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Update 3/29/09: Danny Sullivan correctly pointed out to me that he is a publisher and an advertiser.  I’ll disagree on the idea that he is a “real user”, by which I meant “regular user”, because he is not nor I am.  We study websites, traffic and human behavior – we notice and ignore and react to things very differently than a user just flying by to get the latest news and views.  I do agree with Danny that my argument mostly matches his… thus, I’m only calling out Clemons argument.

Update 3/28/09: Techcrunch keeps stirring this up.  Now Danny Sullivan replies…

The most damaging part of both of their arguments is that neither one is arguing Clemons original argument and rebuttal mostly fail to convince his claims about the death of Internet Advertising.  He’s conclusions don’t match actual data and experience from the perspectives of an advertiser, a publisher nor really a regular user.

These points are not defensible without real data:

Users don’t trust ads
Users don’t want to view ads
Users don’t need ads
Ads cannot be the sole source of funding for the internet
Ad revenue will diminish because of brutal competition brought on by an oversupply of inventory, and it will be replaced in many instances by micropayments and subscription payments for content.
There are numerous other business models that will work on the net, that will be tried, and that will succeed.

In fact, let’s consider some counter examples:

Someone sold 4 million Snuggies based on ads.  Did the people who responded to those ads not trust the ads?  Their behavior shows they did enough to fork over $15 bucks for a blanket with holes in it.  The better statement is some users don’t trust some ads.

Users do want to view ads.  Millions of people love superbowl ads and actually seek them out online and on their TIVOs.  Online only ads that people do want to view include the millions of mini games they play, youtube videos they watch, contests they enter.  A better statement is that some users to want to view some ads, especially when the ads are not engaging, useful or catchy.

Users do need ads.  Search engines and social graphs can only show you information about things that are already popular/reached tipping point.  They cannot show you stuff just coming out of the labs.  Users need ads to learn about new and different products and services.  And the only way to introduce people to new things is put new things alongside already known things.

Ads are not the sole source of funding for the internet. Anyone who is claiming this is what web companies think clearly has not really studied the industry or worked at a web company and/or companies that extensively use the web in their business models.

Ad revenue will continue to grow in the long run.  As long as businesses need to sell more product, more ad revenue will go into the market.  The difference is that the ad spend is spread among more and more entities, so individual businesses will get less ad revenue.

Many other business models already work. and more will be created.  Selling apps, selling computer time, renting server space, selling subscriptions, donor models, barters, licensing, premium access…. I mean, gosh.  I don’t think we lack for business models that work.  The media is simply pointing to the high profile failures of big media companies that haven’t figured out to how to shoehorn it’s model into the internet way of doing things.

Once again we see that pundits rarely represent the real story.  They don’t know the price of milk. Just talking to people in the industry and summarizing the conversation is not enough to predict the end of online advertising.

See below for rest of my original response.

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Despite the impressive length,  a recent TechCrunch guest feature on the failure of internet advertising fails to reveal what’s really destroying the ad model online.  Clemons neither states what he claims is actually failing and doesn’t really prove it is. Alas, I will still attempt to refute the possible implications of his claim.

It is not a particularly insightful observation that “The problem is not the medium, the problem is the message, and the fact that it is not trusted, not wanted, and not needed”. Of course people don’t like being distracted with ad messages.  That’s always been the case, that’s why marketers have to pay for ad placement.  Nothing new here.

Advertising itself is not broken nor will ever go away.  As long as companies have products they need to push into market, they have to advertise, regardless of nature of the medium.  Play with the language and state definitions all you want – advertising will always be a part of our lives and media experiences.

What’s wrong with the business models of sites that rely on advertising is the pricing, not the actual idea of advertising.  Spending in terms of dollars is down in all mediums, certainly.  However, the amount of advertising we’re exposed to is likely still growing.   I have a long post on all sorts of data points on this topic here.  The short of it:  marketers have a growing number  advertising impressions out there, everyone know’s how well they perform and thus the pricing is coming way down from the relatively overpriced “older” advertising models in print, radio and tv.  This shrinking pricing model puts pressure on the business from a margin standpoint and so the less efficient businesses fail.

Yes, I generally hate banner, text, billboard ads and neon signs like everyone else. Except when I don’t.  And when I don’t that’s valuable to the company that paid for that placement and it’s valuable to me to be notified of something I might have missed.  We’re just arguing price.

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Update 2/17/09: Here’s a fun piece on CNN about MDs using Twitter from the OR. Again, this is NOT particular useful data being generated.  It is, however, an excellent BROADCAST tool.  Surgeons pushing out updates is useful to families and friends. In the grand scheme of useful information unto itself, this content will have no reuse outside of that surgical operation context.  Perhaps an aggregation and synthesis (not real time) would be useful in trending operations, but there are other, more efficient, ways of computing and comparing data from operations.

Ok, so perhaps, this is why VCs, media pundits and internet geeks gush over Twitter: The idea that it represents some collective thought stream/collective brain.

The most common statement about why this colletive stream of drivel has value comes in this excerpt from the TechCrunch post:

Twitter may just be a collection of inane thoughts, but in aggregate that is a valuable thing. In aggregate, what you get is a direct view into consumer sentiment, political sentiment, any kind of sentiment. For companies trying to figure out what people are thinking about their brands, searching Twitter is a good place to start. To get a sense of what I’m talking about, try searching for “iPhone,” “Zune,” or “Volvo wagon”.

Viewing the proposed examples SEEMS to validate the claim.  However, online discussion and online “tweets” are NOT the same as the behavior you’re actually trying to gain insight into.  Whether people are into a brand is not accurately assesed by viewing what they SAY about it — it’s what they DO about it.  Do people BUY the brand? Do they SHOW the brand/products to others?  Do they consume the brand?

These above examples are not predictive in anyway.  They are reflective.  Twitter can’t do much better than Google, blogs, and news outlets at ferreting out important events, people, products, and places before they are important.  Twitter, in some respects gets in its own way because the amount of “tweet” activity is not always a great indicator of importance.  In fact, some of the most mundane events, people and places get a ton of twitter activity versus really important stuff.

Twitter is also highly biased.  It is predominately used by the technical/digtial elite.  Yes, it’s growing quickly, but it still doesn’t reflect more than perhaps 1-2% of the US population.    Heck, even Google traffic is highly biased, as only 50% of the US population uses search every day. You say, so what, it will get there!  No, it won’t.  Consider the following examples.

Twitter can’t tell you ANYTHING about the real stuff of life like Baby Food, Peanut (recall), or your local hospital. (I leave it as an exercise for the reader to try these searches on Google and compare the results).  With more usage, this only gets more impossible to find the real information.  New tools to parse and organize tweets must be created.  This implies you’ll need computational time to parse it all, thus destroying the “real time part” the techcrunch authors and this quoted blogger adore.  Beyond just filtering and categorizing, an engine needs some method to find the “accurate” and “authoritative” data stream.  Twitter provides no mechanism of this and doing so would destroy it’s general user value (you don’t want to have to compete with more authoritative twitterers, do you?)  Twitter search would need to become more “Googly” to matter at all in some bigger world or commerce sense.

TechCrunch correctly identifies this problem:

An undifferentiated thought stream of the masses at some point becomes unwieldy. In order to truly mine that data, Twitter needs to figure out how to extract the common sentiments from the noise (something which Summize was originally designed to do, by the way, but it was putting the cart before the horse—you need to be able to do simple searches before you start looking for patterns).

So where does Twitter really sit and does it have value?  It is a replacement for the newsgroup and chatroom and some IM functions.  It has value, obviously, because people use it.  Users replace their other forms of conversation with Twittering.  Broadcasters and publishers are also replacing other forms of broadcasting/pushing messages with Twitter.  This, too, has value in that Twitter better fits the toolsets more and more of us sit in front of all day long.  It’s somewhat of a “natural” evolution of things to find a new mechanism of broadcasting when a medium (terminals attached to the network) reaches critical mass.  The hudson river landing example is a better example of the shift in broadcasting method than it is of some crack in the value of Google and others for a value to have “real time search.”  If that logic were sound, CNN would been hailed as a “Google Slayer” as they are more real time than Twitter is (yes, they use twitter and ireport and citizen journalism…).    In fact, CNN is the human powered analytic filter required to make sense of real time streams of data.  News journalists capture all that incoming data and find the useful and accurate information and summarize and rebroadcast.

If I were an operator of IM networks or a business that relied on chatrooms and forums, I’d be worried.  Google, news outlets and other portals should not be worried.  They don’t need more contextless content to sift through, they do just fine without yet another 99% source of throw-away thoughts.

I, myself, am not a Twitter-hater.  It is a great media success.  It probably can make money.  However, it doesn’t represent some shift in social networking, high tech, communications, much less how we interact.  Anyone who claims that must be delusional or hoping to make a buck or two, which is fine too.

TechCrunch concludes with the real question here:

But what is the best way to rank real-time search results—by number of followers, retweets, some other variable? It is not exactly clear. But if Twitter doesn’t solve this problem, someone else will and they will make a lot of money if they do it right.

Is there a possibility to generate a collective thoughtstream? big Internet brain?  Sure, in some loose sense, that’s already happened.  Twitter (and other tools) is just a piece of the puzzle.  The human brain doesn’t have just one piece you can claim as the main part – the CPU that can make sense of everything.  Why should we think something less complicated (the Internet has far fewer nodes, interconnections and far higher energy demands than just one human brain!) have a central core (service) providing some dominant executive function?   There are several reasons this physically can’t happen.  The main thing, I mentioned it earlier, is that making sense of random streams of data requires computational time.  The more inputs a system takes in, the more computation it requires to make sense (or to filter it in the first place).  New information or new types of information must first be identified as potentially useful before they can even be included for summarization.  And so on.  The more useful you need to make entropic data (random), the more energy you need expend. Raw data streams trend toward entropy, yes in an informatic and thermodynamic sense.

In other words, no one company is going to figure out how to rank real time search results – it can’t be done.  Perhaps more damning is, it doesn’t need to be done.  There’s no actual value in searching real time.  The idea of searching is that there is some order (filter) to be applied.  When something happens, John Borthwick, correctly claims “relevancy is driven mostly by time”.  So twitter already has the main ordinal, time, as it’s organizing principle.  Perhaps TC and John Borthwick desire a “authority” metric on tweet search… however, you can’t physically do this without destroying the value of real time.  No algorithm accounting for authority will be completely accurate -there’s a trade off with real time and authority.  (PageRank has the similar problem with authority and raw relevancy, as no name authors and pages often have EXACTLY what you want but you can’t find them.  This is a more damaging problem in “real time” scenerios where you want the RIGHT data at the RIGHT TIME).

If Twitter could plant an authoritative twitterer at every important event and place, real time twitter search might become real.

Oh wait, that’s called Journalism – we already have 1000s of sources of that.

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Ah, TechCrunch.  You whipped out the old Excel and made the industry famous Up And To The Right Chart.

There is no strong conclusion to draw from this very limited data set.  The only piece of interesting data is:  of the big 4 media companies presented here only Google has any sustained growth and makes up the majority of 4th quarter growth.

The Industry is NOT doing well at all.  Time Warner and News Corp had major losses, and they have huge stakes in the internet.  Yahoo, MSN, AOL all suffered major losses.  Mid-tier Smaller publishers are getting crushed, and you won’t see that in any of this data or any emarketer reports.

If companies in the media industry want to actually survive, get real.  The existing ad model stinks and this recession just nailed the coffin shut.  Don’t take my word for it, run your own analysis. (Just for fun, go look at the ads running on Yahoo, MSN, Facebook, MySpace, Video game sites… let me know if you see a direct sold campaign.  Let me know if you find a non adnetwork ad tag…) Hurry and do it, because this is one short runway and there ain’t no Hudson river nearby.

The biggest advertisers in the game (financial services, computer companies, and auto makers) all took huge hits and continue to falter.  The ad budgets have been slashed and they aren’t moving product.  With that mix, media companies can’t do anything about their ad revenue streams if they don’t find other ways of making money.

No, I’m not doom and gloom.  This is all about reinvention and change and exploration.  The old model stinks and now we get to find out what to do next that is better for the user and the advertiser.  This is good.  It is also painful. It is not Up and To The Right, despite the fact that excel seems to only spit out charts of that type.

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LinkedIn has been a long time darling in blog discussions, VC conversations and strategery sessions.

Techcrunch brings us news of their latest shuffling of the exec deck.

It’s one of these media ventures that seems like such a great idea but really isn’t.  It has no growth potential left and is a media product that grabs user bases that really aren’t worth that much to advertisers or big exec firms – for example… the unemployed middle-aged, middle management white guys.

Now, don’t get me wrong.  I like LinkedIn as a place to hosted my resume and occassionally link to people.  Unfortunately, I think that’s just about what everyone uses it for, excluding marketers and recruiters.

This isn’t so unusual.  Almost all other online job boards, professional networking and recruitment sites go the same way.

Site gets announced

Some people join

It catches fire and everyone puts their data in

The recruiters swarm

People get annoyed, bored, or don’t land that dream job and most accounts/profiles age

Network/Site starts blasting out emails and alerts about people looking for you, jobs waiting for you

That powers the site for years

Revenue grows slightly but never breaks out

Next site crops up and chips away at existing sites margins

LinkedIn’s traffic has fallen off.  It basically has found the 16 million people looking for jobs it can offer them.

People not in the market don’t update their profiles.  The folks most likely to power big network connection growth, don’t need a networking site. Folks who want a bitching resume just go off and build one at their domain or facebook page.

Put all of this together and LinkedIn is another Monster.com.  It’s big, has users, might add a bell or whistle but has no place to go.   It’s fate is set and completely determined but what it actually is – a job board.  It’s only hope to grow is to somehow magically get people more jobs than any of the other methods. It won’t die as people always need networking and jobs.

I predict some old skool news media company will buy it one day and squeeze it for revenue.  It’s a safe haven for the weary Internet exec.

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All these publishers and platforms aren’t implementing FB Connect to help users, it’s to increase traffic.

Techcrunch asserts:

People may have IDs for the various blogging platforms or commenting systems, but most don’t identify with them. It is a necessary inconvenience. They identify with Facebook or their email because that is where they manage their personal and professional lives.

In addition to replicating the comments on your Facebook News feed, the JS-Kit implementation also supports embedding Facebook photos and YouTube videos directly into the comments. It makes commenting much more personal when you know your friends will see it in Facebook. It also has the potential to reduce the amount of comment trolling and general incivility that has taken over many blog comments (we hope).

I disagree with the notion here. Social networking, widgets, ShareThis, Buzz Up and all these single sign ons aren’t about personal identity, better comments, improving connectivity/making it personal or making it easier on the user.

No publisher would bother with FB Connect if it wasn’t going to increase activity.  Plain and simple.  As publisher you want to get into FB user base and you know that user base is active and going to dump this content everywhere.  Sure, eliminating the login is great, but really most these other services aren’t that challenging to a user who really wants to leave a comment.

Yes, it will increase traffic.  Facebook and Social network connectivity is the new SEO.

And just like SEO did for Google, so social connectivity will do for Facebook – FB is now the cornerstone of a whole lot of publishers traffic.

Anyhoo, nothing groundbreaking in the post.  Just wanted to point out something that might not be obvious about this land rush to see who can put Facebook Connect up first.

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Well, I got a comment on my last RIA post and saw the news on techcrunch that the RIA platform space just got a little more crowdedAppcelerator Titanium is an open source platform for building rich desktop applications using web technologies like HTML, CSS, Javascript as well as Flash and Silverlight.

Cool RIA engine

Titanium apps can be built using the Appcelerator SDK – our open web platform, or you can use any third-party Ajax library or framework. We want to make sure you are able to realize the benefits of Titanium without being locked into a particular web framework.

I’ve been toying with it for a little bit today.  Pretty easy SDK and very slick default app to show you around.

Pros:

  • Works on Windows and Mac, both dev tools and deployment
  • No special IDE or language requirements
  • Slick integration with OS
  • No downloads other than the final application for users
  • Good documentation

Cons:

  • It’s not going to provide you an easier way of doing really integrated desktop apps
  • No 3d libraries or capabilities (though you can extend the platform yourself)
  • The name is pretty bland and doesn’t really provide much insight into what it is
  • Confusing (to me) on whether I should use Titanium or their other product Appcelerator

And continuing my earlier argument, I just don’t know yet whether these RIA platforms are worth farting around in too much for bigger development projects.  If you’ve got a real app to build, you’re going to need to use Objective C, Java, .NET or C/C++ and the harder core IDEs like XCode, VisualStudio, Eclipse.

The more I toy with this stuff the more I think it’s going to be stuck in widget making land, simple games, and website extensions.

Then again, who knows where it all goes…

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