A Pause in the Market

John Battelle on the IAB's report today on Q3 '08 online advertising:

It feels like there is a pause in the market as advertisers rethink
how they are spending, and what ROI means in a world of engaged media.

We kicked off a discussion about this at the Social Media Breakfast last week. And Todd pulled things together on his blog earlier this week.


The Irrational Exuberance of Web 2.0? Advertising.

In the bubble that is now deflating, there was both rational and irrational exuberance.

Exuberance related to the social web was rational. If you don't believe
it, go to Washington on Jan. 20. Our new tools to connect are changing
the way we live.

Advertising-related exuberance was irrational. Far too many companies
were launched with unrealistic assumptions about the size of the online
advertising market. (I was certainly an offending party.) New ad
networks like AdSense made it possible to think of revenue as a
constant that you plug into your product after it generates traffic.

Now two problems with that approach are clear:

1. The advertising market became oversupplied. Lots of new social
networks and tools were selling undifferentiated inventory, so
advertisers were able to drive the price of that inventory down.

2. Demand for advertising decreased. As inventory available to advertisers increased,
its effectiveness as a marketing channel decreased. When media
consumers were captive audiences, advertising worked. Now that
consumers have choices, it's less effective. It's mostly irrelevant, or
an interruption.

You can see these dynamics at work on both Facebook and YouTube.
Facebook is still struggling to find an advertising revenue model that
. It has an enormous supply of ads, but can't charge much for them
because consumers ignore them. Online video sites like YouTube have a similar problem.

There are wonderfully stupid things being done to try to solve these problems — and wonderfully smart things — but nothing will fully reverse the declining effectiveness of online advertising. It will persist in more relevant, targeted
formats (I don't agree that it is "now dead"), but it is fading
from the center of the online marketing world.

As Dave Winer puts it,
advertising is just information, and there are now far more efficient ways to collect information.

Photo: tylerc on flickr

Here’s What Openness Means

The flat, green line below represents devices authorized to use licensed spectrum; the purple line represents devices for unlicensed spectrum.


Via Fred Wilson:

"my partner Brad called this 'one of the best proof points that decentralized innovation trumps centralized innovation'"

And Tom Evslin:

"Note the flat line of devices being invented to use the licensed
frequencies vs. the explosion of devices including WiFi, Bluetooth, and
many other technologies we now take for granted in the unlicensed

The innovation leads not only to new devices but also very low
prices and brand new services and products like WiFi hotspots and
Bluetooth cars.

The need for over-the-air broadband and expanded cell service
is greatest in rural areas where there also happens to be the greatest
amount of unused former TV spectrum. But there is a significant amount
of white space available in every market including major cities – note
the 22 channels in LA. That's important because it means that devices
and services designed for the white spaces will have a national market
which includes urban areas.

If Horace Greeley were alive today, he'd say "Go unlicensed, young people, go unlicensed." The opportunity is priceless."

Change.gov: Released Early, Hopefully Often

Picture 12

Barack has already launched a transition website, Change.gov.

As Jeremiah Owyang put it on Twitter, "Our president has a blog."

What a change.

Here's what's best about Change.gov: There's a lot missing.
The blog only has one post, the Share Your Story page is a lame
form, the content is thin, and a lot of social features are missing.

This is a good sign — it means the Obama team lives by the
release early and often credo.

They're acting like a startup, not a
lumbering 20th-century corporation. They're comfortable on the web, and they realize that it's better to
have something up that gathers data and feedback
than to be silent.