Internet is amazing! Web 2.0 rocks! I can get anything and everything I want in the internet for free. How do you get a host of services like free e-mails, free music and information to the extent of every Sodium atom that goes into the making of common salt? Well, the answer is a no-brainer. It’s because of advertisements, the overtly ambitious companies which pump-prime a huge sum of money for its marketing spends.
We see dozens of Web 2.0 companies mushrooming every day. Ask them how they’re gonna make money. You’d not be surprised if everyone responds as advertising. Are these models sufficiently succulent to yield juice for another decade? Well, my prognosis on the future of such businesses is not rosy.
Let’s briefly look at how this digital advertising business evolved. Advertisers are by and large extremely smart. They grab opportunities; rather create opportunities where they find a remotest chance of doing so. When they found internet to be an emerging media used by a lot of people about a decade or so ago, they started the party. Though the initial few years were not great, their prognosis came true. With the advent of Google Ad-Sense, Ad-Words etc, digital advertising reached its pinnacle. We are talking about the generic ads here.
In the last couple of years or so, there has been a lot of emphasis on ‘Web Analytics’ and the marketers want to target the right segment(Google the following to know more - ‘Adzilla’ , ‘NebuAd’). For instance, if you log in to google and search a lot on the car you want to buy, you’ll be shown much of Car ads. This has been termed as ‘behavioural targeting’ and this is evolving big time. Evolving in the sense, the level of customisation of such specific ads is zooming up.
But hold on, how many of us still click the ads on google or any website that we visit? From my personal experience I have realised that, my mind is trained to ignore the ads when I surf the pages and this is the case with a lot of my friends. So even if someone runs a behavioural targeting algorithm and places an ad of a car in front of me, when I’m on the look out for buying a new car, will I notice and benefit from the ad or rather the other way around, will the company benefit from showing the ad to me? My basic question is whether these marketers are connecting effectively to the changing mindsets of customers. Are they effectively tracking the psychological changes the customers are going through at a rapid pace?
This leads to the most fundamental discussion of what advertising is all about. Well, a lot of us tend to lose the sight of the bigger picture when we hear the word advertising. We tend to think of ads ONLY as those creative banners or posters or the flash clips we see around us. Advertising Science fundamentally is a tool of communication and good advertisers are those who can effectively communicate what values their products can add to their targeted customers. Advertisers need not draw the attention of the public by banner ads or flash ads of their product alone, but they can resort to any innovative technique. History shows that advertising techniques have evolved faster than the human psychological changes. Has the time come to think of completely crazy and wacky ways of communicating to the public? My answer is a big yes.
This leads to another fundamental question. What will be the revenue model for the e-businesses in the near future, assuming that the current wave of advertising would lose sheen? One of my friends Sumit strongly believes that you would be paying for each and everything you do on the internet in the near future. Well, I do believe in that to a certain extent, but more importantly I feel that you’d also be payed for every thing you contribute to the web. I have a crazy feeling that you’d even be paid for every useful post you make on a community like orkut or may be on a blog. So the net effect would be that you get richer by spending time on the web. But who would pay you for all this? Advertisers? Well, the answer may be yes, if advertisers come up with some crazy ways of web-advertising (read: communicating values) and I strongly believe in the prowess of Advertisers!
This would lead to a lot of money transaction on the web. Even the conventional concepts of money and finance behind these transactions might change. Crazy, isn’t it? There would be a huge business opportunity not only for these wild gaga marketers, but also for the finance guys since web transaction finance would get really big.
PS: If you are a PE investor or a PE manager aspirant who happened to stumble across this post, think twice before putting your money in the so called evolving ‘web analytics’ companies (for short term, it’s really brilliant though). For whatever change the advertising would undergo, it’s certain that web based transaction finance would be the next big thing and think of putting the big bucks in such ventures.
We see dozens of Web 2.0 companies mushrooming every day. Ask them how they’re gonna make money. You’d not be surprised if everyone responds as advertising. Are these models sufficiently succulent to yield juice for another decade? Well, my prognosis on the future of such businesses is not rosy.
Let’s briefly look at how this digital advertising business evolved. Advertisers are by and large extremely smart. They grab opportunities; rather create opportunities where they find a remotest chance of doing so. When they found internet to be an emerging media used by a lot of people about a decade or so ago, they started the party. Though the initial few years were not great, their prognosis came true. With the advent of Google Ad-Sense, Ad-Words etc, digital advertising reached its pinnacle. We are talking about the generic ads here.
In the last couple of years or so, there has been a lot of emphasis on ‘Web Analytics’ and the marketers want to target the right segment(Google the following to know more - ‘Adzilla’ , ‘NebuAd’). For instance, if you log in to google and search a lot on the car you want to buy, you’ll be shown much of Car ads. This has been termed as ‘behavioural targeting’ and this is evolving big time. Evolving in the sense, the level of customisation of such specific ads is zooming up.
But hold on, how many of us still click the ads on google or any website that we visit? From my personal experience I have realised that, my mind is trained to ignore the ads when I surf the pages and this is the case with a lot of my friends. So even if someone runs a behavioural targeting algorithm and places an ad of a car in front of me, when I’m on the look out for buying a new car, will I notice and benefit from the ad or rather the other way around, will the company benefit from showing the ad to me? My basic question is whether these marketers are connecting effectively to the changing mindsets of customers. Are they effectively tracking the psychological changes the customers are going through at a rapid pace?
This leads to the most fundamental discussion of what advertising is all about. Well, a lot of us tend to lose the sight of the bigger picture when we hear the word advertising. We tend to think of ads ONLY as those creative banners or posters or the flash clips we see around us. Advertising Science fundamentally is a tool of communication and good advertisers are those who can effectively communicate what values their products can add to their targeted customers. Advertisers need not draw the attention of the public by banner ads or flash ads of their product alone, but they can resort to any innovative technique. History shows that advertising techniques have evolved faster than the human psychological changes. Has the time come to think of completely crazy and wacky ways of communicating to the public? My answer is a big yes.
This leads to another fundamental question. What will be the revenue model for the e-businesses in the near future, assuming that the current wave of advertising would lose sheen? One of my friends Sumit strongly believes that you would be paying for each and everything you do on the internet in the near future. Well, I do believe in that to a certain extent, but more importantly I feel that you’d also be payed for every thing you contribute to the web. I have a crazy feeling that you’d even be paid for every useful post you make on a community like orkut or may be on a blog. So the net effect would be that you get richer by spending time on the web. But who would pay you for all this? Advertisers? Well, the answer may be yes, if advertisers come up with some crazy ways of web-advertising (read: communicating values) and I strongly believe in the prowess of Advertisers!
This would lead to a lot of money transaction on the web. Even the conventional concepts of money and finance behind these transactions might change. Crazy, isn’t it? There would be a huge business opportunity not only for these wild gaga marketers, but also for the finance guys since web transaction finance would get really big.
PS: If you are a PE investor or a PE manager aspirant who happened to stumble across this post, think twice before putting your money in the so called evolving ‘web analytics’ companies (for short term, it’s really brilliant though). For whatever change the advertising would undergo, it’s certain that web based transaction finance would be the next big thing and think of putting the big bucks in such ventures.
4 comments:
I strongly oppose to some of your points.
1. There is still a lot of opportunities for internet advertising. If you don't click on ads, that doesn't mean that everyone doesn't click on ads. If your assumption that everyone doesn't click on ads is true, then Google would have been shut down and so will many more companies. Of course, I agree that people are becoming more and more resistant to ads. Ads are mostly clicked by people aged > 30 who browse at a much relaxed way and those who have the spending power. Not us.
2. In the near future, lot more than what is free now will be free. You won't have to spend much. Come from early days. The trend is towards free services.
3. None is going to pay you for what you do in the internet. Web 2.0 is run by the people, nobody has to pay them and it is impossible to do so. For example, there are services that pay to write articles. But are they popular? No. Wikipedia is.
4. Advertisers are coming up with novel strategies. So don't worry about the internet advertising industry to be shut down for at least 50 more years.
Even if you don't click on some ads, they do make an impact on you (mostly banner ads).
@Mahesh
Thanks for those profound comments da.
What you said about people > 30 clicking ads might be true. My sample was people around our age, so it can very well be a biased sample. But my idea was to emphasise that people are increasingly getting used to avoiding ads.
About stuffs being free in the future, probably I didn't drive across my ideas well. What I intended to say was that there might be a monetary value associated with every act of yours, both in the outflow and inflow side and inflow might be a notch higher making your net income higher. It is just about adding a money value(read credibility/autheticity) around every act of yours on the web and on the net you'll gain. It was just a crazy thought of mine :)
Macha, that's a well written post. But somehow even I feel that paid services is a distant reality. Probably you would pay for extremely customisable soluions, but rest all would remain free
@ Harish
Macha you are right in saying so. But my point as I explained in previous comment is that every act of yours would have a monetary association(read credibility)...
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