May 24th, 2008

Why Traditional Advertising Formats Fail On The Web

by

As media companies struggle to figure out their digital future, the elephant in the room is that they have only been able to monetize online audiences for pennies on the dollar compared to traditional media. Here’s why: Traditional advertising formats FAIL on the web. By traditional advertising formats, I mean display ads, video ads, and any other ad whose format and value proposition approximates or imitates that of an offline advertising format.

Google is the ONLY company that has succeeded in web advertising. Why? Because they perfected search advertising, an entirely web-native form of advertising, whose value proposition is perfect for the web and which has no offline analogue.

Why do traditional advertising formats fail on the web? Because people have no patience for them, as they did in traditional media, where we were habituated to looking at print ads or watching TV commercials.

Research by Jakob Nielsen puts this into sharp relief:

Now, when people go online they know what they want and how to do it, he said.

This makes them very resistant to highlighted promotions or other editorial choices that try to distract them.

“Web users have always been ruthless and now are even more so,” said Dr Nielsen.

“People want sites to get to the point, they have very little patience,” he said.

This is why pre-roll ads on online video = fail, why overlay ads on online video = fail, and why online display advertising is a commodity business, where online publishers have to shovel page views and battle for every $1 increase in CPM. Some sites can get $50-100 CPMs on some pages from certain advertisers, but $1 — even $0.10 — CPMs are common on the web.

Just ask newspapers and magazines about their ad pricing power in print vs. online. Can you imagine a print publisher getting $1 for 1,000 times an ad was seen? You’d go bankrupt after one issue.

Here’s a sobering thought: If all advertising in offline media got converted to current online media CPMs, it would probably be worth a fraction of the value, i.e. $300 billion would become $50 billion.

If 1 to 1 transfer of advertising value is at one end of the spectrum and 1 to 0 transfer of classified advertising value to Craigslist is at the other extreme, most of online media is closer to Craigslist — online publishers are vaporizing advertising value in the shift of dollars online.

Even Google has struggled with this problem, as they still make virtually all of their money from pay-per-click search and contextual ads.

But why, why is this so? Because most online advertising creates NO value for consumers.

Search advertising, because it is relevant to what users are already searching for, creates enormous value. But the search advertising is largely about helping people buy what they already know they want.

What about the objective of advertising to convince people to buy things they don’t yet know they want or need (or what never otherwise want or need)?

Consider this: What is the most successful type of advertising online advertising that convinces people to buy something they weren’t in the market to buy?

Email spam.

Spam is probably the most inefficient form of advertising every created, and it creates more hate and loathing among consumers than the worst 30 second TV ad ever created.

But it works. With millions of emails sent at virtually no cost, a 0.001% response rate can still be highly profitable.

The reason why most online advertising fails is that web users see it as little better than spam.

Display ads are ignored in the same mindset as spam is ignored — I’m trying to get something done online and your display ad is getting in my way.

As Nielsen highlights, web use is driven more and more by utility.

Despite the popular notion of viral content, e.g. viral videos, even entertainment on the web most often happens in a utilitarian context.

Sure people browse videos on YouTube, but searching YouTube is the killer app. Want to find video content? Search for it on YouTube, and chances are someone has uploaded it (legally or not). Why do you think Google acquired it?

Social networks have hit hard against the online advertising wall — I’m trying to talk to my friends and you’re showing me ads — get out of my face. I’m trying to talk to my friends and you’re shoving down my throat notifications of what my friends are buying (i.e. Facebook Beacon) — get out of my face!

Is it any surprise that most ad spending still happens offline? Most advertisers use the web themselves. They know how annoying traditional ad formats are on the web.

So what’s the solution?

We need to invent new forms of advertising on the web. But it’s more than that. Facebook introduced Beacon as a new form of advertising — but it didn’t create a lot of value for users.

Online advertising must create value for users or it will create little or no value for advertisers.

This would seem self-evident, but it has not been the case with traditional advertising, which was developed for CAPTIVE audiences, and web users are increasingly anything but captive.

Comments (46 Responses so far)

  1. This is one of the best opinion pieces on the state of online advertising that I’ve read in a long time. You seemed to hit on every point and I appreciated you bringing attention to one of Facebook’s failed attempts at monetizing their users online relationships.

    Personally, I think the future of online advertising – beyond the AdWord/AdSense buyer with intent model – will involve the old school method of clever product placement. The “editorial” won’t be about the product, but the product will still exist within the editorial. The future of modern online advertising will rest in the hands of streamlining the process of integrating product placement with high quality content. In my mind, it won’t be much different than what movies and print publishers do today. It’s just that nobody, except for a few players, have truly created a brokered process that can be easily integrated with mainstream advertisers and generalized publishers (niche blogs, etc…).

  2. look, i hate advertsing, don’t own a tv because of it, no loss, that … but am pragmatic too

    so what is it going to be like in the near future?

    something like a magazine, which i buy for the ideas, and have the choice about paying attention to the ads, if there is visual beauty i had a nice moment, probably don’t remember the product, and didn’t even look at the ones that didn’t catch my eye (didn’t even need to look to know there was nothing there for me, but that is a separate (and mystical) subject)

    as individuals become “empowered” we are more and more in charge of our experience, and ads have to fit into that possibility. if you interrupt me, i will hate you, in short. would happily physically beat many advertisers and spammers if i met them at a party, no questions ask, just whack! we could talk about why later, but the short answer is your greed steals my time. you are not good for the human race.

    you have to give me something, be on my side, try to uplift my life, and then, just like a friend, i will give you lots of time

    in short, it is NOT the technology that needs to be tweaked … it is simply your MOTIVATION!!

    so simple

  3. Love your take on this. But I’ll posit that there is a basic flaw in your logic. And a few facts that get in the way of your arguement.

    1) Flaw in logic: All advertising doesn’t really work. I mean traditional advertising “works” but not to the degree that most marketers thing — and definitely not as quickly as we want to believe. But agencies and CMOs have staked careers on the fact that the millions in TV & Print is “working” without any good way to measure success. So it is not that traditional tactics don’t work online, it is that they really aren’t that effective to begin with.

    2) Fact that gets in the way: Traditional tactics work online, when properly targeted, typically better than offline — but scale is typically the issue. Pre-roll has better recall than TV. I have had lowly banner campaigns that actually drive better ROI when measured to off line sales than TV.

    3) Real problem with digital rates: Most marketers are looking at very near term metrics (Clicks, sales on site, a registration, a site action) vs. longer term brand impact or, gasp, off line sales. Why? Cuz most industries haven’t figured out how to measure it yet. Digital is trapped in a near-term world (hence Google, being as near-term as they come, is king) and hasn’t made the long-term value value proposition clear to advertisers. TV and Print have spent years “proving” that — the digital space needs to do the same.

    If direct marketers spent over 80% of TV and Print dollars you can bet rates would be lower in those media too. The industry has chased the easy money and is paying for it in lower rates.

  4. Scott,
    we will never get to a point where online advertising adds “value” to us. If it did, it wouldn’t be advertising anymore. As Dave Winer says, “Perfectly targeted advertising is just information.”

    Non-direct response, display ads fail online because they rely on interruption, and this medium is resistant to that.

    What works? Online ads that hold your attention and are as well designed as what we are used to seeing in magazines and on tv. Companies spend 6 figures to create a slick magazine ad, and millions to create a great tv spot, but then let the graphic design intern make web banners for their online campaign, and wonder why it’s not compelling.

    Expect to see more investment in casual games and fun apps that are created by advertisers themselves.

  5. The problem you identify is one for advertising overall, and goes back to the old Lever adage – “half my ad spend is wasted, but I don’t know which half.”

    Advertisers want to occupy the places people are, and with volume comes the problem of free-riding, which online translates as low CPMs.

    The reverse is exactly what you say: “Some sites can get $50-100 CPMs on some pages from certain advertisers…”

    That is the business to be in.

  6. A valuable post with a useful perspective I will surely use in a new project I am working on.
    Hashim says: if advertising added value it wouldn’t be advertising anymore. Is that not perhaps the answer? Should there be advertising? Should it not be content which attracts views because of the value it has for the reader?

  7. unobtrusive in-text ads are the answer. i call my ad unit “the hoverer”.

    From my LinkedIn Answer (1/6/07):
    I dropped my subscription to the NYT print daily not long ago (but kept the Sunday sub — which gives me free access to TimesSelect). Now I find I don’t even look at the website much anymore, which is a mess and cluttered with distractions. One Sunday, I was reading a food piece in the print edition of the Magazine. When I went online to find it a day or two later, I noticed that the only hyperlink in the piece was to Al Gore (don’t ask what he was doing in a piece on leeks!). The link took you to NYT news articles on Gore. Really dumb. So here’s my proposal: How about letting advertisers buy relevant text links in the articles (integrate with Google AdWords?). If the article is about scallions, let Gourmet Garage sponsor that link. And signal to the user that it’s an ad link by using a different color (green, maybe) or a double underline like Vibrant Media uses. I know the editorial side will scream bloody murder – just like they did about the very profitable advertorials I produced for years at New York Magazine. So let’s not use the “ad links” in the hardest news stories about war and famine. That leaves, like, 75% of the lighter content – including auto, fashion, travel… big money ad categories. We maintain the same ad/edit wall that exists in print (where even The New Yorker runs advertorials). We tell the reporters: “Ignore the ads; just keep doing the great impartial journalism you’ve been doing. We’ll take care of the business.” How about it?

  8. [...] online ad formats fail: introducing the hoverer Posted on May 25, 2008 by ahoving Good post by Scott Karp on Publishing 2.0 in which he says “We need to invent new forms of advertising on the [...]

  9. [...] An extremely accurate piece on why web advertising so often = fail. Scott Karp writes: “We need to invent new forms of advertising on the web. But it’s more [...]

  10. I believe the CEO of NBC or CBS (can’t remember his name offhand) said it best:

    “We have to figure our how to monetize [the Web] so that we’re not trading analog dollars for digital pennies.”

    Good luck with that…..

  11. [...] Why Traditional Advertising Formats Fail On The Web :: Publishing 2.0 – another excellent post by Scott Karp as to some of the reason why offline advertising ideas just don’t translate to the web. [...]

  12. [...] Scott Karp utvider argumentasjonen her: http://publishing2.com/2008/05/24/why-traditional-advertising-formats-fail-on-the-web/ [...]

  13. [...] I’d share this entry on Why Traditional Advertising Formats Fail on the Web by the co-founder and CEO of Publish 2, Inc. Makes [...]

  14. Or just make shit that people actually want and search for that provides value? :)

  15. Your premise is correct. You can’t just slap an ad on a blog anymore. I think it needs to be more of a partnership. Look at the ads that appear on Pandora, for example, that feature things like playlists that go with a liquor brand, and wraparound ads that become a part of the interface.

    Also, I think the ad clutter on many sites drives their effectiveness down. Not to mention the impact of the site itself.

  16. It would seem to me that advertising on Google is
    analogous to putting a space ad in the Yellow Pages (offline).

    It’s great if someone is searching for something in that particular field.

  17. [...] 26, 2008 · No Comments Scott Karp has written a good post on why traditional advertisement fails on the web. I am not sure if I agree with all of his [...]

  18. [...] http://publishing2.com/2008/05/24/why-traditional-advertising-formats-fail-on-the-web/ (tags: ads) [...]

  19. re: “Traditional advertising formats FAIL on the web.”

    Well, it depends on where you set your goalposts here. One could make the same argument that speed limit signs fail as well.

    I recall your July 2007 piece on what you called the 10% problem, wherein NYTimes.com has 10x the readership of the print paper, while bringing in 10% of the revnues. (In addition, I calculated, the print subscribers are paying a third of the cost of the paper, while the online subscribers are backing to paying nothing.)

    Joshua Jeffryes, in the comment to your piece, pointed out:

    “When I worked in Advertising the ineffectiveness of advertising was hardly a secret. But customers couldn’t measure the effectiveness of ads. So they paid and continue to pay ridiculous prices for them. Online ads, on the other hand, are measurable. They work just as well, if not better, than print, television, etc., the difference is that for the first time ad customers know exactly how ineffective they are.”

    Also, re: this comment: “Research by Jakob Nielsen puts this into sharp relief…”

    Not necessarily. You didn’t link to research by Jakob Nielsen. You linked to an article which mentions the report, without– ahh! linking to it. (So much for linked journalism). I’d buy the report to try and understand his point here, but I don’t know which one.

  20. Scott,

    As ever, you’re straying into the woods when you talk about advertising effectiveness. People have built entire careers trying to parse the efficacy of ad spends — it’s subtle. In your zeal to discount “traditional” methods of advertising (and would that be branding or direct?), you’ve only raised the specter that the Web 2.0 ad-driven ecosystem may be a house of cards built on air. I’m not sure that was your intention.

    For years advertisers have been moving dollars into media forms that allow better tracking of behavior, first with telephones now with cookies — the web is not unique, just more efficient. But advertisers (and consumers) don’t live by conversions alone, there will always be a need for messaging that doesn’t provide (obvious… to you) “value”.

    Re: Google, they succeed because they’re a monopoly. In fact, we have no idea how well those ads “work” for advertisers. And as for the failure of “traditional” ad forms on the web, it may be too soon to announce that. Hulu seems to be doing well…

  21. [...] First you have to buy into the idea that advertising online is broken. Not just because the banner ad is dead thanks to Readers, ad blocking software and java-script disabling, all of which are true. you also have to beleive that the fundamental idea that the CPM-based model doesn’t work. [...]

  22. [...] is online advertising not working (outside of search)? Scott Karp summed it up very well in a few short statements: Search advertising, because it is relevant to [...]

  23. while i agree with the premise that more web-native formats of some form or another will likely evolve, i’m not sure i understand the assertion that “traditional” formats fail.

    first, is a display ad (e.g. image mrec) delivered by adsense and contextually targeted to the content of a page considered “traditional” ? would u consider that a failed model?

    second, if spam is successful based on an ROI argument, why shouldn’t the same argument apply to traditional ad units? i.e. shouldn’t we be looking at ROI or engagement, not price?

    i’d bet the price of traditional web units are being mostly dictated by the demand/supply disparity, not their inherent value…

  24. [...] meme was developed further in a piece by Scott Karp at Publishing 2.0: Traditional advertising formats FAIL on the web. By traditional advertising formats, I mean [...]

  25. I think Jon had it right at the top: “The “editorial” won’t be about the product, but the product will still exist within the editorial… (niche blogs, etc…).”

    As others have suggested, the definition of “advertisement” needs to change. In the online space, information and advertising converge. Take Amazon: before they brought bookselling online you simply couldn’t get hold of the millions of backlist titles that they’ve subsequently made available. A simple listing becomes the first step in advertising the existence of a book that we never even knew existed: any value added to that listing helps shift that item (becomes advertising copy)…

  26. [...] Why Traditional Advertising Formats Fail on the Web – Publishing 2.0 As media companies struggle to figure out their digital future, the elephant in the room is that they have only been able to monetize online audiences for pennies on the dollar compared to traditional media. Here’s why: Traditional advertising formats FAIL on the web. By traditional advertising formats, I mean display ads, video ads, and any other ad whose format and value proposition approximates or imitates that of an offline advertising format. [...]

  27. [...] Free A great blogpost from Mashable, including snippets from Steven Hodson, Scott Karp and Alexander van Elsas: What is the solution proposed to counteract ad-based FREE? Micropayments, [...]

  28. Scott,
    The implications are far greater than advertising that simply does not work. When advertising makes your customers hate you, it denigrates your brand. Advertising can damage your reputation. That’s a liability.
    Max

  29. [...] Karp has a post up on the failure of traditional advertisements online. While worth reading, it makes a common mistake about display ad effectiveness – because [...]

  30. [...] Scott Karp discusses the value advertising online, from PUBLISHING 2.0. Link. [...]

  31. Scott,
    Great post. I’ve been shouting this for years.

    I know the answer to the next online advertising trend.. it’s somewhere buried in Furrier.org :-)

    Short answer: Content is the Ad!

    Problem/Opportunity: it’s not the content people who will dominate – it’s an infrastructure trend (like search that enabled adwords and adsense); Only a small few are tracking this.

    keep these posts rolling

  32. [...] Scott Karp recently observed that traditional advertising fails on the web and it is no more evident than in the newspaper business where they enjoy high, and growing as well, traffic but have a failing online business model. [...]

  33. Fantastic post Scott!!!

    This is one of the reasons why I am so passionate about Spot Us. I’m not saying Spot Us is a silver bullet – but it is an honest attempt to explore low hanging fruit that is an alternative to advertising: Community Funding.

  34. [...] Richard and Chris do touch on a theme, highlighted over the past weekend by Alexander van Elsas and Scott Karp about the current state of web advertising. Scott points out: As media companies struggle to [...]

  35. [...] I came across two great reads that talk about advertising/marketing/social media. The first, being Why Traditional Advertising Formats Fail On The Web. The title says it all, and it’s really interesting to think about how agencies/advertisers [...]

  36. It is possible to create an online captive audience. Bloggers build a readership everyday if they are good and clever.

    Similar to the satanic product placement in movies, blog writers can influence, but it has to be honest and sincere or it doesn’t work. And, it can’t be overstated.

    That’s my useless advertising idea for today.

  37. [...] Why Traditional Advertising Formats Fail On The Web – Publishing 2.0 – [...]

  38. it is really simple about advertising…

    if you interrupt me, i will hate you

  39. What about the unspoken alternate truth: traditional advertising is overpriced. As much as the internet shot itself in the foot by making all of its information available for free or far more cheaply than via traditional distribution channels, those same traditional channels drastically overpay for standard advertising methods.

    Show me a company that finds value in spending millions on a 30 second Super Bowl ad and I bet you’ll notice their name is “ABC,” “NBC,” “CBS” or “FOX.”

  40. Great post, Scott. It’s true that advertising interferes with a user’s “mission” online, and the lackluster performance of social networking ads supports that.

    Perhaps when we perfect targeting, we’ll be able to serve ads that *are* relevant not only to a person’s demographic and interests, but to the person’s “mission.”

    More on lackluster social networking performance:
    “News Corp: Selling ads for MySpace is hard work!” – Silicon Alley Insider
    http://www.alleyinsider.com/2008/5/news_corp_don_t_worry_about_revenue_myspace_is_doing_great

  41. Spot on Scott.

    It would have been great if you had commented on the online ads as a medium for building brands as Chris has pointed out.

    Looking for a followup post on this topic.

  42. [...] that understands and capitalizes on how the web works. (So far, traditional advertising methods are proving ineffective online.) But apparently it’s not enough for Google; they want your TV advertising [...]

  43. Nice article, great points, but you go a bit overboard by saying… “Google is the ONLY company that has succeeded in web advertising. “.

    Cmon man, you write such a great article but blow it by saying the “Big G” is the only ones in web advertising that have it right.

  44. “So what’s the solution?

    We need to invent new forms of advertising on the web.”

    B.S.!!!!!!!!!!!!!!!!!!!!!

    Advertising worked with mass-media because we had no choice but to see it/watch it/listen to it. Now we don’t, and I never will again! I feel pitched and it’s an insult. What? I still need someone telling me how great their product is? No! I’ve got 6billion people out there whose real-world opinion of any product is worth a ton more than the slanted view of the manufacturers overpaid marketing department. I couldn’t care less what the manufacturer says…of course, he’s going to tell me how great his widget is, I expect that.

    Manufacturers! Get rid of the ads. Save your money and improve your product so the 6billion who are commenting on it will describe it’s quality and not how your ad misled them into buying some junk that didn’t work out for them.

  45. We can all learn a lot from Google. They haven't just perfected the skill of online advertising>/a?, but they perfected the skill of giving people what they want without all the run around.

  46. This is exactly why Yellowpages.com works and is the best out there. Its for customers who are LOOKING for a specific service and product in there area…. its not that online advertising doesnt work, its that as you mentioned, the behaviours of customers are different now

    People know what they want, so whicheva makes it easy and convenient, those are the best mediums

    I wouldnt even consider Google as the best method, due to the keyword system. A user going to an online directory such as yellowpages.com is looking for a specific item under a category, there is no mistake from that pt. great article though nonetheless

Add Your Comment

Subscribe

Receive new posts by email