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The Rambling Intro

(where I never broach the actual topic of this post, and instead just give a narrative on how I got to the subject at hand)

Over the last couple of days, I have been trying to do something I don’t recommend: forcing a blog post to happen. Blog posts are much better (to me, at least) when they come naturally and flow.

So I tried to make sense of the notion of “free” as it pertains to web services and apps, and it turned out to be a “so what?” kind of post. However, writing the post did give me some other ideas, and I had one “aha” moment.

Holy F&#king $h1t Dude!

(Where I come to a realization that I should have seen a long time ago.)

Looking at the 2.0 and Beta Landscape, the vast majority of new apps, services, and sites are free. [I’ve already rambled on about the different kinds of “free”, so I won’t keep doing that here] So what does that mean? It means this: the entire spate of new startups depend on advertising to stay alive.

Whoa.

Hey Advertising…Yeah, Can You Hurry Up And Evolve Please? We’re Hungry

(Where content providers look to the ad industry and wait for new ways to make more money)

First there were banner ads (saying that makes me feel incredibly old). Then there were contextual ads. Now we’re moving toward behavioral targeting. Advertisers and ad networks are continually looking for new ways to get products in front of consumer eyes, so innovation isn’t just encouraged; it’s critical.

But here’s the biggest difference: Instead of finding creative ways to lure people into a store, the web is making advertising step forward. Now customers are already in the “store” wherever they are, and advertising is responsible to get them to the cash register. For advertisers and content providers alike, that’s the big prize.

Sure, Those Little Ads Help, But Do Not A Business Model Make

(Where contextual ads generate revenue, but not the scalable, enterprise-level kind)

When Google AdWords showed up at the party, it was a huge deal. Now anyone with a web site could have the potential to make money. It was a no-brainer: you just needed to sign up for an account, put a tiny piece of JavaScript in your code, sit back and start lighting cigars with hundred dollar bills. Right?

Not quite.

AdWords and affiliate networks are great for the little guys, but the revenue generated just isn’t enough. Instead, today’s Web 2.0 Free businesses need multiple revenue streams to stay alive. We’re talking about a mix of contextual ads, behavioral targeting, affiliate programs, widget ads, partnerships, cobranding, etc. This list goes on.

Are Web 2.0 Companies Too Dependent on Advertising As A Revenue Source?

I’m glad I pretended you asked that question.

The answer is: Well, I have no idea. I think it all depends on how fast and creative advertising networks can come with new ways to generate sales. One of the more interesting things I’ve seen recently is a storefront widget that can live on a blog. Rather than clicking the ad and going to a new site, the widget simply does some Ajax magic and takes the “clicker” to the checkout without bringing them to a different site. The entire transaction takes place within the blog (at least on the surface).

Think of the implications here:

1)The content producer can demand much higher ad rates

2)The content producer can also demand a piece of the profit (affiliate-like)

3)The user doesn’t need to leave the site, which is astronomically more convenient and valuable to the content producer (think of the paradox now: you spend all your time working on content for your site in the hopes that users will click on a contextual ad and then LEAVE YOUR SITE?????)

4)There’s a shift in perception: instead of seeing ads as annoying barriers to users, they actually create value. Whoa indeed.

So what?

(Where I justify the time spent writing…..and your time spend reading…..this post)

Right now, a crash in the online ad industry would be catastrophic to the thousands of startups that are popping up every day. With that said, 2.0 companies have two choices: 1) Find something to sell or 2) Find a better way to leverage advertising in a more diversified and profitable way.

Well, to be honest, I’m excited. It feels like the entire online advertising industry absolutely has to change for the better, and that’s a good thing for everyone. It means that someday, I might be able to go from merely being able to cover my hosting bill through my ads to [wiping a tear from my eye] to…..being able to cover my hosting, and be able to buy a couple of pitchers of Blueberry Beer each month.

This is my dream, advertising industry. Please….make it happen.

Filed under: online advertising