Thursday, May 24, 2007

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.


Stockton Hercules said...

Here are some more thoughts about advertising. As the internet increasingly becomes interactive and user-driven, it seems to me that advertising will have to adapt. Two ways seem apparent. The first is by co-opting "word of mouth" & "consumer reviews" via disingenous webpages. The second is through sponsorship & development of more and more fun/artistic/interesting websites & activities. These are my thoughts.

Ritik Dholakia said...

Couldn't agree more. Very interested to see whether greater interactivity, niche marketing, and user-contributed content will either enhance or erode certain hallmarks of advertising, specifically: will ads become more creative? better tailored and targeted to their audiences? will ads become more truthful, or better held to account, in terms of veracity about products and services?

And beyond the web, which just scratches the surface, how will this manifest as broadcast mediums like TV become more interactive? And as the physical environment (i.e., billboards, product placement in stores) become increasingly aware and interactive?