New Online Advertising Models: The Scalability Problem
Search advertising is probably the most scalable advertising platform in the history of advertising and marketing. But ten years into the promise of the web and new media to transform advertising into an ROI-driven marketing engine, the success of keyword-driven pay-per-click text ads is the exception, not the rule.
The problem is scalability.
Just as audiences and media have fragmented, so too must advertising. The problem is that traditional advertising paradigms — the 30-second TV spot or the glossy print — are one-size-fits-all, i.e. you make the ad once and then show that same ad to everyone in every medium. Data-driven digital media, with platforms like behavioral targeting, make it possible, in theory, to show a different ad to each person in each medium, each time they interact with that advertising.
But, yikes, that’s a lot of work — and it couldn’t be farther away from the traditional ad agency business model.
Search advertising doesn’t quite reach that extreme, but it has made it logistically possible to create different variations of ads for different keywords. Search advertising has also come the closest to achieving the great promise of online advertising ROI — optimization, i.e. trying different variations from the endless range of possibilities to see which performs best.
That is not to say that most search advertising campaigns achieve this level of sophistication. But by creating a self-serve platform, Google, Yahoo, MSN, and others made it possible to distribute all of the work involved in leveraging the myriad ad possibilities — that’s why search advertising has scaled so beautifully.
But search advertising is also at the extreme end of simplicity — just a few lines of text. When you get to visual display ads, and then video ads, the complexity increases geometrically.
Yahoo is trying to tackle this complexity with its SmartAds platform, which is a great first step. Google has tried to bring the same scalability of text ads to every other traditional form of advertising, including TV, radio, and print, but scaling in those formats is a much tougher slog.
Facebook and other social networking sites have a huge opportunity to leverage social connections for commercial purposes, but again, there’s a huge scalability challenge. I suggested that Facebook should look to Google for lessons on how to monetize — the key to any successful social networking platform is going to be scalability. All the debate about Facebook’s revenue and the potential for an IPO really hinges on a scalable monetization platform.
Perhaps the best lesson from search advertising is this — get your customers to do all the work for you. But as with successful search advertising campaigns, there has to be a huge payoff for doing so.