Just last week, holding company WPP announced a decline in profits of forty seven percent and indicated there would be more massive layoffs to come. Much is being made of how, in spite of the decline in most ad budgets, the increasing use of the Internet, and particularly social media, will save the ad industries bacon.
Sorry guys, it ain’t going to happen. Simply because it will be impossible for online advertising and social media to deliver everything that is expected of it. The stark reality is that advertising on the Internet is not going to grow; it’s actually going to decrease. This is what happened during the dot com explosion ten years ago; this is what’s going to happen this time around (with perhaps the single exception of Google).
“In recent years, consumers have become used to feasting on online freebies of all sorts: news, share quotes, music, e-mail and even speedy Internet access. These days, however, dotcoms are not making news with yet more free offerings, but with lay-offs—and with announcements that they are to start charging for their services.†No, that’s not me talking today, that’s what The Economist said in April 2001, and in the immortal words of the great philosopher, Yogi Berra, “It’s deja vue all over again!â€
In spite of Chris Anderson’s protestation that we are now living in a society where everything will be driven by the business model “Free,†in which you attract people by giving stuff away in the hope that you will eventually be able to “monetize†the millions of “eyeballs†you’ve captured by selling advertising and other paid-for services, wasn’t that was the business model that saw thousands of dot com company’s crash and burn less than ten years ago?
Obviously, the culprit responsible for the current mania is Google. When they went public, just five short years ago, the stock went through the roof, for the very sensible reason that they were actually making money… Lots of money. And they were doing it simply by placing inoffensive text ads next to relevant search results. Wow, anyone could do this shit. All you had to do was capture all those unwashed millions out there with nothing better to do than cruise the blogosphere and throw money at you. Hence the birth of MySpace, YouTube, Facebook and Twitter, plus many more current and future wannabee’s.
Problem is, in spite of their billion dollar valuations and grandiose claims that they will soon be reaching ninety percent of the world’s population, none of these mass appeal social media sites are actually making money, and the problem is that if they attempt to get anywhere near their inflated valuations by either increasing advertising, or charging for services, most of the fickle eyeballs out there will simply go somewhere else. Don’t believe me? Look at the initial explosion and current implosion of MySpace.
There’s no question that Social media will continue to grow. But coming back to where I started, if I was Madison Avenue, I wouldn’t be putting all my chips on that particular bet right now.
George Parker is the perpetrator of adscam.typepad.com, without doubt, one of the most foul and annoying, piss & vinegar ad blogs on the planet. His new book, The Ubiquitous Persuaders, has just been published by Amazon and is currently setting the ether ablaze. He will continue to relentlessly promote the crap out of it until you are forced to stab yourself in the eyes with knitting needles.
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Nice work guys!
this is just Amazing!
Thanks
September 1st, 2009 at 4:17 am
George- Your rant was entertaining. I especially love your last paragraph…”George Parker is the perpetrator of adscam.typepad.com, without doubt, one of the most foul and annoying, piss & vinegar ad blogs on the planet…He will continue to relentlessly promote the crap out of it (his book) until you are forced to stab yourself in the eyes with knitting needles.”
I do agree we are in the midst of a mini dotcom downturn due in large part to the state of our sluggish world economy, but I believe social media will keep on expanding in popularity and online advertising will evolve, mature, and grow (although at a slightly more modest growth rate). The genie is out of the bottle. Once you empower consumer voices to be heard, they never want to return to the status quo. That’s why I believe real-time social search analytics tools such as those available on http://www.heardable.com will become more critical to brands (and agencies) in the coming weeks and months. Brand marketers still must attain their growth goals and that means they need to advertise (or connect with) consumers whenever and wherever they choose to congregate–via it in front of the television, in the stands at a sporting event, or on twitter via their iPhones. Brand marketers may need to be a bit more selective on where they spend their marketing dollars, but sales & branding campaigns (offline and online) always follow the consumer. You can bet on it. – Porsche
September 1st, 2009 at 3:25 pm
George – you’re right, social media won’t save Madison Avenue because they don’t represent disparate tactics or channels that typically garner immediate profit. However, online advertising will continue to grow, and along with the explosion of social media participation, these types of media relationships are changing the marketing landscape in unprecedented ways. And just because we don’t have a lot of historical data to support our ‘experimental’ use of social media outreach, doesn’t mean it can’t produce ROI or generate significant lifts in engagement across a variety of media.
As a reader of your blog, I understand your disdain for ad holding companies, but I do think the system will change – simply because it has to. Brands are earning their media more and more, and this is a direct result of the connections that they are making with consumers. Whether or not these connections produce better messaging is irrelevant – the larger point is that consumers crave sociable content, be it through a TV spot, a print ad, an OOH display or a mobile app, and they want to talk about the ideas behind these executions within a more relevant cultural context that actually means something to them and their peer group. Unfortunately for most agencies, this a menacing proposition because it suggests that these ideas must live outside or beyond a campaign construct – after all, conversations are indefinite in their lifecycles.
At the end of the day,’social media’ is a misleading term; social interactions are really about culture, not so much the media channels used to deliver them. Where there is an opportunity for ad agencies to come full circle and revitalize their value is in using media to recreate cultural value systems and develop initiatives with higher purpose… even bring deeper meaning to purchases, much in the same way the David Ogilvies, the Bill Bernbachs and the Hal Rineys of the world once did. As an ad veteran and a creative thinker with a long track record of developing brand experiences, as well as an influencer who uses his own blog to encourage deeper (or more controversial) conversation, I think you can identify with that quite well ;)
Best,
Gunther
September 1st, 2009 at 4:43 pm
Yes, totally! These people don’t get it: Social media can NOT be monetized. But they’re gonna keep trying…suckers.
September 3rd, 2009 at 4:50 pm
Thanks for the insightful comments. I think this subject is still wide open. I may be proved wrong (it wouldn’t be the first time) But as with most things in life, we fail to learn from past experience. Far too often the next big thing becomes last years forgotten thing. Human nature is a very fickle. That’s why 80% of new products that test like gang busters in research, fail in the market place. Should be an interesting couple of years though.
Cheers/George
September 4th, 2009 at 7:35 am