Is advertising at odds with technology?

by Staff Writer

Advertising, as a business model, seems to be hitting a few speed bumps lately. And technology, once again, is the major culprit. From the overestimation of the value of Facebook (as an advertising platform) to Dish Network’s ad skipping DVR – and pending lawsuit, advertising almost seems at odds with technology, especially recently. And this could be a defining moment in history for advertising [as a revenue model] if it doesn’t sort it out.

The next generation and technology

First of all, there are some hard truths that the advertising platforms need to come to terms with in regards to the next generation of consumer:

  • They don’t like advertising – Consumers of tomorrow are already growing tired of being bombarded with ads. So much so that they’ll go out of their way to avoid them. The next generation sees ads as being invasive and unnecessary, and that’s a huge hurdle for advertisers.
  • They don’t trust ads – It’s nothing personal. It’s just that when you grow up being bombarded with ads, you start to figure out the end game. Once you know the end game, the rest of the message loses credibility. The next generation will not just be desensitized to ads, they’re actually overly sensitive about being sold to. Almost to the point where they’d consciously disregard the message of an ad just because it was from an ad. But perhaps even worse than that, advertisers desire to show more relevant ads as well as track and monitor results, leads to consumer fears of invasion of privacy or worse. Something online advertising platforms have failed miserably to address.
  • They crave technology, but they want it to work their way – Smartphones and tablets are the new wave of technology that’s a huge hit with the next gen consumers. But once it’s in their hands, they don’t want to be told how they can use it. And use it they will. So if advertisers want to be a part of this world, they need to find a way to embrace user desires and habits rather than confront them, or it simply won’t work.

Facebook’s overvaluation

The Facebook IPO was a disaster. And while there are a number of factors and opinions about why the stock price continues to drop, almost everyone agrees that the main revenue model for Facebook, advertising, is at least part of the problem. Particularly for the long-term.

Facebook ads are actually a pretty good deal for advertisers. Cost per click is relatively low, and even though click-through rates are poor (and falling) since advertisers only pay if an ad is clicked, it’s not really that much of an issue for those doing the marketing. But for Facebook, the falling click-through rates are a huge issue. At 80% of its revenue, less clicks means a fading income stream. And that’s not very exciting to investors. What Facebook does from here, either by improving the advertising model somehow or developing a whole other way to generate revenue is up for debate, but one thing is clear: what it’s doing right now isn’t working well enough as is.

The thing is, it isn’t just Facebook that’s feeling the effects of a consistently devaluing online ad space. The entire online advertising sphere is in trouble. In fact, search Google seems to be the only bright spot in an otherwise struggling business model.

Dish Network’s Ad-Hop vs. Fox

It’s not just online advertising either.  Earlier last week Fox filed a lawsuit against Dish network satellite service for their “Ad-Hop” DVR service that allows viewers to skip commercials for programs they recorded to their DVR. Fox is claiming that the service violates their copyrights. The statement from fox is as follows:

“We were given no choice but to file suit against one of our largest distributors, Dish Network, because of their surprising move to market a product with the clear goal of violating copyrights and destroying the fundamental underpinnings of the broadcast television ecosystem,”

A few days later, Dish filed a lawsuit of their own asking a judge to declare their service not a violation of copyrights. Just this past Wednesday, Dish won a jurisdiction ruling potentially keeping the case in NY’s 2nd circuit court of appeals rather than the more copyright friendly 9th circuit of Los Angeles.

The lawsuits are reminiscent of those the networks tried years ago to prevent recordable Betamax tapes (an earlier form of VHS) from being able to record television programming. DVR services are similar and allow you to fast forward through commercial breaks. Dish’s Ad-Hop service simply expands on this common usage as a helpful feature.

From a purely legal standpoint, Fox (and the other networks) don’t seem to have that much to stand on. But the lawsuit certainly is telling. It’s a clearly intuitive feature (for users) but it makes the content networks very nervous. And once again, instead of embracing the technology, advertising platforms would rather confront it head on.

Adblock & anti-script add-ons

Adblock is nothing new. Script and ad blocking software has been around for some time, but they’re quickly gaining momentum and users. Especially from young people – the next generation of consumers. And while the main motivation for such web browser add-ons is so you don’t need to experience annoying and/or invasive advertising, that’s not all it does.

The thing is, using an add-on like adblock plus also improves page load times, prevents potentially malicious scripts, and even saves on bandwidth (for those of us with limits). Who wouldn’t want these things? Personally, I don’t have a problem with advertising, but that doesn’t mean I’m willing to put up with a slower, less secure, and more expensive web browsing experience.

And instead of being at odds with ad blocking services the sudden increase in popularity should be seen as a wake up call. A not-so-subtle hint that online advertising has failed to address the wishes of the masses. The same masses that the sellers of ad space can’t afford to be at odds with if they hope to survive.

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