Michael Wolff’s link bait grabber line today for Technology Review at MIT that “Facebook is not only on course to go bust, but will take the rest of the ad-supported Web with it” begs, no demands, a significant qualification. He bases this argument on a simple and very real premise:
At the heart of the Internet business is one of the great business fallacies of our time: that the Web, with all its targeting abilities, can be a more efficient, and hence more profitable, advertising medium than traditional media. Facebook, with its 800 million users, valuation of around $100 billion, and the bulk of its business in traditional display advertising, is now at the heart of the heart of the fallacy.
I don’t necessarily disagree with Michael, but he’s missing a very key perspective that renders his argument a bit naive. Here’s the problem: The industry that’s about to collapse isn’t the “ad-supported Web;” it’s the wacky world of Madison Avenue, which has tried to take advantage of the Web’s targeting efficiency only to press its tired, old methods in the name of protecting its place in the status quo. CPM advertising doesn’t work on the Web. It. Doesn’t. Work. It never will. It NEVER will. The idea of “ad-supported content” is also questionable for a season, because the people now making content that really matters are, you guess it, the people who used to buy the advertising. They’re off in their own little (paid for) world, and it doesn’t necessarily include old players.
What do you think when you read that the CFO of Coke, for crying out loud, says publicly that “the 30-second spot isn’t the way to go anymore?” You think that’s hyperbole? GM pulls its advertising from Facebook and the Super Bowl. Why? Everything is changing for these people, the people with the money who have fed Madison Avenue since its beginning.
At the 2012 NAB conference, Digitas executive Ashley Swartz said that everything around advertising has changed, but the advertising agency model has not. Advertising from a technical perspective may be evolving rapidly, she noted, but “the advertising business model, and broadcasters’ focus on digital advertising possibilities, isn’t changing fast enough to adapt.”
And who is the least motivated to talk about that and innovate different options? Madison Avenue. They’ve simply got too much to lose.
So we’re all seemingly stuck, because the ad agencies still control vast amounts of money. They tell media companies — including Facebook — what they want for those dollars, and media companies — with notable exceptions like ESPN — roll over and give them exactly that.
This is the core problem with trying to bolt the old model onto the new. It’s new wine into old wine skins. The market will fix itself after a great deal of pain, and the first today will then be last.
BONUS READ: Peter Kafka’s “TV Everywhere’s Counting Problem.”