Ads, digital media and the free lunch

We seem to be approaching a moment of truth about Internet content and how it gets paid for. Some have argued for a while that maybe the Net was not as disruptive as previously thought, and that the old school notion of advertising had turned out to be the key to commercial viability. The trouble is that notion is quietly falling apart.

There seems to be a clash of realities. It’s said that Internet advertising must be somehow effective because companies keep paying for it, and Google and Facebook have got rich on it. But I don’t know anybody who claims to have read an ad on the internet, let alone bought anything as a result.

I know full well that advertising effectiveness can’t be judged simply on immediate purchases. There’s the possibility of brand reinforcement, and long term relationship-building through reassurance. But there are other clear signs of a problem.

Martin Sorrell no less recently lashed out at Google and Facebook on behalf of advertisers for the opacity of their measurement systems. I’ve heard expert analysts elsewhere suggest that claims routinely made about the reach of internet advertising are little short of fraudulent (you can find a succinct account of some of the technical problems here .

The ad blocker blocked?

Meanwhile more and more people are using ad blockers in their browsers (up from around 18 per cent to something approaching 25 per cent).

In the UK we’re not fond of intrusive hucksterish advertising, which is why on TV many ads evolved into a form of entertainment in themselves (though necessarily irritating even then with constant repetition). Online advertisers seem to have forgotten this lesson. I’ve noticed more and more of the magazine sites I visit now protest at my use of an ad blocker because they depend on the revenue, but I’m not inclined to switch off the blocker when the ads they feature are so often intrusive and mess up my reading experience. Even if I did switch it off it’s unlikely that something which irritates me is likely to make me feel warm about the advertiser.

Similarly in France publishers are trying to put together a united front against ad blockers, denying all access unless you switch the blocker off. Here in the UK the Guardian newspaper has just done the same for some of its editorial. Commercial TV channels have taken similar steps. The trouble is that the primary effect is to make you ask yourself how much you really want to see the content. Do I really care what The Guardian thinks about Jeremy Corbyn’s performance at Prime Minister’s Question Time? Probably not.

If it’s something that matters to you you might just about put up with the advertising, not least because if you’re watching a streamed TV show you can always look at something else in another tab while the ad spews its drivel in the background. As for the newspaper titles here and in France, since the vast bulk of daily newspaper content is immediately forgettable, and there are always likely to be alternative news sources, all they are likely to do is lose “eyeballs”. It’s as though these publishers really don’t understand the hopelessness of their plight. It’s not simply that the Internet has undermined their business model. It’s underlined the easy disposability of what they offer.

Last week Opera software launched the latest preview version of its browser, with an ad blocker built in. Opera might be a niche option (though it’s long been my preferred browser) but it has consistently pioneered features that all others have followed. It claims the built-in blocker will be more efficient than plug in alternatives, and the result will be a significant boost in browsing speeds, an overt acknowledgment that ads are actively damaging the Internet experience for many people.

The end of newspapers?

Then there’s the decision by the UK’s Independent newspaper to move to a digital-only format at the end of this month, the first national newspaper in this country to do so. It’s true that the Indie’s hand has been forced by falling sales of the print edition, but this has long seemed the likely fate of all newspapers here as younger generations in particular have turned to online sources for their fix of news and comments.

Because the Indie is commercially the weakest of the UK’s titles (despite being good editorially) it’s probably not an ideal test case for the digital-only move, and it remains to be seen whether it can build a good enough circulation with the digital subscriptions to sustain the established media model of advertising and cover price revenue.

All of this underlines the reality that we are still in relatively early days, where habits and possible commercial models are very uncertain. And although journalists themselves may wring their hands over the possible cost to democracy of a diminished or even non-existent fourth estate, in truth this has become more of a theoretical than a real loss: the news media in the UK, sadly including the BBC, has become the hapless lapdog of vested Establishment and proprietorial interests. If you want a sustained critique of governments you need to look to independent blogs and web sites like Open Democracy, though it’s true that even these face the challenge of getting people to pay for content. The preferred answer seems to be ask for donations, which at least do not compromise editorial integrity, but this must be an uneasy way to build a title. Unfortunately too these sites are unlikely to have the impact on political behaviour that mainstream titles have acquired.

The rise of the platforms

Why would anyone pay for journalism, when titles are still trying to maintain an ad-funded “free” model? There’s a world of difficulty here, not least that that the commercial fruits of having global mass audiences are being largely vacuumed up by the mega-platforms, Google, Facebook, and in a different way Apple, Netflix and Spotify. The content organisers and aggregators have been harvesting most of the available advertising revenues, while the content creators struggle.

In a sense this too is nothing new: it’s just that the point of intervention in profit taking has shifted. In the last hundred years or so publishers have controlled writers’ access to the paying public, and reaped disproportionate reward. The Internet promised radical disintermediation, and theoretically it’s still available, but predictably too people have needed help in finding what they want or might value, and along the way have learned to expect most of that content for free. The “guide” platforms have become more important than the publishers, let alone the content creators.

But contrary forces have been gathering strength. Martin Sorrell has only articulated a growing concern among advertisers, and signalled what is probably the end of an uncritical honeymoon phase for social media and other digital properties.

A few things could happen now.

The big platforms are already making an offer of more advanced analytics: Google’s 360 tools (for instance) promise to simplify the maze of Big Data already available to marketers. It promises to do this by lining up a deep analysis of web behaviour with demographic data. Whether this proves to be another profit-generating smokescreen remains to be seen. It’s one of the uneasy trade-offs of the current Internet that we’re forgoing privacy for the sake of relevance. The deal is supposed to be (on both sides) that we’re only subjected to ads that could be specifically meaningful, in which case we might not mind them so much. The trouble is that there’s no sign of this promise being realised .
If advertisers remain unconvinced, and consumers irritated, there could well be serious consequences for the social media platforms.

Value, and possession

In any case things are not looking great for the media properties, unless they can persuade people to move to subscriptions. This might happen with time, but no one can imagine it’s going to be an easy transition.

The key here must be the ability to relate clear value to the point of payment, or to create a payment mechanism which softens these questions of value. This is after all how Netflix works. I’m happy to pay Netflix my six pounds a month, because it’s not much money in return for having a load of content organised for me in reliably good quality form (and free from ads). The fact that I’ve no real interest in the vast majority of titles on Netflix doesn’t matter as long there are two or three things in each month that I do want to watch. This model could work for other types of content, though I suspect the widespread habit of watching films and TV series makes it easier for people to see that they are going to get the value they’re paying for.

There may be something subtler, and ultimately more important at work too. Theoretically the Internet makes possible a closer continuing relationship between businesses and their customers. That seems attractive to marketers, and reinforces the idea that brand reputation is a critical commercial currency, but in cold reality such close relationships have so far proved too difficult (and too expensive) for most businesses to sustain, particularly when other factors have kept margins under pressure.

On the other side it’s hard not to think that consumers at a fundamental level don’t want the intrusion. In most areas the relationship has been preferably transactional: you pay some money and take away a product which you can then use without much thought for where it came from (unless it goes wrong). What we buy becomes a possession, and possessions are important to our sense of ourselves.

This may be part of the reason why there’s been a resurgence of interest in vinyl music recordings, or in craft products, and beyond these niche areas, a resurgence in sales of printed books at the expense of ebooks. I doubt it’s simply the superiority of the reading experience on paper; having a virtual library of titles that in truth depends on the continued existence of Amazon or Google seems a poor substitute for having books lying around your house. We might trade off some of this pleasure for the convenience of a tablet or Kindle, but there are limits.

Possession can’t be everything, and for other reasons we may have to adapt to some very radical ideas about shared resources (for instance with cars) but if that happens it may become all the more important that we hold on to the things we can possess, that we resist the move, attractive to many businesses, to turn products into “services”, or at least draw a clear line between which is which.

Follow the smart money

It’s still too early to say how all these different pressures and trends are going to resolve themselves. I’ve no doubt that advertising will continue to be present in our lives in many ways, though I suspect there are real and imminent limits to our tolerance of the corporate takeover of things we previously thought of in the public or personal domain. It wouldn’t be surprising to find that future digital business models will depend on service providers providing services that are genuinely valuable, allied to a payment mechanism which allows us to relate our sense of that value easily to a sensible financial figure. What matters is to work out where the real value lies, and offer it in a form that people can’t easily get elsewhere.

In this light media titles don’t just have a problem with their business model. They’ve a problem with their products too. Although the Internet has already changed the economics of production and distribution, this is an old verity that’s not going to go away.

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