Yahoo's bad news is good for internet advertising

Update: I caught Drew Robertson's comments on Publishing 2.0, and it made me think about my post below.

Update: I caught Drew Robertson's comments on Publishing 2.0, and it made me think about my post below. I think his explanation is good because it takes into account factors beyond the world of the internet - something I try to do but failed this time. I now think some of what is written below is overblown, but my core argument remains the same. Advertisers need to get more sophisticated, and Rich Internet Applications can help them do that.

It was a dark day on Wall Street for the web. Yahoo announced that Q3 revenue was going to be at the low range of its estimates and the response was swift and vicious. Traders sent Yahoo stock down 11% and other web stalwarts like Google, eBay, InterActive Corp, and Amazon all fell after the news. Clearly investors are worried that the advertising gold mine may not be as rich as everyone thought. And to be perfectly honest, they are correct to think so. Web advertising has funded an amazing amount of innovation and creativity. Google AdWords was such a simple, elegant solution that it was able to draw smaller advertisers to the web in a way that gave them quick return and easily accessible metrics. Somewhere above, John Wanamker smiled. But things have gotten out of hand. Free is the word of the day and the new web is all about giving content away in return for clicks. The mantra has become "if you build it and they come, they will click". But consumers are a fickle bunch, and as they flock to the web, they are upping their standards.

That is why Yahoo's news today is good for internet advertising. People are being bombarded by text ads everywhere and the effectiveness of run of the mill web advertising techniques is fading. I would argue that the savviest web users have trained themselves to ignore the text and picture ads that they see on nearly every site they visit. Clearly these have become the staple of internet marketing, and they won't go away because they do work for some things. Advertisers can segment their campaigns more effectively, targeting sites that have users with the demographic makeup they want. Search terms will continue to show intent and provide web companies with a healthy revenue stream. But the road to a profitable web application is not paved with simply eye balls and page views - the advertising industry needs to become more sophisticated.

I've always felt that Rich Internet Applications presented a unique advertising opportunity. The enhanced experience matters to the user and it the more pleasant interactions make them enjoy using the application even more. The richness of the experience gives advertisers an opportunity to heavily, and elegantly, brand it with their content. They have full control over the canvas, and can allow their creative teams to go wild. I'm not talking about annoying Flash ads that we see now, but rather very orchestrated campaigns focusing on building the brand through a rich experience.

But the great thing about Rich Internet Applications is that you still have the power of the web. Advertisers can still measure almost instantly what campaigns are working and whether or not this is the demographic they are targeting. The fluidity of the web and RIAs means they can move their advertising to the mobile world, the "offline" world and the living room. It doesn't have to be intrusive, and it can become a fun part of the experience.

Just as we have discovered new ways to make the web work for us, advertisers will find new ways to make their ads work. The current advertising model has run its course and web applications simply cannot continue to simply run Google Ads and be profitable. Application creators and advertisers need to work closely to make the advertising of tomorrow more sophisticated and personal. Rich Internet Applications provide that in a way that traditional web applications can't. The multimedia, the freedom from the browser, and the collaborative aspects make RIAs unique in the kinds of advertising they can provide. That is the next step, and the sooner we get there, the better.


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