Wrong Model, Dumb Money

I am not a technophobic Marketeer, an old “resistant to change” type.  In fact, I’m just the opposite, and that’s why I can’t understand why Online continues to Repeat Past Marketing Failures.

I was one of those kids that built crystal radio sets and messed around with ham radio.  My favorite place to hang out was Radio Shack, back when they were an electronic parts house.  I built all kinds of circuit board stuff with a soldering iron, mostly bugs and telco hacks.  I was a geek when they were called nerds. 

In 1977 I learned the BASIC language and was writing simple programs for the mainframe at college.  In 1978, I was part of a small group of students who worked on the Synclavier, the first large scale truly digital music synthesizer.  I started working with PC’s in 1987, and had a home computer by 1991.  I was one of those people who dialed up to the CompuServe Forums at 300 baud, primarily talking about computers and music, figuring out how to rewrite .bat and .ini files to get the computer / keyboard interfaces working properly. 

And at the same time, making lots of  “online friends” ;).

So I have to tell you, the following is not coming from someone who is against or afraid of technology or experimentation.  What I am against is the illogical squandering of resources, and people who are inflexible in their thinking.

I understand perfectly well why coders get excited about developing new ideas for new platforms, solving problems and providing new functionality.  Let’s build something for Facebook!  Get tired of that?  Let’s build something for iPhone!  Etc.  On and on, over and over.  Nothing wrong with that.

Here is what I don’t understand about this “innovation” on the web.  The magic bullet for monetizing all the free platforms and applications so pervasive on the web is Advertising.  But the platforms and applications are rarely developed, it seems, with a clear vision of creating value for the Advertiser.  Surprisingly, this part of the job is not well thought out and often bolted on later.

The problem with this approach should be obvious – ultimately, the application fails to pay for itself, the business model collapses, and that generation of work disappears with another “lesson learned”.   Except, this lesson is often the same lesson learned in the previous generation, from an Advertising perspective.

Here is something we have now learned about 20,000 times on the web:  Advertising lacking proper Context generates little value for Advertisers.  As is the case offline, by the way.

That’s what makes a prediction like MySpace will be Tripod all over again from an Advertising perspective so easy to make.  It doesn’t matter what the platform or application is.  If it lacks the key contextual elements to support successful Advertising, it will fail from an Advertising perspective.

Why care about this?

I will tell you why – Budget for Online Marketing / Analytics.

As long as online looks and acts like some kind of ongoing experiment, it’s going to get that kind of attention and budget.  Seriously.  And the ongoing, repeated failures of the same ideas over and over does not help with this issue very much, know what I mean?  I know, I know, you think each generation is a new idea because it’s new technology.

But these are not new ideas to Management, and they’re not ideas to Marketing.  They’re the same ideas with new technology, and each fails in the same way the others did.  So, why do we keep repeating these cycles?  What is wrong with the transition from brilliant software development to sustainable business models? 

There have been lots of good suggestions.  Defective analytical cultureIncompetent industry analystsShort-sighted business goals (more on that one here).

But when I keep asking “why?” for a lot of these issues, I always come back two two ideas:  Wrong Model and Dumb Money

Wrong Model – Why, over and over, are new platforms and applications built that fail to provide proper context hooks for Display Advertising, and are not structured to take advantage of Search?  I’d guess it’s because developers simply have been fed a lot of crap about the true nature of Advertising and Marketing.  In case this concept is unclear, let me be specific: A random space with a random Display Ad in it creates very little, if any, Value for Marketers.  Context is king.

CEO’s and  CMO’s are looking for the Strategy edge, and they are looking for ways Online is a “logical fit” into the Marketing Mix.  What is online “for”, and perhaps more importantly, what can Online Advertising do better than Advertising we already have?

This concept is extremely important because if you can get to this place, then you have leverage, then you have the ability to draw more money into online Marketing / Analysis – because it is different

When everything you come up with replicates the offline model but doesn’t work as well – take Display Advertising, for example, which is the business model most every “new” idea uses – then how would you expect to get any Marketing respect / budget? 

Seriously, this approach looks ridiculous from outside the small world (budget-wise) of Online.  Think about it.  What other medium relentlessly pursues a failed business model so persistently, hoping something will change?

Dumb Money– either VC / Buyout money or stupid (unaccountable) money coming from Advertisers – is in many ways just the enabler of the Wrong Model problem.  It allows these innovators to stop thinking about what they are doing, to really create something different as far as Advertising / Marketing goes. 

It’s just too easy to say “make sure we leave space for Display Ads” and leave it at that, instead of building in the plumbing to give the advertising proper context.  I’m not going to go deeper into the fundamental problems of Display Advertising on the Web here as I covered these issues in the Online Brand-ing series.

Conclusion

I’ve spent a long time thinking about how to define the “correct model” for online Marketing comprehensively, and found it’s a deep hole I can’t travel down further than I already have at this time.  I think readers of this blog probably know which direction I am leaning on this model.  Perhaps we can do that together at a later date (feel free to leave your Comments on the correct model).  I do know what doesn’t work, though, and am surprised we keep repeating that model.

For now, here’s a prediction: The first social network to:

1.  Drive “vertical”, highly segmented participation, which drives context for Display Ads, and

2.  Becomes transparent to web-wide Search or uses Search really well internally to expose rich contextual spaces

will be the first social network to make money.  How do I know this?

Because the same thing has happened over and over again already with each new generation of technology.  If you’re on the Marketing / Analytics side of Online, you know this to be true, right?

I’m not a genius, I just remember history.

Can anyone give me a reason why the next generation of platforms and applications can’t be built with these two ideas embedded in them from the beginning?

Other comments on the above?

 

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One thought on “Wrong Model, Dumb Money

  1. Let me preface this with I run a really small business, so I’m a bit biased (no marketing and IT departments to fight–except when I talk to myself).

    I’m using various social networking tools to help support and grow my business. Facebook, Twitter, etc. As a user as well as a business owner, I don’t think the social networking platforms are useful as advertising venues. Rather, they provide a great mechanism to keep in touch with my clients and peers. I see what they’re up to, they know what I’m doing.

    For the most part, any ads that I see I ignore. They rarely fit my interests, so they are definitely failing on #1-Drive “vertical”, highly segmented participation, which drives context for Display Ads. They do try, but either they haven’t gathered enough information about me or they don’t know how to use the information they have. That is the key, I think. They either have to figure out the right questions to ask of me or how to best use the data they have.
    As for your question, Jim, about reasons it can’t be done: no reason it can’t, but someone will have to work at it. Again, marketing needs to drive the technology.

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