Tuesday, September 11, 2007
Research Note: The Adpocalypse, the Prosumer, and the Fallacy of Advertising
There's lots of noise in the mediascape today; for my money, the most interesting thing I've read is a very interesting post by VentureBeat about Crackle (nee Grouper, bought by Sony, corporately lobotomized, now attempting a new strategy).
I'll try and avoid using the words "user generated content". Here's the money quote:
"...Traffic is booming. Crackle has 20 million unique visitors, compared to 7 million monthly uniques in September of last year, when Sony purchased Grouper.
Meanwhile, placing ads on user-generated sites, even on leader YouTube, has been extremely difficult to do – with analyst Mary Meeker estimating that YouTube would get a mere $720,000 in additional revenue by adding such ads – a paltry sum when you consider Google paid $1.6 billion acquisition of that company (indeed, the number was so low that Meeker later changed her assumptions in an embarrassing correction).
Other user-generated companies have fallen by the wayside, unable to contain costs. Tod Sacerdoti, who runs an online advertising company Brightroll, recently gave up on advertising on user-generated sites, because of the danger posed to brands by raucous images like the ones he blogs about here (scroll down, only if you can handle quasi porn)."
All of which begs the strategic question: is prosumption meant to be advertised on?.
Of course not.
From an economic point of view, the prosumption is the ad.
That is, the economic roles of prosumption and advertising - to signal expected costs and benefits - are one and the same.
It's no wonder prosumption is so difficult to advertise against. Most marketers are lending credence to an economic fallacy when they think otherwise.
More concretely: marketers are trying to "target" ads - against their economic substitutes; but they are hyperefficient substitutes (less costly, far more relevant, culturally amplified, etc).
Obviously, in most cases, this is a setup for utter failure.
Have I ignored the "issue" that much prosumption results in stuff that's offensive, etc? No.
Prosumption - unfortunately for boardrooms - also results in good stuff (like lolcats, as just a quick example).
Just like with any other kind of economic output - there is a distribution of quality. Certainly, navigating through this spectrum is part of the marketer's new value activities.
Do people responed nastily (the vast majority, and consistently) to what you have to say at xyz community? Well, there are a very limited number of reasons why. One, it's the wrong community - these guys and gals are totally disinterested by what you have to offer. Two, and far more likely - what you have to offer sucks; especially relative to what they want.
But that's missing the bigger picture. Interfacing with markets, networks and communities is the easiest part of the new economics of marketing.
Marketers, as we've pointed out before, have to figure out how to make 'ads' that benefit people.
Part of doing so is understanding that prosumption - as messy as it is - offers paths for marketers to shift into far more valuable activities than the simple, inert - and thoroughly obsolete - act of...just marketing stuff.
Pretty compelling reasoning. Maybe this is why P&G are creating their own "Saturday Night Live" and developing their own social networks for mothers? Seriously, advertising on uTube, seriously? Now a vid network dedicated to "How To: Fix A Tap, Change A Sparkplug, etc. etc.", might draw some attention, but still, the value would be in the fact the guy uses, and refers to how he likes using, the particular torque wrench your company makes! (ah come on, 1950's Washing Powder Sponsored Programmes !) "All the new thinking is about all the old thinking"....
In light of this it is interesting to read Blue Lithium's (the recent Yahoo! advertising acquisition) thoughts on advertising on UGC sites
If you can' be bothered reading the pdf, the key quote is: -
"If marketers are not experimenting with UGC, they may be missing opportunities to deliver higher price performance.
UGC possibly provides a better place to invest advertising dollars to drive clicks and conversions"