The Advertising Bubble

Before I started to write this article I heard two pieces of news. First, that the economy of Latvia had failed as part of the ongoing depression. Second, that the American Government was going to provide subsidies to hedge funds (!) to promote a revival of the financial services industry. The mind boggles, to very different degrees at both of these stories. Like this whole depression, it seems clear that the core issue is that economies based on inauthentic exchange of value are prone to failure: the act of moving money from hither to thither doesn't create value, even though paper values rise. That's a bubble.

There are a lot of these, of course, the bubble under my lens today is the advertising bubble.

It seems to me that advertising, is really minimally effective, or accidentally effective at any rate. Our world is submerged in advertising, and yet we spend a great deal of time ignoring it: we use DVRs to skip commercials, we install ad-blocking plug-ins on our web-browsers, we instinctively tune out advertisements and have grown so acclimated to the presence of advertising that we ignore ads. If advertising is effective it is only effective incidentally.

And yet, we've built (albeit faltering) economies around advertising. The first dot-com burst was due largely to the fact that advertising revenue couldn't support dot-com business model. The Web-2.0 bubble hasn't been entirely advertising driven, but that's a huge part of the equation (eg. google), and particularly for content (rather than service) driven websites.

The thing is that advertising seems like a great way to support the content industry (such as it is): we have practices to separate it from editorial content, it provides a revenue stream, it's easily integrated into our designs, we know how to buy and sell it. But because it doesn't really work (at anything beyond generally raising the profile of a logo, possibly), and advertising money dries up when the economy dries up: so it's not exactly a robust business model.

The problem, is that there's not a lot of good models for content-based services to operate under. Subscriptions don't often work because the threshold to commitment is high, and unless you already have an audience, it's hard to convince people to pay subscription fees. Micropayments, and tip jars where you expect a lot of people to give a very little in support of your site, often suffer from the same problems as subscription models in practice.

The solution?

Well there isn't one, exactly, so I'm really excited to see what happens in the next couple of years. My gut instinct is that the following two factors are important:

1. Content on the Internet should be a hook into some other revenue generating scheme. Consult, coach, be an academic, publish books, sell relevant stuff, and so forth. This works, it can certainly be overdone, or done poorly, but blogging is a great way to prove to the world (and yourself) that you know what you're talking about, and that you're an interesting, creative, and committed thinker and worker, worthy of their investment in other contexts.

2. There should be less content on the Internet. Part of the problem is that since everyone can have their own website, in most cases everyone does, and while this is great for the democracy of the web, it means that there's way more competition (for eyeballs, for advertising money) than there needs to be. The end result is that audience is way too divided. The solution: group blogs and more curated content. It's still possible for people to present individual streams of content, and use personal sites for profiles, but in the age of the niche and the post-advertising age, working in groups is the way. I'm convinced.

More thoughts on this, particularly the second point to follow, of course.

Onward and Outward!

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