Why Social Media Won’t Save Madison Avenue!

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!”

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.