BUSINESS BLOGS
BUSINESS BLOGS
category: business
17 Mar 2008

What if advertising does not work? Well, it doesn’t. Advertising works because of economic determinism, but in odd ways.

- If no one advertises alongside a piece of content, the price of that real estate falls enough to make it financially viable to be there.

- If too many companies advertise alongside a piece of content, the price of that real estate increases and becomes prohibitive for many, but for some, not being proves far costlier.

In this context, advertising has nothing to do with short-term ROI, but with necessity, or to quote Darwin, survival.

Speaking of ROI, however: at Paid Content’s Future of Business Media, I heard:

- Tad Smith, Reed Business Information has a very good point: for all of the talk about targeted [web] media being preferred comes the flip side: “If a Chief Marketing Officer can spend $1M on TV, $1M on print and $1M online, but with online you can see that it has a negative ROI, what do you do? What happens when you realize just how much of a negative ROI some campaigns get online. What will that result in? I don’t know.”

I guess ignorance is bliss. He has a good point, but I’d say how much greater of a negative does print, TV or radio “yield”? Of course, you know the expression, if you’re gonna be in the negative, go big!

I think all of this talk is folly. We’ve been down this road before. In 2000, we wondered, search is the second most popular activity on the Web after email and 7 out of 10 websites are found via the Web, but so what.

So what? So Google crushed everyone by focusing on search and here we are today in a Google dominated world.

The next area of growth is video. There will not be 1 Google of video. Too many companies in investing in video and no one platform is taking precedence. While video (and display) advertising are fundamentally different than search advertising, they remain marketing tools… so at their core, they share more similarities than differences.

Video is where search was in 2000-2001: it’s a major component of the online media landscape looking for a business model.

Indeed, a video stream is no different than a search query: it has an informational component and a commercial component.

While a search query conveys intent, a video stream captures interest. While performance-based marketers care about intent, branded advertisers care about interest.

Yes, those who search are looking for something, some times of a commercial nature. But they represent a far smaller component of purchasing power. To build awareness, market share you need to advertise to many more would-be consumers than those who are looking for your product (and online, can do so easily anyway).

This is why video will be far more important than search. Advertising alongside video will capture the attention of those who are interested in informational things that have the psychodemographic you are targeting.

Advertising works, just not in a direct, methodical, linear fashion. More importantly, the payoff comes over time, and sometimes, the time value of money makes the investment seem like a loss-leader.

More on this in “What is the value of a video stream?“