Why have internet business models that rely on web advertising failed ?

One need but make a cursory glance of high profile publications today and signs of the demise of the internet are nowhere to be found. ‘There is no successful business model’ is the unified cry. ‘There are far too many firms vying for far too few advertising dollars’, the WSJ informs us.

So what is the problem ?

Yes advertisers are spending less because they see no return on their revenue - does this mean that supporting online content through advertising is an unsuccessful idea ? Or does it simply mean that the internet community is incapable of analysing its data correctly ?

If it’s the former it would be an unprecedented change over any content delivery medium in history.

Although information wants to be free, editorial and content simply cannot be - somewhere along the lines somebody has to fund the overhead of all the would-be newsweeks, times’ and rolling stones’.

And about the only thing we know for sure (insert evidence from subscription based sites here) is that the online user is not prepared to pay for any content. Perhaps we should be more precise - the online user is not prepared to perceive to pay for any content. When we watch TV we are paying for it - it just doesn’t seem that way. The channels of payment online are much more confused.

[I want to say something here about how any web companies do not see a cent of my isp money - so the connection charges are totally separate from usage charges (the phone company) which in turn are totally separate from the content charges. the flip (tv) side is that though the usage charges are separate - the electricity company - the content and delivery medium is frequently owned by the same people...hmmm...dunno where this is going]

The reason advertisers consider the majority of their ads a failure is because they are forgetting the manner in which web advertising must function and attempting to analyse the data they gather using the same techniques they would apply to traditional media.

In any above-the-line (tv, cinema, radio, billboard) advertisement the time between seeing the advert and actually sampling the product is necessarily long. We’ll call this the delay time.

The necessity from a long delay time comes from the fact that at present it is not possible to instantaneouly respond to advertising, for example to order 10 pizzas simply by clicking on a remote control whilst watching a pizza hut ad or to drink a cold coke simply by pushing a few buttons on your dashboard as you drive by a billboard.

This is of course, why brands exist. The whole purpose of a brand experience is to embody an emotional collection of events into an image or catchphrase. That is to sell by implication.

It is important to note that the point of sampling of the product is also the point of getting more information about the product and very frequently the point of sale.

The web model, or beyond the line advertising, differs most importantly on one count.

The perceived delay time shrinks to almost nothing. So the advert actually functions perfectly since every user can easily find out information about this product. The point of information is moved to the point of advertising. The sale is no longer performed by implication alone since the viewer is effectively sampling the product. So to knock a web ad for not performing sales is not only unfair, but is a completely incorrect approach.

In fact the purpose of any advert is to push the consumer to the point of information.

This point just happens to be next to the purchase point in traditional media and next to the point of advertising in online media. So both ads are successful in their own way.

This begs the question of how do we actually get the information that follows web ads to push users towards the point of purchase ?

The answer must lie in personalisation. The internet offers us one to one marketing for the first time in history and if it is not exploited then we web publishers will be forced to adopt the push or ‘broadcast’ model which of course all the large media conglomerates want - what better then to own the content and the conduit. I suggest we try to solve the problem rather than give up at the first sign of trouble.