The Short Happy Life of the Infinite Advertising Theory

It was now crunch time and they were all sitting under the soft white glow of their computer monitors pretending that nothing had happened.

Eric Clemons sums up the obvious to many but ignored by some flaw in the Infinite Advertising Theory, the somewhere between a wish and a belief idea that online ads can pay for everything forever:

Pushing a message at a potential customer when it has not been requested and when the consumer is in the midst of something else on the net, will fail as a major revenue source for most internet sites.

Amen, brother.  The word in that sentence that I want to focus on is “most.”  Because that one little word is responsible for the mass denial that propagates the hopelessly broken revenue model that is rampant on the internet.

In any statistical model, there will always be examples on the edges that can be misused to support an invalid argument.  When Wake Forest flames out again in a post season basketball tournament, some overly optimistic fans will cite the fact that one or two other highly ranked teams also flamed out, ignoring the painful fact that other than Wake Forest the list of underachievers changes every year.  This attempt to wrap oneself in the false blanket of statisticulation may make the non-mathematical reader feel better.  But relying on that placebo not only does nothing to fix the problem, the head in the sand passage of time makes the problem bigger and harder to fix.  And it doesn’t make anyone any money.

The fact that the top microscopic percentage of web sites have so much traffic they can make money by tossing ads in a reader’s face and waiting for him to accidently click on them is utterly and completely irrelevant to the validity of the Infinite Advertising Theory.  For every TechCrunch and Mashable, there are thousands of other web sites that may be fooled into thinking that they too can make money via ads.  To base your web site on advertising is like basing your income on the lottery just because you read stories in the paper about people who won millions in the lottery.

All we need to fix this problem is the one thing we don’t have.  A time machine.  All of this happened because of one bad decision.

When it became clear that the web was going to be a giant, less expensive distribution channel, old media, in a land rush brought on by greed and fear, tossed up its content on the web in a mad rush for eyeballs.  The people that ran old media didn’t really understand the web.  They were afraid of it, but they were at least smart enough to realize it couldn’t be ignored.  Everyone else was rushing to stake out a claim on the net and so old media did too.  Everyone confused eyeballs with subscription numbers, and decided that whoever had the most eyeballs would win the game.  In that death race for eyeballs, content producers soon upped the ante by giving their content away.  Even those holdouts who felt that hundreds of years of business theory dictated that giving away your only product is a bad idea were forced by momentum and customer alternatives to capitulate to free.

Surely if everyone is doing it, it must not be a horrible idea, right?  And if we get lots of traffic, we can monetize that traffic, right?

For a while it actually worked.  The perfect storm of a booming economy and the newness of and investor uncertainty about the web allowed people to make money for a time almost solely based on eyeball traffic.  When I founded ACCBoards.Com you got paid by impressions, meaning you got paid based on how many people saw the ad.  It didn’t matter so much that they all ignored the ads, because they were there to read about college sports- not to buy something they weren’t looking for just because someone tossed an annoying ad in their face.

Another problem is that advertising in general is based on the gullibility and suggestibility of the target audience.  The fact is, however, that the online audience, particularly the early adopters, is likely lower than the traditional old media audience on both scales.  Plus, unlike pre-TIVO television, you don’t have the benefit of a captive audience, when leaving is just a mouse-click away (stupid, irritating and ineffective mousetraps notwithstanding).

Eventually, the web matured as a distribution channel, and advertisers and investors had to start looking at scary things like click-throughs, sales figures and attributable revenue.  Which caused the online advertising gravy train to slow down significantly.

So online content producers now find themselves trapped in a paradox of their own creation.  They gave away the only thing they have to sell, in an effort to increase traffic, which costs money to serve, while ad dollars are not as infinite as they thought, but because they gave their product away for so long no one believes it has any value.  How’s that for a mess?

I don’t really see an easy way out of this mess.  But I can tell you one thing:  the fact that a few web sites can make good money via online ads does not mean that yours or mine or some desperate to survive newspaper’s can.

We need a new plan, but first we have to admit the old plan isn’t working.