Note the Date and Time… the Ad Industry has Finally Started to Get It

Today the ad industry trade press finally wrote the story we’ve been telling for the last 15 months:

Think Different: Maybe the Web’s Not a Place to Stick Your Ads — Matthew Creamer Asks Whether We’re All Missing the Point When It Comes to the Internet

This is exciting for us as we’ve been trying to get the press to write about this story for quite some time. All credit to AdAge reporter Matthew Creamer for understanding where things are heading and writing about it so thoughtfully and comprehensively. He’s not just pointing to a trend, he really dives in to understand why this is the future. Credit also goes to Nike which is living it with their Nike Plus efforts.

The story is this… the internet is a platform for software. Software is an incredible medium for engaging audiences which is exactly what marketers are trying to do. Interactive experiences that are actually useful rather than being focused on themselves will engage audiences. And they’ll do it at a fraction of the cost of traditional advertising (online and off).

Creamer elaborates:

“…there’s the basic mistake that marketing is synonymous with advertising. Then, there’s the underexamined assumption so popular in marketing circles of all kinds that when it comes to helping companies create brands or move product the Internet’s greatest use is as an ad medium.”

Of course, more often than not advertising on the internet is a distraction that removes value from the user experience. In effect, owners of web properties are trading user value for cash in their pocket.

“Are we having the right conversation?”

I love this question because it acknowledges that the vast bulk of current internet advertising is flawed from conception, not execution as many ad “experts” might have you believe.

“What you’re about to read is not an argument for making over web marketing as a factory for destination websites or for making every brand a content player. Not every brand has as much natural pull as Apple and, anyway, there have already been high-profile flubs in the if-you-build-a-content-channel-they-will-come department (Bud.TV, anyone?).”

We actually would argue that every brand has an opportunity to create value for an audience with a website that does something useful. Creamer only slightly misses the point when he thinks of content as the main vehicle for engaging audiences, but he corrects this later in the article. And also to his credit, he uses our favorite whipping boy — — as his example of marketers creating destinations resulting in major FAIL. ($60 million to build, program, and promote a site that a few months after launching got a lower Alexa ranking than my food blog.)

“This, however, is a call to give some thought to a question that’s not asked enough about the Internet: Should it even be viewed as an ad medium?”

If you constrain the definition of “ads” to what we can transplant from billboards, magazines, and television, then of course they are right that the internet is not optimal for those “formats”.

“Trends like those listed suggest the possibility of a post-advertising age, a not-too-distant future where consumers will no longer be treated as subjects to be brainwashed with endless repetitions of whatever messaging some focus group liked. That world isn’t about hidden persuasion, but about transparency and dialogue and at its center is that supreme force of consumer empowerment, the Internet. But when you look at how the media and marketing business packages the Internet — as just more space to be bought and sold — you have to worry that the history of mass media is just trying to repeat itself.”

Creamer gets the prize for this one. He calls out many of his own readers for their cynical approach to the internet.

“Rarely a fortnight goes by without some new bullish forecast for ad growth that works to stoke digital exuberance within media owners that often drowns out critical thinking about the medium itself.”

Ah… the emperor has no clothes. Maybe video isn’t the answer. It’s a sad day for wannabe movie directors at ad agencies who felt the internet would break them out of their 30 second stranglehold. ;)

“Here’s the issue: The internet is too often viewed as inventory, as a place where brands pay for the privilege of being adjacent to content, like prime-time TV and glossy magazines relics of the pre-blog days when getting into the media game actually required infrastructure and distribution.”

While some get it, you will often say to marketers: “it’s interactive, it’s networked, it’s fundamentally different.” They nod, they say they get it. Then they put out And clearly, they don’t get it.

“…marketers can build website that do cool, useful stuff.”

This is the first step to companies with large marketing budgets turning into software companies.

“Better examples include Johnson & Johnson and its BabyCenter, a deep repository of information about raising a newborn that’s a clear competitor to Bonnier or Meredith, the publishers of Parenting and Parents magazines respectively.”

This actually isn’t a much better example as a huge amount of the value of BabyCenter is its content. However there is some actual software value on the site.

“Nike Plus, whose sharp interface connects runners all over the world, is a real threat to any traditional media owners who wants to engage with that running population.”

This is a way better example. Nike is creating online experiences that are fundamentally productivity software for runners.

“Answer: create advertising that has value”

Ding ding ding. The answer is clear and simple. :)

“Functionality has often not been the role of advertising.”

Time for marketers (and agencies) to seriously retool. Learning how to make great software is no small feat (we’re still learning after doing it for decades collectively). And it’s going to be challenging (but fun).

“Functionality, utility — whatever you want to call it — brings a different level of engagement from consumers. Because people click on these things freely and voluntarily, because it helps them to get something done, they come to them with a different mindset than they do marketing communications that interrupts, whether a TV commercial or a pop-up ad online. Put simply, they want to be there. ”

Bingo. Most agencies are staffed with people who are way too focused on distracting. Even when they apply their skills to “interactive” (that’s what they call the web) it often (not always) ends up being distraction instead of value.

“There’s one other thing about them: Unlike that TV spot, the cost of distribution is very small if not free.”

And this of course is the cherry. Not only is creating useful software on the web the best way to engage an audience as they actually want to be there, but it is incredibly cheap relative to the money the big marketers are used to spending to reach audiences of similar size with deep engagement.

Can you tell we’re excited that the story has finally broken?

To be fair, the New York Times did write about Nike creating “ads” that were sites their audience actually found useful back in November of 2007. Umair Haque at Bubble Generation and the Harvard Business Review discussion has been writing about corporations trading user value for cash instead of creating new value, and the new economics of brands. Elinor Mills of c|net has also mentioned this phenomenon in passing. It’s true that Matthew Creamer wasn’t the first to notice this but he was the first to focus, go deep, and nail the story to this degree with texture, clarity, and courage.

I will say that we’ve approached at least a dozen mainstream and industry reporters trying to engage them on this story (Creamer not among them) and have been greeted typically with a polite ‘thanks but no thanks’. To be fair, I have no doubt reporters are approached with stories from self-interested startups every other day and it’s hard to separate the wheat from the chaff.

Credit also goes of course to the folks who are actually doing this. Nike is leading the way among some of the biggest marketers. But Van City, a Canadian credit union, worked with Social Signal to put out Change Everything before we even existed. I can’t find an example of a great branded destination prior to theirs so they get credit for planting the first flag in this territory.

We try to document these experiences over at our Branded Software Experience Index. I wish there were more good ones to write about. So far, there aren’t. But they should be coming soon now that marketers are starting to see the light.

Jim Stengel, P&G’s CMO, was also preaching this a year ago at the AAAAs conference in Las Vegas. The ad agency ecosystem folks in the audience were mostly listening to him glassy-eyed. I’m not sure they quite got what he was saying. And also, I have yet to see a great example of this strategy come from P&G itself. Though I would imagine they have some in the pipe.

We don’t claim to have invented this business model/category. But we did observe when we started our business (back in November of 2006 — did they have indoor plumbing back then?) that the notion that advertisers would soon realize that useful interactive destinations — or “branded software experiences” as we called them — would be the single most engaging, emotionally connective, and cost-effective method of engaging an audience on the internet and conveying brand values and messaging to that audience.

It’s all written up in our white paper on the topic if you have the energy for more. :)

So… what’s next?

Here’s our prediction:

  • even the biggest brand advertisers will realize that creating and maintaining high quality web apps is not a simple proposition
  • they will turn to their ad agencies and their interactive retinue to build these experiences
  • more often than not, these folks will build sites oriented around expensive content, video, and the like
  • brand advertisers will realize that they need the traditional creatives combined with deeper software expertise to make great online experiences
  • some advertisers will bring this in house and in effect become software companies themselves
  • some advertisers will work with companies (like ours) to deliver online experiences that have depth, quality, and utility (some of the agencies over time will build deeper expertise in this area — it’s harder than it looks)
  • and whichever tactical choice a marketer makes, the bulk of online consumer software will be funded directly by brand advertisers

Super interesting. Super exciting!

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