At last, the Web moves beyond advertising

Faced with the impending demise of advertising on the Web, it seems people have moved from sullen apathy to angry denial. The next step comes when platforms like Facebook start making money from technology that subtly matches buyers to trusted sellers.
Written by Phil Wainewright, Contributor

A Sunday guest article on TechCrunch arguing that "traditional advertising simply cannot be carried over to the internet" has attracted vitriolic protest and derision from the blogosphere. While I sympathize with Danny Sullivan's critique that Wharton professor Eric Clemons' analysis of search advertising lacked substantial rigor, the extremity of the wider reaction seemed excessively defensive, as if people really are scared that the bottom is about to fall out of online advertising revenues.

For all the flaws in his exposition, the core of Clemons' analysis was spot on in my view:

"... simple commercial messages, pushed through whatever medium, in order to reach a potential customer who is in the middle of doing something else, will fail. It's not that we no longer need information to initiate or to complete a transaction; rather, we will no longer need advertising to obtain that information ... Instead, we will use information that we trust, obtained at the time that we want to see it."

To believe that advertising simply carries across to the Web unchanged is to fall into the same trap that people made when they described the automobile as a 'horseless carriage' (or indeed when they call web-based computing 'software as a service'). The Web is such a disruptively new medium that advertising, like many other forms of discourse and interaction, will be transformed anew.

I've been saying the same thing as professor Clemons for several years now, but it was too early and people have either ignored or simply not understood what I was getting at. At long last I think people may have started to wake up, because at least now they've moved from sullen apathy to angry denial. Here's an extract from my posting last May called Web 2.0 and the end of advertising:

"Advertising is the creation of a disconnected era when businesses needed some way to get a message out to prospective customers that they couldn’t reach directly. The purpose of an ad is to motivate the prospect to get in touch. The Web, as we all know, puts us all in direct, real-time contact with each other, wherever we are in the world. Instead of advertising a message and waiting haplessly for a response, businesses can proactively connect directly with their prospects, reaching out to them in contexts where they’re ready to buy. What counts on the Web is product placement, merchandising and other forms of direct promotion."

Coincidentally, Robert Scoble was writing at the weekend about what he believes Facebook's impending business model is going to be (leaving Twitter stranded alone on the lunatic fringe of freemium):

"Yes, we’re having another baby. But look at what did NOT happen on Twitter: not a single diaper company contacted us yet. Not a single maternity clothing company. Not a single car company ... Imagine we’re on Facebook in a year. Now all of a sudden I can search for all these things and see which items and companies have gotten the most 'likes.' Now do you get why Facebook is copying friendfeed?"

What Scoble describes sounds to me remarkably like a real-life example of what prof Clemons called "information that we trust, obtained at the time that we want to see it." In fact, I think Clemons describes it better than Scoble because it's not just about bombarding people with diaper ads when they mention the word 'baby' in their Twitter stream. In the Web era, marketing has got to move beyond the intrusive megaphone of advertising and use the enormous computing capacity of the Web to develop much more subtle methods of matching propositions to people at exactly the right time, price and place. That means Facebook will monetize its platform not by hosting ads, but by hosting applications that bring buyers and sellers closer together.

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