Online advertising needs to grow up

A piece from the New York Times has reignited the debate over online advertising and the monetization of the “long tail” of the Web, one that got a boost recently with a post from Jeremy Liew, a venture capitalist at Lightspeed Venture Partners, who noted that in order to build a business with $50-million in revenue — pretty small beer in most circles — a site would have to have about gazillion page views a month (I’m rounding up).

As the ever-insightful Scott Karp of Publishing 2.0 writes, this rather depressing arithmetic exposes a fundamental problem with online advertising: namely, that the pricing is all out of whack when compared with regular print media, or pretty much any other “real world” media for that matter.

In a nutshell, most advertisers and ad agencies still see online advertising as something akin to direct mail, or junk mail, as most people refer to it. In other words, you send out billions of impressions a day and hope that some moron decides to send in that coupon, or sign up for your special travel deals, or order your Cialis knockoffs, or whatever. And my friend Rob Hyndman suggests that they might be right to see it that way.

As Scott and others have pointed out, however, this perception also has a lot to do with the fact that advertisers are still focused solely on the page view, and in part the Web industry is itself to blame for that, since page views are still one of the primary yardsticks by which sites measure themselves and others. Until we come up with something better — some measure of engagement, broadly defined — online advertising is going to languish.

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