How Advertising Runs the World, part 1 of Infinity

Wired: How should we think about Google today?

[Eric Schmidt, CEO of Google]: Think of it first as an advertising system. Then as an end-user system -- Google Apps. A third way to think of Google is as a giant supercomputer. And a fourth way is to think of it as a social phenomenon involving the company, the people, the brand, the mission, the values -- all that kind of stuff.

from the May 2007 issue of Wired magazine.

"We are in the business of monetizing our services through advertising." - Marco Boerries, Executive Vice President, Connected Life Division , Yahoo! Inc.

at TIECon 2007, discussing how Yahoo! plans to make money from its emerging suite of mobile services.

Stating nothing but the obvious, but it is interesting to hear how two of the most exciting, fun, and revolutionary companies of the past ten years view themselves. Yes, both Google and Yahoo! have been on the forefront of innovating new products and business models, and continue to either build, acquire, or incubate cool new products seemingly every quarter. But at their core, and certainly at the core of their revenue streams, they each understand themselves in clear terms: as effective channels for delivering ad content to consumers.

No news here, and my purpose is only to set the table for a series of future posts exploring my love/hate for the advertising industry (where $150 billion a year is spent, annually, in the United States alone). Some of the questions I am looking to pursue:

- Are the metrics and core theses for advertising (from impressions to purchases, from direct marketing response rates to brand value) well grounded in data? Still valid as advertising finds new mediums and channels, like the Internet? Do those questions matter? [In short, No, no, and no].
- Can advertising be art? Is this redeeming?
- What are the real insights in how Google (and, to a lesser extent, Yahoo) have brought advertising to the internet?
- Is advertising an effective medium for achieving non-commercial goals?
- What happens to advertising in a world where content becomes increasingly diversified?

My admitted biases are that I enjoy advertising (when it is used to create campaigns that are artful, funny, or cool), that I think advertising can be highly successful (when it creates a meaningful brand or transparently puts meaningful product data in front of consumers), that I think advertising is generally deceptive, dishonest, unimaginative, base, and boring, that I think advertising is increasingly ineffective (who even looks at banner ads? or watches ads on TV?), that the need to circumvent the disdain that consumers have for ads, in terms of interrupting their consumption of media, will have few positive and numerous negative consequences. And so on and so on.

What I'd love to hear from you are any perspectives or questions that you'd like me to consider as I start thinking more closely about advertising, and more helpful to me, any interesting data points or analyses that you could send my way. Dear readers. All four of you.

Wanting Less, Needing More

I spent the weekend in Santa Clara, attending TIECon 2007. TIECon is the annual conference of The Indus Entrepreneurs (TIE), a global networking association primarily for technology entrepreneurs from the South Asian diaspora. Due largely to the success that Indian entrepreneurs (I'll use Indian as politically insensitive shorthand for South Asian) have had, and particularly in Silicon Valley, the conference was able to host panels and keynotes comprised of a who's who of Silicon Valley tech all-stars, including Marc Benioff of Salesforce.com, Vinod Khosla of KPCB and Khosla Ventures, Matt Cohler of Facebook.com, Meg Whitman of eBay, etc., etc.

While I wasn't able to attend the conference wire-to-wire, I did sit in on a number of keynotes and panels, mostly choosing to focus on mobile and alternative energy. Lots of interesting stuff I'll deep-dive into further in future posts.

Among the notable trends was the excitement and focus that the conference paid to opportunities in alternative technologies, including a keynote by Vinod Khosla touting biofuels and solar thermal arrays (see slides here) and a panel moderated by Ajit Nazre of KPCB in which a number of exciting green technologies were discussed, including representatives from NanoSolar, Amyris Biotechnologies, and Tesla Motors.

The panel was of particular interest to me, as it brought together five very prominent entrepreneurs who are actively trying to build successful companies in the alternative energy space. I was pleased to hear a well-moderated and very candid and thoughtful exchange which highlighted the difficulties of innovating in the clean tech space (due to long cycles of innovation vis-a-vis information technologies, up-front sunken investments in excess of $20-30M to get a business of the ground, and uncertainties in both technology innovation and the structure of the marketplace), the interplay between technology and entrepreneurial drivers of innovation and the important role of policy in helping to internalize external costs and create the transparent prices and costs in the market, and the passion and moral perspective that many of the entrepreneurs brought to their ventures, above and beyond their belief that an open market opportunity existed, on which they could capitalize.

All of this was very exciting to hear, but one consistent and vexing problem always remains unaddressed when business people discuss potential solutions to environmental concerns. The problem arises because innovation, either in core technologies or in business processes, when driven by entrepreneurs, requires a market in which demand, and strong demand, exists. Demand for their products, be they energy, new housing materials, alternative vehicles, or whatever, is necessary in order to create and sustain a market-driven engine for innovation.

And while this is not inherently bad, and in general, most likely an accurate reflection of a consumerist society, it fails to leave much of an opportunity for the idea that consuming may be a key factor in addressing environmental problems. Consuming less is not, in general, an outcome that is well-supported by markets, by capitalist systems, or by entrepreneurial societies. Consuming less then becomes an ethical question, relegated to academia and the fuzzy world of non-profits. The question that I am left with, then, is how to inject this thought into the entrepreneurial debate. Can it be a part of the conversation? And if so, at whom should the question of Should we consume less? be aimed?

Would be interested if any other folks had thoughts on this, and I will try to uncover some better examples of how the ethic of consuming modestly has been injected into commercial discussions successfully. Until then, the best I can leave you with is Bill McDonough's excellent Cradle to Cradle, which should be read by all business students, in my opinion.

It Ain't Easy Being Green

My Indulgent Lifestyle
The world is going to shit, and I'm part of the problem. There's no doubt about it. I'd like to think I'm part of the solution, but it's just not realistic. Consider: If everybody in the world lived a lifestyle like I do (small, walk-up apartment in New York, no car, subway to work everyday, modest consumption of convenience goods), it would take over 6 planets to sustain our resource needs.

This assessment courtesy of the Ecological Footprint assessment quiz, available from MyFootprint.org. The quiz, which takes less than 10 minutes to complete, helps evaluate what the environmental impact of your lifestyle and consumption habits, captured by the Ecological Footprint indicator. If you've got a second, take the quiz, and then come back and read on.

A Little About the Ecological Footprint
Ecological Footprinting is a methodology of evaluating how big an impact each individual has on the earth (it is also useful for measuring impact for other "units" like cities, companies, and nations), in a set of simple and discrete composite indicators. Based on principles of resource accounting and material flows through systems, Ecological Footprints (EF) try to estimate the impact that each and every individual has on the global environment, specifically in terms of resource use. Initially developed by Dr. Mathis Wackernagel as a PhD thesis, and later refined at Redefining Progress and currently the Global Footprint Network, Ecological Footprints have been widely employed as a tool for helping people (students, concerned community members, business people, government leaders) better understand exactly how resource-intensive our lifestyles can be. While the EF can help you better conceptualize your environmental impact, it is even more beneficial in helping you understand how you might reduce your impact -- by making discrete (though rarely insignificant) changes in your life.

The EF is a great heuristic tool, and among other things, helps set a common standard measure to help judge whether you are doing better or worse in terms of environmental impact over time. That said, it should be noted that Ecological Footprinting is a very imprecise science, reducing and generalizing complex ecological concepts for the sake of comprehensibility. Additionally, the methodology, particularly as it is expressed in simple quizzes, cannot account for every variable in a person's impact on the environment. For example, the Ecological Footprint does a poor job accounting for the impact of persistent toxins in the environment - materials which, once entering an ecosystem, cannot be absorbed and processed by the ecosystem. Similarly, any given EF is a snapshot in time, and will not account for improvements in technology that may make it more efficient to extract resources from nature and process them into the goods or services you consume. To learn a bit more about the methodology itself, see the Global Footprint Network.

As a quick point of disclosure, I spent four months working on the first Ecological Footprinting quizzes while a research assistant at Redefining Progress in 1999.

What My Ecological Footprint Tells Me
I find the best way to take value from the EF quizzes is to first complete the quiz as faithfully as possible, and then go back to the quiz and vary your responses, in order to find out what aspects of your lifestyle have the greatest impact on your Ecological Footprint. In my case, my base EF was a whopping 29 acres -- much bigger than the half-acre lot I grew up on, with its little vegetable plot in the backyard.

So what about my lifestyle causes this impact? There are a few discernible factors:

• I eat meat fairly regularly. Meat is an energy and resource intensive food to raise, process, and deliver to market, particularly when compared to a diet consisting of less meat and more grains and vegetables.
• I live alone. While I don't have a particularly large apartment, living by myself does proportionally increase my share of household related impacts (electricity and water consumption, household waste) when contrasted with multi-person households.
• I travel, by plane, a lot. For both work and pleasure, I travel. Not surprisingly, the environmental cost of air travel is quite significant (think about the equivalent fuel you might consume driving to all of the same destinations to which you fly).

What, then, is good about my lifestyle? Well, when your EF is 29, not a ton. But some positives include:

• Commuting via mass transportation and foot. The shared energy burden that public transportation allows can greatly reduce your footprint, and, of course, biking and walking are the most efficient ways of getting from point A to point B.
• Living in a big city. Although this isn't well captured in the MyFootprint quiz, living in urban centers can significantly reduce your environmental impact, when compared with living in the suburbs or in traditional houses not specifically retro-fitted to be environmentally friendly. In cities where residential and commercial uses are mixed, where public services are shared, and generally, efficiently distributed, individuals are able to consume a proportionally smaller share of resources.
• Shopping smart and shopping less. Being aware and trying (although not always succeeding) to shop for products that are locally grown/made, to cut down on energy associated with transport, have minimal packaging, and generally, not buying a lot can help your impact profile.

Those modest good points aside, the average American has an Ecological Footprint of 24 acres per person, requiring 4.5 hypothetical planets to sustain this level of consumption, if we believe that everyone in the world is entitled to pursuing similar happiness. So what to do about it?

Lifestyle Choices
Already implicit, I would hope, in the EF quiz are changes that an individual can make to lower their total impact. Unfortunately, the choices are rarely as simple as "Paper versus Plastic." More often, these choices are much more core to major lifestyle decisions: where to live, what car to drive, what to eat, how big a house to own. While the choices aren't easy to make, the environmentally healthy choices are generally clear: live near where you work; walk, bike, or take public transport, if possible; buy hybrids and fuel-efficient cars instead of SUVs; eat locally grown food, with as little packaging as possible; eat meat as infrequently as possible; own a smaller house that is equipped with energy-efficient features.

Can You Be Green and Be Happy?
One of the unfortunate bugaboos of the environmental movement is that it is comprised of a bunch of dour, nay-saying party-poopers. The tendency to frame environmentally positive choices as being negative, in terms of requiring a person to make a sacrifice in the quality of their lifestyle, is another unfortunate hallmark of how people understand environmental decision-making. Many environmental choices, however, are net-positives in terms of quality of life, and should be framed as such: a diet richer in grains and vegetables will be healthier than a diet that is red meat-heavy; living closer to work means less commute time and more personal time; mixed use communities tend to be more vibrant and active than commuter suburbs.

That said, it would be naive to think that every environmentally positive decision will also make a person happy. And, of course, the lifestyle choices listed above will only work and last if they are in line with what is fulfilling to an individual in their life.

To read more about how to make personal lifestyle choices that are more green, see Slate.com's Green Challenge.

Personal Choices vs. Political Choices
Unfortunately, for most people living in the U.S., it is very difficult to live with modest environmental impact by making personal choices alone. Unless you are willing to put a good deal of effort in to making your house energy efficient, not drive much, and have good luck aligning your work life and personal life, chances are you'll end up a net-consumer of environmental resources. Certainly this will be true if you are an "average American."

What this requires, for those of us who care about the environment and sustainability, is to be active in advocating political and economic outcomes that can make it easier for everybody to be environmentally more responsible. Such political and economic choices might include promoting community development policies that focus on mixed-use communities, functional downtowns, and useful mass transit systems; supporting a locally-focused food economy and creating incentives for local business to provide good and services locally; buying and promoting alternative energies, including hybrid cars and cleaner energies from the power grid.

The list goes on, and I'll try to spend more time in later posts talking about both personal and political choices that can have a positive impact on the environment and quality of life. Of course, as someone with an EF of 29, I offer this not as preaching, but as part of my own quest to find a happy medium between choices that enrich my life and choices that are environmentally responsible.

How Many Friends Does Obama Have (on MySpace?)

Well, ENW sends me an interesting link this morning to techPresident, "a new group blog that covers how the 2008 presidential candidates are using the web, and vice versa, how content generated by voters is affecting the campaign."

So now we get a running commentary on the collision course of two of America's most narcissistic, frustrating, and illogical social phenomena: presidential politics and social media. Grrreat.

Actually, in addition to the somewhat funny, though certainly not irrelevant features you can find on techPresident, like the monthly change in MySpace friends of leading candidates (Clinton up 38%, Obama down 66%) and the Flickr ticker of candidate photostreams, there is quite a good bit of interesting commentary and anecdotes on how campaigns are using social media, to good effect and, well, less good. Worth a look.