Advertising Model Alternatives?

So Online Advertising is big business! But is it sustainable, and more importantly, is it effective?

There is no doubt that the short answer to both of these questions is “YES”. However, while some forms of online promotion are both sustainable and effective, like SEM and contextual messaging, in my opinion, online display advertising is reaching a dead end.

According to Wikipedia, in 2012 online Advertising revenues in the United States totaled $36.57 billion, a 15.2% increase over the $31.74 billion in revenues in 2011.[1]:4–5 U.S. internet ad revenue hit an historic high of $20.1 billion for the first half of 2013, up 18% over the same period in 2012. [2] Online advertising is widely used across virtually all industry sectors.

The famous John Wanamaker observation “Half the money I spend on advertising is wasted; the trouble is I don’t know which half'” may have held true pre-internet, but online advertising is fully accountable. Online advertising comes with the tools to assess the effectiveness of all online promotions. Average online display advertising costs have steadily reduced over the past decade, along with response rates, and supply outstrips demand in most situations. Yet, advertisers doggedly refuse to give up on traditional techniques, which are not well suited to the online medium and represents another classic example of #OldTechvsNewTech.

I for one, shy away from sites that interrupt me with advertisements. More often than not this is not a single site either. Ads chase you from one site to another in a hope that a search term you used on site A, may be a good hook for an ad on site B, or C and so on. I find the video ads on YouTube, and other video sites, pointless if you can choose to avoid them, and loads of my apps seem to be now sporting display ads. I have abandoned my Accuweather app because when I try to look at long term forecasts, for example, as I scroll down to review the information I’m seeking, the ad follows me down the page preventing me from seeing the very information, for which I am using the app – Aghhhhh!  I’m just not interested!

Here’s another personal example of what I’m talking about. I’ve recently cut the cord and now my family and I consume all our TV from the Net using ROKU boxes. While there’s still some advertising, most has gone. What a relief! Its like a background noise stopping – you don’t notice it was there until it’s gone. I think online audiences are at a point where they will start saying NO to ads and vote, like we did, by taking their business where the ads aren’t. This presents a big problem for publishers and broadcaster, among others. I expect whether or not content is accompanied by advertising is a key driver in this #OldTechvsNewTech battle involving traditional production, broadcasting and cable #OldTech companies, for, and #NewTech companies like, @NetFlix, @Amazon, @HuLu and @Aereo, against, advertising. This battle is heating up and my money is on the latter seeing off the former or the former embracing the @NewTech approach.

Is there an alternative to this model of internet advertising, which can support commercial online endeavors? YES, there are other ways to generate revenue and not interrupt  your customers’ user experience. Subscription is the obvious alternative, and it is being used both online and via apps. Another, less familiar model, is B2C Over the Top (OTT) mobile messaging. Revenue generated from businesses sending simple text messages to consumers, who have agreed to receive such messages, is a well regulated, cost-effective and an incredibly successful medium. The global mobile network operators jealously guard this market, which is worth in the region of $50b – $100b annually. Its time for the #NewTech companies to get in on the action by working with mobile messaging aggregators, who are the intermediaries between the mobile networks and the businesses sending B2C mobile messages. How does this model work? Simple, in exchange for content a user gives permission to the publisher to send relevant commercial messages to the customer’s mobile device from time to time.

One may argue that this is simply interruption advertising in all but name, but I would counter that the messages being sent do not interrupt the content being consumed. Furthermore, when received by the recipient, they accord with marketing best-practice principles; namely expected by the recipient, relevant, valued and timely.

Your thoughts and comments on this developing situation would be greatly appreciated and will help me flesh out future posts on this topic.

Author: Oscar Jenkins

Dynamic entrepreneurial leadership career as a Senior Executive of successful technology start-ups, turnaround situations, and high growth companies. Combines astute strategic, business, and financial skills with a 20+ year track record of multi-million dollar profitable revenue growth. Progressive, decisive innovator, highly valued for insightful corporate vision and strategy development. Expert at translating board-level strategy and objectives into actionable plans, and then providing decisive leadership to multi-functional teams. Highly regarded for developing relationships and developing executive teams and staff. Key professional attributes include: • Financial Management • Technical Product Development • Complex Negotiations • Corporate Leadership • Turnaround Management • Recruitment / Retention • Start-ups & High Growth • Mergers & Acquisitions • Fundraising • B2B & B2C Sales and Marketing • Multifaceted Digital Marketing • Stockholder Relations Specialties: Start-ups, fundraising and technology.

One thought on “Advertising Model Alternatives?”

  1. Very interesting and prescient article. I’m most impressed by the model that asks users to watch ads in return for rewards. I came across it in free game apps and it reminded me that we are implicitly (or mindlessly) agreeing to do something in return for free apps and content including giving out our data for free so advertisers can target us. Is there room for more rewards based advertising do you think? Feels like a fairer exchange to me as a consumer of free content.

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