I built my first commercial website in 1995. New Jersey Online (NJ.com – it was cool when I ran it! Today, Meh.) It was one of the first online newspapers; was tied to the three leading New Jersey newspapers; was extremely well-funded by Advance Publications,;I had brilliant partners like the prescient Jeff Jarvis; had numerous industry firsts (like the first real-time global newsfeed) and was designed to make money.
I ran it for five years, it won awards, was considered a leader in the category. It didn’t make enough money. I don’t even think that today, almost 20 years later, it (or its cousins like OregonLive) even come close to replacing the money loosing Newhouse newspapers (just Google The Times Picayune and its death). Why didn’t NJ.com make cash?
Advertising Does Not Work On The Internet
I don’t really think that this is big news for anyone working in the digital space. Of course there are pockets of online advertising success, Google’s billions are a good starting place. But un-clicked banner ads, ignored pop-ups, those pesky 5 second YouTube pre rolls, newsletter ads, Facebook ads, and on and on are simply not working like the good old days of advertising. Sure we can pretend that “Likes”, actually figuring out mobile advertising (in my lifetime??) and Twitter’s valuation — based on hoping that they eventually figure out their own form of advertising — will save the day.
Read This: “The Theory Of Peak Advertising And The Future Of The Web”
So, rather than take my word for it, I suggest that you read the paper “The Theory of Peak Advertising and The Future of the Web” by Tim Hwang and Adi Kamdar of Nesson Center for Internet Geophysics. Here are their key findings:
- Key indicators for online advertising effectiveness have declined since the launch of the first banner advertisement in 1994.
- These declines are increasingly placing pressure on even the most established businesses in the space.These developments suggest important (and potentially painful) implications for market structure, privacy, and authenticity online.
- Existing alternatives appear at present to be insufficient to replace lost revenue from near-future declines in the value of display, search, and mobile advertising.
- Ultimately, the economics of the web will necessitate pivotal decisions about the financial underpinnings of the Internet in the decades to come.
Hwang and Kamdar point to four key factors that will accelerate the decline of online advertising effectiveness.
- We, especially the younger demographics, don’t like web advertising. Actually, decades of pre-Internet advertising research showed that people never ever said they liked advertising. But, since you couldn’t watch Friends without having to watch the commercials, it didn’t matter. Yes, there was a time before DVR’s.
- Ad blocking tools will grow in use.
- Click fraud is rampant. See this fun infographic.
- Ad density is dense. There are just too many ads. Everywhere you go online.
- And, one from me. Smart phones suck as an advertising interface.
So… Do I have a point to make? If I have one it is that 50% of all advertising dollars are wasted (you can quote me on that.) And, maybe in the future that number will decrease despite the promises that fine-tuned advertising analytics and ultra-targeting will save the day.
I guess we will all have to stay tuned. For the time being you can continue to trade on headlines like this absurd B.S.:
“Twitter starts trading at an astounding valuation of $31.3 billion.”