Internet businesses in the advertising space are in dire straits. The Standard's flop tracker is full of companies who hoped to be profitable solely on the basis of advertising revenue. Internet ad agencies are in dire straits- Doubleclick's share price recently dipped to as low as $8. Recently, Salon.com launched its Salon Premium, a paid service to users who did not want to see banner ads.
In this article, I make five points that capture my analysis of what is wrong with Internet advertising. My hope is that advertising businesses of the future will learn from these points.
1. Advertising rarely leads to immediate action.
Unfortunately for the Internet advertising industry, the banner was linked to the click-through- an intermediate behavioral measure with no intrinsic meaning. Advertising on no other medium is linked to direct action. As a result, when advertisers did not see immediate action, they lost faith in the medium. Moreover, now, industry experts say that the long-term effect (i.e., those that viewed the ad, did not click, but returned to the site later) is stronger than the click-through effect. However, selling the long-term effect during a downturn has proven to be challenging.
2. Classic advertising techniques (e.g. humor) will work for banners as well.
How many humorous lines have you seen on a banner ad? Compare this number with the number of funny TV ads you have seen lately. It is no contest. For some strange reason, banners moved away from the true-and-tested techniques such as humor and celebrity endorsements. As a result, banners lacked personality and did not have a "water cooler" effect.
3. Annoying your customers gets you nowhere.
Unfortunately, short-termism has been the name of the game in the industry. Techniques such as push banners, rich media, forced exposure and pop-ups were touted as winners. The latest trend in this series is the infamous pop-under ad. Internet advertisers have tried to confuse customers by blending site content with ad copy. All these techniques simply annoyed the customer and did not create true value.
4. Advertising is a cyclical business.
Most dot-commers did not realize that the advertising business has its ups and downs. Firms scale their advertising dollars in all media from time to time based on the business outlook. Firms come and go in the advertising world leading to intense competition. As a result, a firm that wants to rely only advertising revenue will have its share of ups and downs.
5. Spam, anyone?
While the banner is a beleaguered creature, the potential of e-mail advertising is considerable. However, due to the pervasiveness of Spam, consumers are leery of e-mail as an advertising tool. Many still delete e-mail promotions as Spam. Moreover, due to the widespread diffusion of free e-mail accounts, most consumers now have 3-5 accounts and they do not always pay prompt attention to promotional e-mails. Consequently, the premium on e-mail lists has also consistently fallen.
Overall, e-businesses that want to use Internet advertising must recognize that there are decades of research in the public domain that can help them. Those who will not pay attention to advertising history will be condemned to repeat it.
Sandeep Krishnamurthy is a professor at the University of Washington. He can be reached at: sandeep@u.washington.edu
