Why Brand Advertising Has Not Flooded the Web (and why Google wins)
March 17th, 2008Much of the growth and optimism surrounding advertising-backed internet properties has been fueled by the assumption that the shift from offline to online advertising is inevitable. Everyone knows audiences are spending less time with traditional media sources and more time on the internet, but advertising dollars have followed less quickly than they audience. Most then conclude that this is just a temporary market efficiency failure that will eventually correct itself, causing online ad rates to spike and billions of dollars more to flow into online brand advertising.
Most are wrong.
There’s a famous, and perhaps apocryphal quote by John Wanamaker, who said “Half my advertising is wasted, I just don’t know which half.” But what he did know is that advertising worked; that if you spent money on promotion, eventually people would become aware of your product / service, and those people might pay a premium for it. This has been true with print, with radio, and with television. But it’s still unclear whether this is the case with banner ads, and thus, for the moment, the money is largely staying put, awaiting further data.
Of note, this does not apply to CPC or search engine advertising, which is largely cost / benefit based, and for which the ROI is clearly calculable. This discrepancy is particularly salient in light of the Yahoo acquisition, where people have claimed Yahoo failed to monetize its traffic in comparison with Google. But Google is a search engine, with a large portion of intentional traffic, a type of audience that wants something and is thus easily and directly monetizable. Yahoo, by contrast, sees most of its traffic come from other sources, such as mail, or news, or finance, and thus relies heavily on brand advertising. This was a conscious decision at some point in the past, when Yahoo outsourced its search-engine functionality, and one which has come back to haunt it as the brand advertising money tsunami never appeared.
This is not to say brand advertising will never hit the web; it will. The shift is inevitable, but it’s not the result of a market inefficiency or ignorance. When internet brand advertising is demonstrably effective, when it can be shown that a web-based branded campaign will cause people to go buy stuff, brand advertising on the web will begin to flourish. It’s unclear what form that advertising will take (I’d bet against banner ads), but what is clear is the online brand advertising adoption rate is going to be far slower than originally predicted.
The Universal Platform: how two-way aggregation and dispersion will change the web
November 23rd, 2007The last six five years have seen a rapid expansion in the number and scope of web platforms. There are ad platforms, social platforms, game platforms, and likely some sort of meta-platform platform with which I’m unfamiliar. Generally these platforms fall into two categories: public facing “consumer” services, and “back end” or “white label” providers that power other people’s services. In part a function of limited resources, and a part a function of an assumed need to “focus”, few services ventured into both categories. Changing this dynamic to one of a universal platform, where a service provider is both a front-end consumer facing site, and a back end private label provider, has significant potential to significantly improve the usefulness of all web applications.
An astute reader will note that there have been attempts to do exactly this in the form of widgets, and I would agree it’s a solid first step. But these widgets tend largely to be branded plug-ins, extensions of a site experience onto another site. When I speak of back end provision, I’m referring to true brand agnosticism.
An example may help clarify the concept:
Take a photo site, such as flickr. Add in a private label photo service, which could use flickr’s features and back end, but which has a completely customizable and skinnable front end, allowing seamless branding across any site. Take any posts on these sites, unless the site specifically opts out, and replicate/syndicate them to flickr’s main site. Similarly, allow anyone posting on Flickr’s main site to syndicate to any Flickr-powered sites to which the user belongs.
What this really means:
Incentives for any given site to create a competing but duplicative service will be lowered, diminishing the threat of competition.
In many ways, the concept of both being a white label and consumer provider is not new; many popular consumer platforms do provide back ends for other sites, largely as a way of supplementing revenue. What’s revolutionary, or at least evolutionary, is changing the way one looks at this split. Back end and consumer services must be thought of two sides of a coin, as complimentary, and a necessary pair for the rolling out of any new platform. When they are, expect the adoption time for new consumer-focused services to drop significantly, and scale to be achieved far sooner.
The Amazon Kindle(ing)
November 23rd, 2007The concept of an e-book is exciting; one universal book, connectible to a celestial library of content. In many ways, we have this already. It’s called a tablet laptop, and is quite useful for reading multiple content sources when paired with an internet connection. Recently Amazon launched the Kindle, an attempt to combine some of the functionality of a laptop with the readability of a book. In some respects, it succeeds, but from a consumer perspective, it’s doomed to fail.
There are five axis on which we can look at a laptop, a book, and the Kindle, and determine how each fairs in comparison. They are: Longevity (battery life), Readability (screen quality), Weight, Functionality, and Price.
Axis One: Longevity (battery life)
A laptop needs to be plugged in every few hours. A book last about 100 years or so. The Kindle falls somewhere in between, but still well within the realm of usability, with a 30 hour battery life.
Axis Two: Readability (screen quality)
Most laptops rely on backlight LCD screens. While considerably easier on the eyes than CRTs, the backlighting can, over time, cause eye strain. Books have print on paper. Our eyes like this, as it provides a specific focal point. The Kindle uses an e-ink screen, which I can confirm is significantly easier to read for long periods than an LCD, and nearly comparable to paper.
Axis Three: Weight
Even the lightest laptop is a few pounds, and those that are so light tend to be highly fragile as well. A book’s weight varies, but is generally about half a pound to one and a half pounds. It can generally hold up to being stood on, thrown on the ground, and if the movies are any indication, shot. At less than a pound, the Kindle is fairly light, and though I have not field tested it, looks reasonably durable.
Axis Four: Functionality
Laptops are inherently poly-functional; this is a large part of their appeal. Books are largely mono-functional. Unfortunately, the Kindle, much to my consternation, is also fairly mono-functional. While it does offer cellular connectivity, it takes no advantage of this other than using the network to download data. It can marginally be used as a web browser, but apparently, the experience is horrible.
Axis Five: Price (or why the Kindle is too damn expensive)
$400 dollars currently buys a quite reasonable laptop. Nothing that will provide fully rendered graphics for your World of Warcraft guild meetings, but a perfectly acceptable device for reading the internet and entering text. $400 dollars would also buy, assuming an average price of $12 a book, roughly 33 books. For most people, this is probably equivalent to a reading supply lasting over two years. $400 dollars is also the price one Kindle. Books are extra, as are internet feeds.
And thus, for $400 one gets a device that is comparable to a book with regards to longevity, readability, weight, and functionality. Rather than offering a multifunction device, something that might justify a consumer’s expenditure of $400, Amazon has given the world a product that allows people to look at almost screen as good as a book for roughly 33 times the price. Now that’s a compelling value proposition!
The lack of market adoption of the Sony e-book reader has absolutely nothing, contrary to some people’s claim, with the fact that the device had to be tethered to a computer to download content. It had everything to do with the fact that it was $300 for a book. Charging $100 *more* for the device does not solve this problem. Unless one happens to have a reason to carry around multiple books with some frequency, and this burden is significant enough to justify a $400 outlay, there’s absolutely no reason to purchase a Kindle. E-books themselves are just as expensive as their print versions, and every RSS feed or subscription comes at a fairly significant cost increase over the non-Kindle alternative.
When will e-books succeed? When someone develops a light tablet pc with an e-ink display, or offers an e-book below a $50 price point. Until then? I’m sticking to paper.