Last week, we addressed the demise of the ad-only model. Solutions won't emerge overnight, all the more of a reason to start searching. Here are a few leads. (This is the second of two parts, the first one is here)

The AdTech conference took place last week, in Paris; the mood there wasn’t exactly a statement of the internet advertising sector’s vibrant health. Light attendance, few commercial booths and presentations that were, at best, uneven. Speakers sported either the long face of gloomy realism or the pitchman’s forced grin.

Robin Sloan, VP of Strategy for and co-author of the cult net-fiction Epic 2014 outlined the future, picturing himself at the AdTech Paris 2019 Conference. He envisioned high-tech enhanced ads, the development of social sponsorship boosted by new Google features as well as strong regulatory backlash initiated in Europe. I don't want to say more about Robin's prez, he will put it online soon. As for myself, twice in the same day, AdTech plus a roundtable held by the French Magazine Publishers Association, I delivered a talk based on our industry’s facts and figures (see this Monday Note entry and this one).  I also added material I'm gathering for an upcoming story: crowdsourcing, the destructor of creative value in design and photography. In summary, my pitch is these difficult times are a unique occasion, the best, most propitious moment for the invention of sustainable businesses.

Coming back to advertising, and to fixing this ailing system, here are some possible directions.

Lead #1 : The design issue.

There is an inherent contradiction between the way we design websites and the way we insert ads. This collective mistake comes from our reliance on the traditional but inadequate newspaper design. We assume, wrongly as it turns out, similarity between news consumption on the Internet and on the newspaper. We forget one thing: the quality of attention is very different. Statistics (see The Alchemy of users stickiness) show visitors spend around 15 minutes per month on the online versions of The New York Times, Le Monde or le Figaro; they spend between 25 and 35 minutes per day on the paper version.

The conclusion is inescapable: advertising space can’t be managed in the same way.  In the newspaper version, ads are part of the glancing through, of the browsing process. Ads are placed on the best spot in a spread (the right page is better) to naturally catch the eye. In the best implementations, ads are formatted using attractive graphic design, sophisticated layouts, art photography and clever messages. It is part of the great "serendipity journey" that makes newspapers and magazines almost irreplaceable: you browse, you accidentally spot something unexpected and likable.  Agencies are good at this, mostly because their fees are set in accordance with a prized place in the newspaper. This is the focus of their energy, skill and creativity.

No such comfort on the internet. For our part, in the news sector, the design goal is to capture as much of the online reader’s scarce attention as s/he is ready to grant us. Editing is tailored to the medium: shorter pieces, punchy headlines and story leads, multi-layered reading structure and so on. No room for ornament, here. As for advertising, it is treated as a necessary nuisance, not cleverly integrated into the pages -- sorry the screens, we tend to forget...  Furthermore, because it is a low fee job -- no Bahamas shooting, no Annie Leibovitz craft -- ad agencies tends to consider web creations as a "genre mineur".  Poor media planning further deteriorates the situation (see below).

What can we do? Well. For instance, the management of a big adverting house could force in the same room news web designers, creative ad people, editors, brand representatives, marketers, all gathered with one command: agitate goals and ideas. More a boot camp format than a tea party -- results are mandatory.  Attendees would be fed with the latest behavioral studies, with interface specialists showing a typical web surfer’s course between sites, pages, and of course the ways s/he looks at a single screen. Techies would explain the state of the art in page creation, from Flash construction (as opposed to soon-to-be prehistoric HTML) to the benefits of well-designed recommendation engines. Such gathering couldn’t help but bring new, useful insights. If anything, managers would have a better idea of who is ready to move to the next generation and who isn’t.
Lead # 2: Targeting and capping.

I feel sorry for the mentally challenged media planner who bored me with a phony "making-of" short film featuring a second-class filmmaker peddling a LCD monitor. This happened on, at every visit in the last two months. I was so fed up with the combined pop-up + sound disturbing my reading, that I ended up hating the brand. The day I'll be in the market for an LCD monitor, I won't click on such ads.  I'll go to comparisons sites, I'll search for reliable tests, ask knowledgeable friends. Welcome to the complicated world of educated consumers. Agreed, this is no picnic for the advertising community either.  About the LCD ad invasion I just referred to, the cure is called capping. A cookie on your site avoids endless repetitions of the same message. I still don't understand why so many media-buying agencies don't get it. In doing so, they are killing two businesses: theirs and ours.

To get an idea how low we can go: at the AdTech conference, an entrepreneur delivered the following pitch: "We specialize in re-targeting users who bounce on your e-commerce site without stopping". Then he fired the punch line: "70% of users land on an e-commerce site through SEO/SEM [read: Google], and 95% leave right away. Our idea is to get them back". The company does that through a blitz of banners supposedly targeted to the crowd of users who have just expressed their disinterest a split second earlier. Good luck with that. Even goofier, another company specializes in "psychometric marketing": random visual tests designed to fine-tune the profile that helps advertisers deliver the right banner to you. Sure. "This is a call to the reptilian part of your brain," said the pitchman. Silicon Snake Oil still commands the prime spot on the shelves, just like the good old days of the internet Bubble.  Pathetic.

Actually, true targeting does exist. And it is a credible part of the solution. But true targeting is a  complex and sophisticated process. I already mentioned here the technology developed by the French company Weborama.  The technology combines two approaches. The first one is a huge panel (300.000 individuals) used to extract socio-demographic data. As a comparison, Nielsen in France, which sets the tone in the audience measurement, relies on 25,000 panelists.  You want young, working mother living in medium cities in a particular region of France, Weborama finds them for you among a network of 200.000 affiliated web sites. The other secret sauce for better profiles is a web-based lexical algorithm that clusters words (see our story How the Web talks to us).  It works. Weborama is still a small company, €9m revenue last year, but it is growing fast: +82% in 2008, with an operating margin of about 20%. As expected, Google is watching closely.

Google's next move: targeted display ads. And they plan to be big. "Today, TF1 [the n°1 TV network] is the biggest sales operation in France, said Pierre Conte, Le Figaro Groupe’s commercial division’s chairman.  But with TF1's current decline and with Google’s expected growth in France, we might see, this year, Google getting the n°1 spot in the French ad market".  By jumping into the display ad market, the search giant will deploy targeting capabilities in an unprecedented way.

Lead #3: Solving the inventory issues.

In a nutshell: each year, content creation on new and existing sites adds billions of new pages; these are all legitimate candidates for ads. One example in France: Skyblog, the biggest blog platform,
owned by the radio station Skyrock. Reportedly, the blog giant sits on an inventory of 3.5 billion pages generated by their 29 million blogs, resulting in 5.8 billion page views last month. Skyrock is a brilliantly managed company doing very well. But, with such staggering numbers, prices are falling.

Last week, I described the tragedy of news sites dumping their excess of inventory like sheep jumping from the cliff. There is only one solution: they must stop feeding the parasites; they must draw a line in the sand: below a certain price, they simply won't sell pages (this is what Yahoo does for its own good, I'm told). This is bold, it requires guts when dealing with the CFO and stock market analysts, but it is the only solution to preserve the business.

Lead #4: Reinventing the revenue model.

Let's revisit our own business model of news content delivery, with the revival of an old idea: making the user pay, somewhat, somehow. Last week, in his blog, Alan Mutter reported that during the annual conference of the Newspaper Association of America in San Diego, several CEOs of big media companies held a discret meeting to devise a strategy to start charging users. The idea is to do so in a concerted way.  To prevent any antitrust issues, a lawyer was invited at the discussion.

OK, then. What do we do? Past misadventures clearly show this is no trivial problem.

My take is that we'll en up with a variant of a 20/80 model, that is 20% of the users paying a small fee for the 80% who get free access. Advertising provides a workable revenue solution, leveraging on both ends: large audience and normal prices for the free audience part and high prices for the targeted, highly valuable pool of more interested, more involved subscribers. Now, the question becomes: where exactly do we place the paid wall?  Bruno Patino, creator of the highly successful Le Monde Interactive websites, summarizes the problem in these terms: "... The question is no longer about which content is premium and which has to be free. The line to be drawn is between usages. The heavy user will pay, the occasional one won't. That's it." I can't agree more. For our very own spectrum of interests, each and everyone of us has in mind news sites we are ready to pay for, as opposed to nice, but peripheral ones we’ll only go to if they are free.

On the paid versus free, another dividing line might be located between big news sites with enough breadth and depth to allow heavy usage, and lighter ones -- such as most of the "superblogs" galaxy -- that won't have any alternative but to remain free, with small newsrooms, specialized contents and limited journalistic resources.

The advertising bone has just been scratched clean, I know that. In the coming weeks, I'll discuss ad agencies on a path comparable to the music industry’s death march. And, someday, we will run a Google Special with fact-based case studies (if we can get the data). — FF

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