Jason Rines (iThinkBig)

Why Advertising Is Failing on the Internet

1) Internet like any new advertising vehicle was drastically overpriced. It still is.
2) The advertising model of display ads combined with point 1 has Social Networks scrambling for a new revenue model using the data. It will be opt-in email. That form of advertising is store and forward.
3) Marketers will have to begin utilizing data better. For example, why do I get ads for female hygiene products? This example shows a massive failure by the sector.
4) Bigger clients are now facing up to the true reality of depression. That means they will compete using coupons and such to sway customers from the competition. Discounting is being worked on as we speak even at big pharma companies.

To summarize, the value proposition both from an advertisers side and the consumer is not there. Pain is a catalyst that creates innovation, the mother of all invention. I am in the Consumer Healthcare advertising industry. For display ads online, vendors are working with us on a cost-per-lead model where they are forbidden to host the lead form, they just drive traffic. We have our clients open there books to us in the discovery phase on knowing what there cost per acquired client is. This model is what I am familiar with and worked during a bull market, now is working stellar in this bear. The takeaway - provide real value to the advertiser and consumer and you win, period. If you don't know how, learn how to use a spreadsheet. You will find the answers right underneath your nose.

The Problem of Media Economics: Value Equations Have Radically Changed

Bingo. Here's a more personal story in this regard: Businesses want sales leads. That NEVER changes. But the market of 2001-2005 gave contact records that could have been yanked out of the phone book to pass as 'qualified leads'. It was tantamount to fraud. The market prices for this quantitative model was around $20 a lead.

I went the other direction as CEO of a marketing business. I demonstrated a spreadsheet in 2005 to Higher Ed sector how sales conversions with 100% true purchase intent would yield 2 1/2 times the profit of the quantitative model, even with the lead cost being triple, $60.

I proved the model but had to be patient for the market pyschology to change and a catalyst. I prepared in 2007 for the same quality model in Healthcare market. Q4 2008 market accepted the value proposition but the turmoil had middle marketing management running for personal hedges.

Now we are VERY busy already as there is no competion of marketers willing to share the risk. We get paid when our clients make profit. Imagine that, a value proposition.

Last point: If your an entrepenuar attempting to raise money you had best learn how to give a presentation in 10 minutes of how to make money for your investors. Focus on market problem, market solution, management team and competition. Know numbers of how to make profitability and presenting that rather then how your airplane flies and putting potential investors asleep.


On Jan 07 01:29 PM Good News Economist wrote:

> Scott,
>
> Great examples. This re-arranging of the value chain in media represents
> a huge opportunity for those entrepreneurs willing to invest the
> time to understand and business sense to monetize their understanding.
>
>
> For those new businesses and business folk that get it right, it
> will be nothing good news.
>
> GNE

Wednesday Market Outlook: What Is the Fed Hoping to Achieve?

You know Smarty Pants, it might just be better to give $50,000 to every taxpayer and be done with it. The responsible would pay off debts reducing our debt to GDP ratio and a portion would start small businesses spurring innovation and slowing unemployment.