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.

When I see people post stupid headlines, like, say, this one:

Facebook Could Kill Google,

it infuriates me and makes me laugh, at the same time.  When did the entire internet go full Enquirer just to cobble together a few extra page views?

Henry Blodget, editor of the semi-ironically named Silicon Alley Insider, wrote under that headline based on some comments by some cat named Ross Sandler (or maybe it was Adam?) of some outfit called RBC (maybe the Bebo one?) about how Facebook is a major traffic source for Google.  How, exactly, this means that Facebook may one day murder Google is not clear.  To give a morsel of credit where a morsel is due, Henry does point out the important little fact that “Facebook does have a big problem relative to Google, which is that it doesn’t have a business model.”  Surely a little thing like a business model won’t keep Facebook from ending the life of a $105B company. 

When you get past the idiotic headline, the point of the story is that Facebook is growing faster than Google.  Of course a seedling is also growing faster than a massively larger ancient redwood, but who wants to get hung up on the math.  Nevertheless, there is some semblance of a point and purpose to the article, all of which is of course secondary to and nullified by the attention grabbing headline.

But everybody knows you never go full Enquirer.  Check it out.  Jason Calacanis, “Mahalo,” look Enquirer, act Enquirer, not Enquirer.  Bulldog obesessed, stupid Twitter offer.  Narcissistic, sho’.  Not Enquirer.  You know Guy Kawasaki, “Alltop.”  Self-promoter, yes.  Enquirer, maybe.  Spam on Twitter. But he charmed the pants off Metacafe and ran a book cover competition.  That ain’t Enquirer.  Robert Scoble, "Video Blogging."  Nerdish, yes.  Enquirer, no.  Henry went full Enquirer, man.  Never go full Enquirer.  You don’t buy that?  Ask all these sites, "Deadpool."  Remember?  Went full Enquirer, went home empty handed. . .

The Jon Stewart, Jim Cramer interview is compelling television (be sure to watch all three parts).  It’s an interesting case study on media and industry relations, and should be required for anyone who invests, directly or indirectly, in the stock market.

I’m not a Cramer-hater.  I have sporadically read and watched him since the good old days when TheStreet.Com had a TV show and I had a TIVO.  He’s cost me a lot of money, but so has every other media outlet I ever listened to.  For that matter, so has Morningstar (thanks a lot for those Citigroup and Bank of America recommendations).  I think Cramer’s current show is way over the top, but I also understand his point that he’s trying to bring these topics to a younger generation.  I guess someone needed to be the Jason Ellis of the financial sector, and he took the job.

The thing that kept standing out to me during the interview, however, is the idea that there are two financial markets.  One run by the rich insiders who have all the knowledge and pull all the strings, and another funded by the 401(k)’s and investment portfolios of the rest of us.  The latter serving not to secure our future, but to support the accelerated wealth accumulation of those who control the former.  If any part of this is true, it completely sucks, and makes the fairness of the stock market suspect.

And when I saw the clips of Cramer and others allegedly manipulating the stock market, it all sounded very familiar.  It sounded just like the venture capitalists, marketers, sycophants and other hangers on who invest in and promote all these Web 2.0/social networking/whatever applications.  Think about it.  Today’s hype about Twitter and Facebook sounds a lot like yesterday’s hype about Lehman Brothers, AIG and Washington Mutual.  The stock market pundits don’t promote those stocks any longer, just like the Web 2.0 hype-machine no longer raves about those former world changing services that wound up in the Dead Pool.  Those who believe that they may make money by promoting these stocks and applications aren’t concerned about how things go for the end user.  They just want to create buzz to increase the likelihood of a payout.  Everybody’s bullshitting everybody else and, after the insiders cash (or get bailed) out, the end users get left holding the bag.

We need a Jon Stewart too.

I have tried to do my part, to the point that a lot of the hype-machine won’t have anything to do with me.  But my podium is small compared to the consolidated podium of those who want to control the message.  Until the skeptics reach critical mass, the questioning voice gets drowned out by the hyperbole.

Plus, people just don’t want to hear it.  This part troubles me the most.

When I have a thought or an idea, I want people to test and challenge it.  The guys who work for me know this.  They have learned that I will be disappointed if they don’t vigorously test my thoughts and ideas.  In fact, my ideas get more scrutiny than theirs.  And that’s just the way I like it.  If I can successfully defend my idea against a passionate lunch table attack, then I feel better about it.  If I can’t, well maybe I need to go back to the drawing board.  Additionally, I really enjoy spirited debate.  It’s fun to argue and spar over ideas, and truth is best found through that process.  Not by nodding our heads eagerly to whatever cockamamie plan someone comes up with.

But, again, lots of people don’t approach it that way.  My wife frequently tells me that her friends are put off or offended by my challenges to their statements or ideas (actually, she tells me I can come across as an asshole).  What’s fun and useful to me is viewed as rude or impolite by them.  Sometimes I try to keep my mouth shut and let bad ideas die their own slow death, but it’s hard not to help the process along.  If she read this blog, my wife would say that was an assholish statement, but I don’t mean it that way.

I think people caught up in the Web 2.0 let’s change the world and get filthy rich in the process euphoria are equally uncomfortable defending their positions.  Some of them because they genuinely don’t like conflict.  Lots of them because they are afraid it might decrease the likelihood of getting paid.

Manners and gentility aside, we need a Jon Stewart.  We need a bunch of them.

But you gotta have something if you wanna get paid.

Techdirt has a piece today about US News and World Report’s plan to charge readers $20 a year for an online subscription.  There are very few publications that have content and delivery that will warrant an online charge.  Techdirt mentions the Wall Street Journal as one example, because of its excellent content and delivery, and because most people view the Journal as a tool in their quest to make money.

I’d add Consumer Reports (I subscribe to its online content) to that very short list.  I can’t think of any others.

The problem, of course, is that everyone, especially big media, was highly confused and short sighted when the internet land rush began.  Everyone and her dog tossed up web sites, gave their product away and focused all of their effort on getting readers.  This increased costs while generating little or no revenue.  The idea was to stake out an audience and figure out how to make money later.  The trouble with that plan is that there are only two ways to monetize that audience: get bought or sell ads.  The lucky ones who got up and running first have already been bought, many of them several times and at increasingly lower prices.  The later plan was also turned on its head by the inevitable economic slowdown and the resulting implosion of online advertising.  The Web 2.0 developers made the same mistake, which is why so many Web 2.0 sites are dead or on life support.

This implosion will be good for the internet in the long run, but those speculators and developers caught in the middle find themselves in a tough spot.

Billy Preston was right.  You have to have something somebody wants or needs to get paid for providing it.  But the cat’s out of the bag and, once you go free, it’s really hard to go back.  Especially in a bad economy.

You have to admire the effort.  But unless we can travel back in time and keep the free cat securely in his bag, it’s not going to work.

While I am a consistent skeptic when it comes to dressing up advertising as a Twitter post or some other disguised form of entertainment, here is an ad that works. It’s really funny and very well done.

Good stuff.