Advertising is failing on the Internet?

I guess we would call that the “Department of Huh?” But that is exactly what Eric Clemons of the Wharton School has said today. He starts of with some assertion that the decline in Internet ad revenues is not explained by the recession and that traditional advertising (of which the page of his post is littered) cannot translate over to the internet (which may be true). But he believes that the fact that content is not pushed but shared causes the whole model to collapse.

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I guess if he had left it with that, we might be OK, but the perennial question arises: What about search and Google? After all, that is hardly directed advertising.

Misdirection, or sending customers to web locations other than the ones for which they are searching.  This is Google’s business model. Monetization of misdirection frequently takes the form of charging companies for keywords and threatening to divert their customers to a competitor if they fail to pay adequately for keywords that the customer is likely to use in searches for the companies’ products; that is, misdirection works best when it is threatened rather than actually imposed, and when companies actually do pay the fees demanded for their keywords.  Misdirection most frequently takes the form of diverting customers to companies that they do not wish to find, simply because the customer’s preferred company underbid.  Misdirection also includes misinformation, such as telling a customer that a hotel is sold out when, indeed it is still available, if the hotel has chosen not to pay a promotional fee, and then allowing the guest to choose an alternative property.

What? Has he ever done this? The ads come up because of the keywords the consumer has typed in and the advertisers recognition that they may have something that can attract their attention. Then, the consumer, in the face of a column of explicitly unrated search results must actually choose to click an ad for anything – misdirection, payment and business model – to actually happen. Let me put the business model in as simple a sound bite as possible:

If the ads trick, consumers won’t click.

In other words, it had better not be misdirection and all of the evidence (in terms of Google ad revenues) suggests that they work just fine. Danny Sullivan reckons Clemons doesn’t actually use the net. It is hard to disagree.

I think search directed advertising works precisely because it matches the user activity – search – with the form of the content – both sponsored and not – search results. This is why banner ads have a much harder job; consumers want to avoid them. This is not necessarily the case with sponsored search.

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