Ads By Themselves Won’t Cut It
This analysis of AOL’s financial numbers got me thinking about advertising and online advertising networks. There was a time when top technology companies had to succeed by building products that people wanted to buy. Today, many of them are running after ad dollars.
What’s wrong with this? Nothing, but here’s a point. Ads, lets remember, is only a good thing for advertisers and publishers. Users don’t like ads. In fact, it’s fair to say that other than during the Super Bowl and other exceptional circumstances, most people hate ads and avoid them at all costs. Ads don’t lead to customer loyalty and don’t get people to line up for hours to buy a hot new product.
Let’s look at AOL. Ten years ago, AOL’s revenue was coming from people paying for access to its network. Today, AOL hopes to become a leading ad network and fatten its bank account with ad money. Back in the day, people were paying for an AOL product that they themselves used. Today, AOL’s success is highly dependent on the health of an industry it doesn’t have much control over.
I have a feeling that a lot of companies like AOL are really going to feel the pinch once the current wave of excitement around online advertising dissipates. Unless you can translate ad money into something that people can use and derive value from, you are toast. Google is what it is because it managed to navigate these rough waters very successfully. I would not bet my lunch that AOL can succeed at this game.
1. May 2008 at 4:38 am :
Ads are really strange, to the point that i really don’t understand the whole concept sometimes. For example, watch an hour of television, and you’ll see ads for all sorts of things that you can’t buy — ads for how awesome Cisco networks are, or ads that tell us how innovative the men and women of a defense contractor are. And the pharmaceutical ads — which you can’t buy unless a doctor can be convinced to prescribe it for you. Crazy.
So it’s not sales of product they’re after, it’s lifestyle and corporate image. They may generate goodwill and maybe some bump in their stock price — but it’s really bizarre to me if that’s the goal of primetime TV advertising.
Google’s innovation was that they had a great search algorithm, and figured out how advertising could generate revenue based on that core competency. Though ads in general are annoying, Google’s ads are, for the most part, pretty non-intrusive, but apparently the targeting of certain search users is valuable to the companies that buy ads.
What Google does not prove is that advertising is the magic bullet for all web companies to stay afloat.
What does AOL have to offer here? What’s their core competency that they hope advertising can leverage? The days of AOL being the major ISP are gone, and with it, the eyeballs of its once huge pool of customers. Why would a company rather advertise through them than through Google?
1. May 2008 at 7:16 pm :
That’s exactly my point. I don’t know if there’s room for a whole lot of game dominating players. It’s a bit like, ‘sorry guys, too late, game’s over’.
BTW, the two ads that you link to are very well done. But as you said, they are completely non-actionable. There’s nothing I can do other than watch them. It’s all about brand awareness.