning systems. And in fact, there are ads that are of low enough quality that Google chooses to not show them at all. Of course big companies think their ads are relevant and they think they should be ranked higher. But many times they’re not and many times users don’t behave the way advertising executives would want them to.
So why does it matter how Google works?
Because Google’s core business does what few other advertising networks are able to do: produce relevant ads for users. The problem on the Internet is that advertising is not relevant in most cases because the bulk of advertising on the Internet is not targeted well. For example, you don’t hear the term “remnant inventory” thrown around with Google search ads…because the focus is on relevance and if an ad isn’t relevant, you would rather not show it at all. There is no threat of misdirection, there is no human intervention in the process.
It’s a very simple proposition: produce ads that users think are relevant and are willing to click through on and produce high ROI for you, the advertiser, and we (Google) are happy to take your money and show your ads.
Imagine what would happen if there were a human sitting in between a blog you read and the advertising network serving ads on the blog, and the human’s job was to cut out irrelevant ads based on the content of the blog and the person viewing the page. Most blogs and websites would have far fewer ads on them.
Advertising must become more relevant
————————————————————–
Advertising is just content…it has an entertainment value, a relevance to your interests, a timeliness, etc. Google figured out how to show you relevant, timely commercial content right before you purchase. A lot of other companies have to figure out how to do this for their own domain. It may be integrating it into a blog post, it may be making the content entertaining (think Burger King’s recent stunts), it may be location based relevance, or any number of things that we haven’t thought of yet.
Advertising is not going to fail in the long term and Google is not going to fail in the long term. The opposite is going to happen — advertising will morph into a far more Google like view of the world out of necessity. People respond really well to advertising that is relevant and targeted well (demographically, topically, geographically, temporally, etc.). Most advertising on the Internet doesn’t do this. This does not mean advertising will fail. It means advertising must become more relevant to users. And when companies figure out how to make advertising more targeted, users win, advertisers win, and publishers win and the entire industry grows with it.
Your view is interesting; however, I also think you should focus a bit more on the areas where Google has actually gotten it wrong (radio, tv, newspapers etc.) , and also give more credit to Overture — the originator of the PPC/Auction idea in search. Search is a unique beast on the net.
Search traffic is extremely targeted traffic in nature — you have much better parameters about what the user wants especially if it is a commercial term– in reality I think it is much it is exactly like “content” as you said.
In the search equation, the user is actviely willing to examine the ads as content– much like large ads in a phone book.
As a result, statisical models can be applied, parameters like location can be used — serving the advertisements becomes much like the algos for search itself.
However, this is preceisely where I think you start giving Google too much credit — the auction (for the placements) and inventory give Google a signficant network effect advantage (like the largest distributed phonebook/newspaper in a city).
Advertising outside of search/yellow pages — (including content ads, video, radio, newspapers etc.) are much different beasts, I don’t think Google has any stronger solutions than anyone else in those domains, and as a result relies on the larger base of publishers and advertisers in those areas.
I think Google has great search tech and great search monetizing tech. All the other Google tech for advertising is the same as everyone else — save the benefit of a massive user base.
“People watch the Super Bowl FOR THE ADVERTISING.” Really? All this time I thought it was for the teams.
As a result, advertisements in almost ALL REAL content areas are a distraction from the real content — no matter how innovative the ads are.
Search and Yellow Pages are unique beasts.
Therein lies the Rub — to beat google at advertising you have to re-think navigation, or pour billions to break the Network Effect Google enjoys — those are pretty rough propositions.
Avichal, I was thinking the same thing about the people Clemons said he talked to. You’ve confirmed some things I’ve always suspected that 1) upper level execs often don’t understand the nature of search ads and 2) people who complain about Google’s ad programs probably aren’t utilizing it properly. To get a true sense of where online advertising is going, you need to talk to the people in charge and the people who actually run the campaigns. I’m sure you’d get two very different perspectives. It’s understandable that companies don’t want others advertising on their trademarked terms, but advertising on search campaigns is a lot like marketing your product in a grocery store. There are always going to be competitors trying to one-up you. Competition is inevitable and in this internet age where reviews and product information are easily available the companies that survive are going to be the ones who put out the best products and offer the best services.
Avichal, a very good point there about relevancy of the item. Relevant item is no different to Amazon relevant book recommendations. If Amazon recommends mostly irrelevant items to users, then cross-selling & up-selling would be useless (ie, no effect in terms of targeted cross-selling). I had pointed out in my post in Dr. Clemons first article on the subject, that the key is item relevancy, which was something not discussed by Dr. Clemons himself in his first article.
The only people who believe in or even care about the value of advertising are the people who have a stake in it.
The rest of us stopped giving a crap, and learned how to filter and ignore advertising a long time ago. But I guess they’ll keep fooling themselves as long as advertisers are willing to pay. The naked aggression displayed when anybody dares to address the painful truth is telling.
Would the last person to inadvertently click on an ad please turn out the light?
kthxbai
This thought is continuously thrown out there, but myself and many others can look at their analytics and conversions and know that they’re making a nice return on ad dollars. At the very least, I can’t be the only one.
Damn dude, why do I make more than 99% of the country solely from internet advertising revenue then?
You idiot.
Fully agree with Clemons conclusion. We need new business models, and forget about advertisement as the main source of revenue.The growth of the internet services should not be limmited by advertisement buget. The change will come when big editors start to charge for its contents.That should be a coordinated strategy, in order to avoid free riding.But will that be considered a colusion for the antitrust institutions? This scenario will take place sooner or later.
The fact that people don’t like ads doesn’t mean ads will/should disapper at all. People don’t like ads but they HATE paying for online stuff.
If I had to pay just $1for each site I visit, I would stop visiting them. Mr. Clemons is looking at today’s advertising models and making some assumptions but he certainly misses the point. We should keep in mind that online advertising is still evolving.
People don’t trust ads! Ok, but isn’t there a way to create more trustworthy advertising platforms rather than treating it like a piece of junk? If google is not good enough, someone else will fill the gap and it’s already happening. More and more publishers are turning to affiliate marketing.
When publishers select the ads which could be useful for their readers, most of the Clemons’ arguments becomes obsolete. What’s wrong with a dentist recommending a certain toothpaste on their site?
@erg – that’d be because affiliate marketing is honest, decent and trustworthy? I have a large collection of misleading claims from affiliate marketers I’d like to show you. How about the affiliates offering an *entire major version* later of a web app (an as yet to be develop version, with no existence whatsoever in the form of code), to convince people to click for the “latest and greatest”, for example?
At least Google has some Editorial Policies and Guidelines. The affiliate networks have no police other than the vendor. If users are to trust advertisers, then the advertising networks need to be complicit in the trustworthiness of adverts.
Fully agree with Clemons. We must forget about advertisement as the main source of revenue for internet services. Growth should not be limited by advertisement buget.
The change will come sooner or later and it will be traumatic, because it will be probably sparked by a coordinated movement of big editors to charge for its online contents, in order to avoid free riding. Will that be considered as colusion by antitrust institutions?
I really don’t understand where Clemons gets the ‘Google threatens to give top spot to a competitor if you don’t pay up’ part of his argument. Even this direct quote makes no sense; “Google does not require that the top companies bid top prices, but it does require that they pay.”
How does Google require that they pay. They can simply opt out and not be seen in the sponsored search results altogether if they wanted too. That’s their prerogative. And top spot, in the sponsored results, is open to whoever wants to pay for it.
I use Google Adwords to market products and services for small business clients operating in their own “local markets”. We bid on relevant keywords and use geo-targeting methods and some people click the ads. The searcher is free to click the result they find most relevant. In a “local search” they can have up to 30 different results to choose from on the first page of a Google search. There’s the local 10 pack Map results showing 10 local businesses, there is the normal “organic” or “free” results, again 10 of them, where some local businesses have their own websites that appear relevant to that search term, or maybe it shows a few directory sites like yellowpages, superpages and others that are listing some relevant local businesses. And lastly there are the sponsored ads over on the side, usually up to 10 of them.
Users are free to choose among the many relevant results. Some will click the paid results. If the advertiser is astute enough then the ad and the landing page are well targeted to that users need. They are “searching” for something to satisfy a need and the keywords they used in a search gives clues to what they want. When all is said and done, if the ads are generating sales then I think those ads do indeed provide value, not only to the advertiser making money off sales, but to the user that ended up finding the product or service they were searching for.
If it works for small business at budgets of $200 to $20,000 per month why would it be any different for the big boys working at national or international levels with budgets of $500K or $5M per month.
Speaking of local businesses, I’ve seen steady traffic growth for the past 3 to 4 years for small businesses with their own websites. That’s for targeting localized web traffic from the city they operate in. I equate that growth to more people using the internet, and in particular search engines, to find local stuff. They’re using the phone book less and less. Therefore the opportunity for advertising online will continue to grow.
Whether or not users want/need advertising online is irrelevant. We don’t want it on TV either, I know I often go channel surfing or turn the volume down when ads come on. Or sometimes I watch them. But I know if all TV ads disappeared then so would my TV shows. And maybe someday I’ll buy a Shamwow.
I fully understand, as should most people, that the ad revenue keeps the wheels turning, and the ads try to entice me to buy certain products or services and part of that sales revenue gets invested into more ads to keep the system going. Why would it be any different online?
Clemons says: “As for others who believe that some types of paid search are a form of misdirection, I suggest that interested readers check out the website for Alliance Against Bait and Click”
Huh. I clicked through to that site and read “The Alliance Against Bait & Click is comprised of a diverse group of leading experts, organizations, and companies working together to stop bait & click and make deceptive sponsored search results a thing of the past. ” Click to see some of the experts by name and the list includes “Professor Eric Clemons of the Wharton Business School (and)
Professor Ben Edelman of the Harvard Business School”
Did Clemons mention his association with AABC in his original article or this article? Clemons also recommends Edelman’s blog but doesn’t appear to mention his joint role with Edelman in the AABC.
The TechCrunch pieces only mention that Clemons is a Wharton professor; would it be possible to ask Clemons if he has any financial or other conflict of interest in writing his articles as a result of his association with the AABC? It’s strange that Clemons would write these pieces and recommend the AABC and Ben Edelman without mentioning his association with them.
When I search for ’samsung’ I got a sponsored result for samsungmobile.com at the top spot although the first two normal search results already go to samsung’s sites.
In this case, average user clicks the first sponsored result, samsung loses money, google makes money. Don’t you think something’s wrong with this?
Please stop ripping people off. You are losing credibility. What’s with that sponsored results thing anyway? How can you put ads on content scraped from other sites?
erg, what makes you think the average user clicks the first sponsored result? And if Samsung doesn’t want to advertise, they certainly don’t have to. And if Samsung doesn’t want to show up in the search results (”content scraped from other sites”), they can certainly block Google or any other search engine trivially with a robots.txt file.
I would guess that the reason that Samsung allows search engines to crawl their site (or that Samsung advertises on search engines) is because they see some value to it?
Samsung is paying to be there knowing full well their normal results are already there too. Many big brands see value in paying to be seen one more time on the same page as their “free” listings. But they don’t have to if they don’t want to.
Or, Samsung is paying to be in the top slot because they are protecting their brand and brand placement and feel the need to defend from others trying to hijack this search placement, rather than seeing value to it. The value is in the defense not the upside. Our company buys our own brand name as a search term and we pay when people search for us and then click on the paid link. Competitors buy our brand name as a keyword. If we don’t buy it then we surrender the positioning. You do it because you have to, not because of the value.
Holy shit man. You’re so god damn stupid. Have you ever seen how many searches Google has per day and how many clicks they have? Almost everyone clicks on the organic results.
I understand your point about conflict of interest; however, there is a point at which it’s a bit nit-picky.
Should you say you work for Google* in your response to Clemon’s post?
*Thus, have material interest in how the trademark PPC ad stuff works out.
umoja, thanks for mentioning that. I assumed that most folks would know that I work for Google, but in case peope haven’t heard of me before: I’m an engineer at Google.
Now about whether Clemons’ potential conflict of interest is a nit-pick: I believe Ben Edelman (for example) has filed lawsuits against both Yahoo and Google in the past. When Clemons recommends both the Alliance Against Bait & Click and Edelman’s site above, I would have preferred that Clemons disclosed more clearly his association with the Alliance Against Bait & Click jointly or with Ben Edelman via the AABC.
You are probably right about Clemon’s lack of disclosure; however, I think it is pretty clear from the context the AABC is a sort of a “rent-seeking” lobbyist group and not some consumer advocacy group looking to resolve the issue between rights-holders and search advertisers.
That’s my only point in regard to being a bit picky — it is clear from both the context and Sullivan’s reply that part of the position of the players stem from the players themselves. Sullivan biased towards Google and Clemmons biased toward rights-holders.
However, “trademark searches” are a problem for rights-holders! So, from a business stand-point I understand the need for advocacy groups / best practices on their behalf. Also, google’s aggressive position toward the inclusion (perhaps abuse?) of OPIP (other peoples’ IP) is pretty clear (book search, youtube, google video etc.)
That said… I find it more than a bit disheartening that professors are busy working for rent-seeking groups AND writing papers, articles etc. on the same topics.
not bad at all!
why online advertising failed when more people visit the internet,learning and try there luck on it,I think the internet sales down because the target is to slim,I think the advertisers need to broad there target out from US ,I think with this case “Geo targeting need to be activated with the campaign
The current real world reality is that we now have millions of advertising channels, including the Internet, Cable TV, Radio, Print etc. It’s up to the educated media buyer to make NEW decisions that work best. it’s never been easier to target demographics in many cases and PPC (pay-per-click) remains one of the most cost effective advertising channels done properly. In fact, in a recession, PPC (for some) is the best deal in town. My money’s on Danny.
My basic take is that the online is becoming more and more a part of our lives everyday. So therefore advertising on it will only increase but also will become more targeted. If tv advertising enjoyed such great success for so many years then the ability to target extremely niche markets has huge potential.
They will deal with the contracts, tenancy agreement, deposit, advertising, references etc. Future Works
How about citing some valid and relevant research about the effectiveness of online advertising in this debate? For example, at comScore, based on more than 200 studies, we’ve definitively established the effectiveness of online display ads in increasing site visitation, trademark search queries and both online and offline sales — despite minimal click rates and irrespective of whether users want / don’t want to see the ads:
http://www.coms....asp?press=2587
Our research will be published in an upcoming issue of the Journal of Advertising Research. Perhaps the good doctor should read it. Online advertising will continue to grow because it works.
If its good it works, if its shit it doesn’t. End
I saw Mr. Clemons original article and saw the comments. I would imagine that many who commented rabidly are involved in management of sponsored ad programs and so do not want to have any of their income stream affected by clients reading the original article and questioning the use of the models that generate their own income.
Personally I feel that based on client feedback (I also manage paid accounts) that sponsored ads are getting very expensive and without the transparency of knowing what other advertisers pay, concerns about Google’s manipulation of auction figures (they decide the minimum auction value for a keyword), and quality score adjustments that look like cash grabs (remember September 2008), clients perceive that they receive less value for their investment in paid advertising.
I perceive that Mr. Clemons will be found right that reviews, personal interaction on social networking platforms, and other alternatives will change the world of sponsored search programs, SEO, and the importance of social networking. It won’t happen this year, but I see the changes coming within the next five years as well.
The costs that customers pay and are willing to pay for sponsored search advertising is rapidly changing. Some in part based on the economy, and some in part due to the lack of transparency and the escalating cost per click. Who do you know that you manage is paying per click what they paid one year ago? Even with dropping impressions the max CPC is still way up for many accounts across a wide variety of business sectors.
If you don’t hear the dissatisfaction, then you are not having regular chats with your own clients or are not putting their ROI strategies first in the marketing plans that you create for them. Don’t flame me on this, it is just my two cents, just leav your own opinion.
Yes! Yes!
At last somebody started discussing the ‘minimum price’ (to ‘activate’ the word). I reported many times that I’ve seen NUMEROUS occasions when there were NO competitive bids, but I was suggested to set this ‘minimum price’ at $10 a click! How do you like that?
This speaks to my earlier comment.
If Google’s machine learning systems determine that your ad is low quality Google would rather not show your ad. The $10/click is an economic disincentive to showing those ads.
Now, that doesn’t mean your ad actually is low quality — it may be a great ad. When you’re dealing with the volume of advertisers and ads that Google is dealing with, sometimes your systems learn strange things. It’s entirely possible that your ad was of reasonable relevance but it does reinforce the point that Google doesn’t want to show ads it thinks aren’t relevant. The focus is on ad quality and relevance.
It’s even simpler Avichal. The Page Rank assessment DOESN’T WORK for the content of COMMERCE site. What is the typical page SELLING something? Picture + description + price and the Buy button. No pages from other sites will be linked to it. Also, there’s no guarantee that the words that need to be advertised will be on this very concise page. See? Page Rank works AGAINST commerce. By a complete ‘accident’ this increases the revenue of the company providing search.
And by the way, to your response: WHO SAID IT CAN BE AUTOMATED AT ALL? Page? Who told you, people, that your million of junk servers will be able to assess the MEANING.
Relevancy, do you quite understand that it’s about the MEANING, not about statistics.
Apparently, WPP, the largest ad agency in the world, doesn’t share Professor Clemons’ negative view of the future of online media:
http://www.mrwe...no/news9699.htm
Clemons still neglects how sensory capacity and orientation are two factors that help determine how much influence a “cue” might have to a person, and that familiarity shapes which cues people gravitate toward. Ho hum.
Best,
Rich
TC is a few days late in posting this and it seems others are addressing the topic. I got the following in my inbox from Adotas last week, I thought it was a great letter and great rebuttal.
My letter today could just as well be titled “Why Advertising is Not Failing on the Internet”.
This letter is in direct response to an increasingly controversial post on a notable technology blog entitled “Why Advertising is Failing on the Internet”.
The author in that piece draws on four major arguments to support his point about why internet advertising, today, is failing and will continue to fail. He says: People don’t trust ads; People don’t want ads; People don’t need ads; and there is no shortage of places to put ads.
I disagree with his conclusions and the logic that supports them. I wanted to address these topics head-on, however, because perhaps you have all heard these myths, too, or had someone try and convince you of these assertions.
The facts (but not according to “vast literature” that the author repeatedly cites) are that online advertising is certainly not failing today and some areas of it are actually thriving and growing, and will present opportunities in the future for every player in the ecosystem.
The author claims that people don’t trust ads. I’d like to see this literature and who wrote it. It begs the question: why, for decades, have companies poured so much money into advertising if so many consumers do not trust it? Advertising is as much about establishing an emotional connection and/or value proposition with a consumer, and successful advertising harbors trust. If advertising fails to establish that emotional connection or does not offer a value proposition, it fails. Because of the interactive nature of the web, it is actually easier to establish a connection with a target audience, and yes, there are companies successfully doing it today.
The argument that people don’t want ads does not hold water either. Has the author watched the Super Bowl in recent years? Does he realize that even the worst performing ads on the web still get clicked? Just because people in front of a TV happen to turn the channel more often during commercials than during programming doesn’t mean consumers don’t want ads; historically, they might just not have wanted them at that very instant or they may not have been targeted properly. The internet through its measurability, by the way, helps solve this in a way no other medium can.
The author’s point about people not needing ads is pretty subjective. I happen to believe people do need ads; to educate, inform, establish emotional connections with products or services, and engage with brands. If the author doesn’t think that millions of kids who have bought Happy Meals at McDonalds didn’t establish their connection through some form of advertising, he is mistaken. I’m living proof of that; I would say as a consumer, I have always relied on advertising and welcomed it.
That there is no shortage of places to put ads is true. There isn’t a shortage. But this is what makes online advertising more effective and more efficient, creating a more powerful marketplace. It puts control back towards the advertiser, allowing the advertiser to come to market faster, pay only for performance, target customers better…all vast improvements over what one can do through offline media. More choice is better for everyone, in my book, and fosters innovation and creativity by publishers.
Why did I feel the need to respond to these assertions? Because the author’s final conclusion is that over time online advertising will be “smaller than it is today”. Perhaps many of you have heard these very same arguments from people, especially during this recession.
The fact is, many companies – like Epic and several others we know well and work with – are harnessing the web by making it more efficient and profitable for the entire advertising ecosystem, and creating better experiences for the consumer. When naysayers, who clearly exhibit little knowledge of online-specific ad topics, try and talk about how internet advertising is failing, it is simply incorrect. There are companies that operate entirely in the online ad ecosystem not named Google who are doing well even in this down economy. The viewpoints expressed by the author referenced above, and maybe by others, are incredibly short-sighted and inaccurate. I wanted to set the record straight.
We welcome you to contact us at Epic for more information on how to “win the Web”.
Best regards,
Michael Sprouse
Chief Marketing Officer, Epic Advertising
michael.sprouse@epicadvertising.com
The problem with online advertising, or any advertising, is that the audience is over-saturated; that they’re becoming jaded and just don’t believe the ads they’re seeing anymore, not online or in other media. Advertisers respond by trying to make the ads stand out more, which only makes people believe them even less. We’re in a deflationary cycle of trust, which has led to a deflationary cycle of value, which naturally leads to a deflationary cycle of price.
Google’s a great company; they are and will remain the leader in search and online advertising for a very long time. But info overload has led people to tune out, or at least remain jaded, to the core product they sell. I click on Google ads sometimes when they’re relevant but rarely seem to buy anything from them. Instead I buy the products that interest me from merchants I trust; I don’t trust a merchant because they’ve purchased an ad — I trust them because either I’ve done business with them in the past or somebody has recommended them.
To the point of trust in advertising. The bigger the poster, the less I need it. That is advertisers that go for the big poster need me more than I need them. What they are offering me then is difficult to trust. To the point of over-saturation and jadedness I score high:) Of course, advertisers don’t really target the jaded.
Performance based advertising online is growing at a very fast rate. This is based on clear metrics for success that advertisers need to achieve ( e.g. I need to acquire customers at $20 Cost per Acquisition). If advertising like this was not working or did not work (and so much of search is based on this model) how can this success and the move of more advertising dollars into performance based buys be explained? Clearly there are ways to make it work. People are interested in what is relevant to them. Sometimes that’s an ad.
Jonathan, you’re exactly right. And no “expert” will ever admit that performance-based advertising is a viable, healthy and growing model. People don’t care to recognize it. At our company, which is entirely performance-based, we have year over year % growth comp’s that would surprise people. But you’re right, if there’s no axe to grind for people, they don’t care. Even though they should.
Long Long posts… but can we say?
1) The ROI of online advtg would depend on optimization?
2) Content generators need to think beyond ADs more than ever before. So 2 things here – a) Increased need for supporting the AD networks with their own sales force b) Looking for other income sources
3) Social Media Marketers would get increased significance. For a) Obvious rise of consumer interactions over the internet. b) Social media is not about buying banner spaces here and there like offline market. Its about engaging the consumers. This requires expertise and high level of optimization.
4) Dont people trust ADs? or Do they see ADs as an attempt to over sell something? I feel reviews, expert opinions and recommendations will take greater importance. This again goes to SMM for me..
‘ I am no expert, but trying to express what I felt…
Ignoring the search engine part, Professor did have some good thoughts though.
I sometimes go to search engines just to see ads. They are that useful to me.
Driving to go to McDonald’s, and and on our way we saw a Burger King- we changed our mind, and went to BK. That is highly ethical, and similar to what PPC-search engine allows a visitor to do.
Regards,
Subhankar Ray
Saying that ad revenues will be replaced with other business models is a no-brainer since the medium itself is changing and has more to offer today than just written content in drab old-school html. While this isn’t really the finished product a consumer would want to spend their money on, a downloaded application, a movie streamed to your home or a book from amazon certainly is.
The mistake I feel both writers are making here is describing “The Internet” as some kind of entity adhering to predefined rules. Surely, it’s simply a virtual place consisting of millions of individuals and businesses.
Saying “Advertising won’t work on the Internet” is paramount to saying “Advertising won’t work in France/Spain/etc”.
Discussion is usually something I welcome, but this one sounds more like a clash of two inflated egos than an intellectually stimulating discourse.
What a patronizing intro:
“Great response. I disagree with parts of it, but it is well-reasoned and in places quite convincing. Mr. Sullivan presents no data and no studies, but some very persuasive stories. Nicely done.”
Clemons backtracks on his original assertion:
“Google is running a monopoly based on misdirecting consumers”
with…
“Google mostly does not misdirect”
Make up your mind.
Given the way the quality score works, and the fact that users do click -thru, purchase and provide ROI, it is obvious users aren’t being misdirected. The fallacy of his argument is that he assumes he knows what the visitor wants (a brand), but provides no data to back this up.
Advertising money is going to follow data. Advertisers want to acquire customers because they are running a business not an “ad show”. Internet and digital based services will get advertising dollars because as D. Sullivan says “offline ads are poorly targeted compared to those online and tracking performance is laughable compared to metrics for internet ads.” ROI and transactions are the key words for the advertising game. And yes, publishers are not very good at it. I wrote a post about it last week: http://mediacaf...ingly-more.html
Web advertising was defined in the early 1990’s and was based directly on precedents set in the broadcast-television and newspaper publishing industries, and still operates based on this pre-web logic. It’s fundamentally the old television/newspaper ad-model, with the Advertiser at the front of the marketing-funnel, treating the web as a broadcast medium, with business on the server-layer, and consumers (viewing audience) on the client layer.
In Google’s successful business model, the value (our interests & preferences) created by consumers on the client-layer, is harvested and this value then moves up to the server-layer where it is monetized creating multi-billions of dollars in revenue for Google annually.
Google’s advertising business model was an accident… that is widely known. But importantly it is inherently based on a 1998 client/server foundation… and while they are: making hay while the sun shines, Context-change is occurring.
The argument above, (in main article) reminds me of two 19th Century Railway experts predicting future passenger share of train-transport compared to horse-drawn carriages, (the automobile)… although I think generally Eric Clemons is thinking further out of the box.
The great anomoloy on the web/internet is that some memes move at light speed while other memes appear completely stuck with incredible inertia.
I am an ex-OgilvyInteractive Managing Director, (Shanghai) now working on new internet software systems including totally new models for what we have generically described as ‘advertising’. (let’s call it tradvertizing)
For more of my thinking visit: http://tinyurl.com/dau8hw
In attempts to simplify this debate I would like advertisers to approach consumers with this in mind… Why do I have to pay for transit pass and then have to view ad after ad? I think they should be paying more, if not all, for my seat and eyeballs.
Ok, this is not always possible, but make me feel like you, as the advertiser, provide me value in my commute and we start to get things in better balance. Advertisers should be driven by this and similar simple value statements.
When I go to a hockey game and feel so bombarded that I can’t see the puck and players through the bill boards and flashing lights, I feel like those advertisers should be paying for my seat. Until I feel like they do, I turn off of both the product on the ice and the ads that surround it.
Question to all above:
Who of you clicks on online ads?
Be honest.
I’m just happy you guys spelled champing as in champing at the bit correctly.
Personally i have never understood how Google makes so much money on search advertising – i know that i never click on the right side of the page. For me, Google is a victim of the strength of its own algorithims – when performing a keyword search, am i going to provide greater weight to the results from those algorithims on the left, or to the amount of money some vendor was willing to pay on the right? Which will provide me with a better result? its a no brainer for me. This is especially true when I’m actually looking to buy something but not sure of a vendor to use – i don’t want to see the vendor’s sites, i want to see 3rd party sites that have forums or reviews of those products.
It may very well be a function of saturation.
The more intrusive ads will be,the more hostility and dispersion solutions to block ads will be used. (ala adblockplus)
I suspect targeted ads that actually give you something (instead of just demanding your attention) is a way to go.
Dont offer the option to just buy your wares, offer me a discount, a reward gained for your viewing your ad.
Advertising agencies need to learn that the broadcast model does not work on the web for their particular type of work. A population that is already untrusting and hostile to ad intrusion will not accept the same obnoxious model on the net, and will find ways to avoid it- because it can.
I don’t take my internet advice or theory’s on the future of technology from OLD guys in bowties, thanks for the offer though.
Internet advertising…what a failure.
http://www.iab....8_full_year.pdf