Why not fund on-demand with ... money?

Why not fund on-demand with ... money?

Summary: The thing I don't understand about ad-funded applications is this: Why does everyone have such a problem with asking people to pay for them instead?

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TOPICS: Tech Industry
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I can't let John Carroll's latest posting about ad-supported software pass without comment, because he repeats a misconception right in the middle of it that is really central to why I get so steamed up on this topic. Here's the bit that made me fume:

"Ad-funded software already exists, though it's most successful on the web. Google makes stacks of money from ads, as does MSN, MSNBC, CNN ... or even ZDNet."

Sorry, John, did you say 'software'? I was not aware that Google advertisers pay for their use of AdWords with money. Now there’s a thought.MSNBC, CNN and ZDNet were software publishers. Surely what you meant to say was 'ad-funded content,' not 'ad-funded software'? I find it simply incredible that otherwise highly intelligent people seem suddenly to be unable to tell the difference between content and applications when they're discussing the Web.

John isn't alone in repeating this canard. It seems to be received wisdom among industry analysts. According to another ZDNet news report last week, George Colony, CEO of Forrester Research, went as far as to write this in a recent column:

"Google's programs are free, funded through advertising and syndication. This is a prescient move. I foresee a world in which even enterprise applications like financials, ERP (enterprise resource planning), and supply chain software will be advertising-funded."

I'm sorry, George, John and everyone else who believes this, it's utter baloney, it really is. You can fund content with advertising (up to a point) but you cannot fund applications with it. Do you not see the difference?

Maybe it's a technology thing — geeks perceive them both as payloads, so they ignore the fundamental differences in the ways users interact with one or the other.

Maybe people get confused by Google, which makes money from advertising in two very distinct but highly sophisticated ways. One of them is by monetizing its content with ads. The other is by providing an automated service called AdWords that allows advertisers to buy and manage those ads. AdWords allows Google to profit handsomely from selling its unique form of advertising, but the application itself is not ad-funded. When a user goes into their AdWords console to choose some new keywords, there are no ad panels down the side promoting third-party keyword directories and AdWords optimization services. No, Google is much more cunning than that. Its advertisers pay for their use of AdWords with money. Now there's a thought.

Maybe people have got the wrong metaphor stuck in their heads because they've spent too much time listening to Tellywood and the telcos. Here's a selective extract of some of the many things Doc Searls had to say on the dangers of that in his latest essay on the future of the Net:

"Most significantly, the Net is a marketplace. In fact, the Net is the largest, most open, most free and most productive marketplace the world has ever known ... When we talk about 'delivering content to consumers through the Net', rather than 'selling products to customers on the Net', we ... unconsciously agree that the Net is just a piping system ... one way of framing the Net — as a transport system for content — is winning over another way of framing the Net — as a place where markets and business and culture and governance can all thrive."

To adapt Doc's language, I can't understand why people are still thinking about 'delivering software as a service over the Net' instead of 'selling software-based services on the Net'. Why persist in befuddling their brains with this absurd conflation of content and applications? All we're talking about is competing in an open market at a fair price for services rendered. Why on earth would anyone find that such a difficult concept to get their heads around? 

Topic: Tech Industry

Phil Wainewright

About Phil Wainewright

Since 1998, Phil Wainewright has been a thought leader in cloud computing as a blogger, analyst and consultant.

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6 comments
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  • Ad-funded ERP? No way

    Enterprise Software is used by businesses, and the typically support business processes, support a workflow. Clicking on ads would be a distraction, I can't possibly see companies would support it. If prices come down from the stratosphere (Oracle, SAP -style) and become more reasonable, a'la Salesforce, NetSuite, SugarCRM, 24SevenOffice ..etc, my bet is companies would rather pay those prices then see their employees click around the Net for hours a day...
    Zoli Erdos
  • Excellent post!

    Phil, you nailed it. And I think you're correct that the inability to distinguish between content and software is a techie blindspot.

    Stephen
    Stephen Howard-Sarin
  • Interesting point...

    ...but since we're doing a blog tennis match, I'll make my response in blog form, tomorrow. Hopefully, people won't be too deep into the prelude to turkey day.
    John Carroll
  • John Isn't All That Stupid

    [i]Sorry, John, did you say 'software'? I was not aware that Google advertisers pay for their use of AdWords with money. Now there?s a thought.MSNBC, CNN and ZDNet were software publishers. Surely what you meant to say was 'ad-funded content,' not 'ad-funded software'? I find it simply incredible that otherwise highly intelligent people seem suddenly to be unable to tell the difference between content and applications when they're discussing the Web.[/i]

    Phil Wainewright,

    John Carroll is not as dumb as you suggest. From a programming standpoint, a web page is part of a web application. (Programmers consider a web site, a web application.) Therefore even if a web page belonging to a web site displays content, the content laden web page is technically part of an application.

    Even if we were to decide to consider web pages that display content as not being part of a web application, web pages that primarily provide links to these content laden web pages, can reasonably be considered part of a web application. If you take a look e.g. at Zdnet Page One, you will see that it is a web page that primarily provides access to content / stories, via links. Even on this web page, you see that the ads are placed among the links to the web site?s content.

    Even if we become more restrictive in how we classify web applications, by saying that only web sites that emulate GUI applications can be considered web applications: if you take a look at programs such Hotmail in the browser, you will see ads scattered around the web pages that make up the application, that have nothing to do directly with content.

    [i]Maybe people get confused by Google, which makes money from advertising in two very distinct but highly sophisticated ways. One of them is by monetizing its content with ads. The other is by providing an automated service called AdWords that allows advertisers to buy and manage those ads. AdWords allows Google to profit handsomely from selling its unique form of advertising, but the application itself is not ad-funded. When a user goes into their AdWords console to choose some new keywords, there are no ad panels down the side promoting third-party keyword directories and AdWords optimization services. No, Google is much more cunning than that. Its advertisers pay for their use of AdWords with money. Now there's a thought.[/i]

    To an extent, you are arguing semantics with Mr. Carroll. Google cannot monetize its content without having an application to begin with, that processes user requests, which then dishes out the content. Therefore it is reasonable to say that Google monetizes its search engine (which is a web application) by placing ads within the content produced by its web application.

    As far as AdWords is concerned: again we get into semantics. It is reasonable for someone to say, that Google generates money from ads with its AdWords service ? which is in fact a web application. There is more than one way to make money from ads. Just because a company does not make money from ads by placing them directly on web pages, that doesn?t mean that the company is unable to make money from ads by some other means. Also, I don?t see why MS cannot do something similar to AdWords, that pushes ads onto GUI applications, after they have been set up by advertisers.

    [i]To adapt Doc's language, I can't understand why people are still thinking about 'delivering software as a service over the Net' instead of 'selling software-based services on the Net'. Why persist in befuddling their brains with this absurd conflation of content and applications?[/i]

    You won?t get much argument from a lot of people at MS on this point. That is what smart clients and XAML applications in a browser are all about. As far as I?m concerned, the browser was never built to support applications having a sophisticated user interface: the GUI was. That is why the GUI still persists. A lot of the push for widely using applications in browsers, has to do with making Windows irrelevant. However, all MS has to do is realize that the GUI is inherently stronger than the browser for hosting applications, and it should largely focus on neutralizing threats from competitors, by incorporating whatever new advantages arise in browser based applications, into its GUI applications. Therefore if e.g. Google comes up with a way for users to search books in a browser, MS could counter the company by allowing users to go to a web site, click on a search link, have the browser morph into a sophisticated search GUI application that is fast and easy to use, and allow the user to click on an item in the search result that allows the browser to morph further into a sophisticated e-book reader.

    Google is cunning and has very smart people. However, MS can continually counter it, by giving users a richer way to interact with content, than can be provided by just about any browser based applications.
    P. Douglas
    • There You Go

      Phil,

      Proof of the blind spot for you. P.D.'s post also goes some way to explaining why that blind spot exists.
      Stephen Wheeler
  • Tech blindspots

    You highlight basic blind spots that many nerd pundits have about business in general. I am most astonished that they seem to have forgotten (maybe never noticed?) that the advertising market collapsed after 9/11 and took years to recover. Volatile by definition.

    Also strange is the remarkable lack of attention to how the (current) big players in the space (read "Google") can expect to maintain growth rates when others enter their field and given that they depend upon a direct competitor (Microsoft Windows) for access to 90% of their customers.

    But Gates and Co. are not nerd pundits, so I see their sudden touting of ad-supported services as a mere wave to Wall Street which currently thinks all things ad-supported on the web (Google, again) are the way to go. They'll take some of that low-hanging consumer fruit if they can. Why not?

    The other poster who commented on the persistent viability of the gui and desktop is onto something. What if Microsoft incorporates search strategies into its desktop apps in a way that circumvents a trip to the browser entirely? What do Google and all the Google-wannabes do then?
    broper