What's wrong with the advertising model of Internet content

As early as last December, a reporter summed up the most important question about online advertising: Is it a fallacy that advertising is ultimately spent buying people's time?

"If people's attention time is supply, advertising budgets are needed," the reporter wrote. Just because people spend more and more time in the Internet media, it doesn't mean that advertisers have the same desire to get bigger. "Indeed, as the price of online advertising continues to fall, it looks as if the total amount of online advertising will only get smaller rather than bigger (because the price of advertising purchases is falling)."

According to Mary Mik (Mary Meeker), 67% of the total advertising is spent on TV or print media. Todd Juenger, a research institute Bernstein, Tode Zhung that the total amount of advertising in the television media was actually on the rise between 2009 and 2012, although the focus of American audiences was shifting from television to other screens during that time. I think this is reasonable, and as early as 2009 has pointed out that: Brand promotion (brand advertising) and direct marketing (directly marketing) there is a significant difference between the television media bias brand promotion, while online advertising is close to the field of direct marketing.

When Mary Mik is talking about the issue of advertising, it mainly refers to the part of brand promotion. Brand is very valuable, every year there are billions of of dollars of input in order to maintain the value of the brand, most of the spent on television and print media. If you're a big national brand, the only way to reach the national audience is to buy ads on the TV media. The cost of doing so is very expensive, but it is essential, and very effective. It also explains why a lot of money is spent on television every year.

Zhung that over the past 20 years, internet TV audiences have been decreasing by 1.8% per cent a year – while the total number of other television channels has "shrunk to a smaller segment", making the network the only option for advertisers of scale. As a result, internet TV (NETWORK-TV) advertising a single audience coverage costs of 4.9% annual growth rate, the total revenue is increasing by 3% a year, but the total market space is shrinking.

Online advertising has nothing to do with the occurrence of this situation. The following is a chart from Nielsen that analyzes how much time the audience spends on different screens each month:

Television still occupies the lion's share, the elephant in the ecology: Americans have apparently made their own choices, choosing between cable TV and broadband Internet.

For publishers of the Internet, the situation is much worse than what is seen in this picture. Imagine that the sum of all sites is several orders of magnitude higher than the number of TV channels, which means that even if Internet TV is more popular than a small cable channel, the latter is still better than any other site, as long as it is not Facebook, Google or Yahoo. Not only that, but if you run a news site, you have to face the fact that only 2.7% of all the time people spend on the internet are on news sites. Do you think you are competing with other news sites for advertisers? Wrong, in fact you have to compete with 97.3% of other websites, and they are competing with the TV media. This is a battle that has little hope of winning, especially when non-news sites are providing users with purchase information (such as searching for a website) or meeting the needs of a large crowd of precise content (such as Facebook).

Internet advertising cannot be a substitute for television or media advertising, no matter how people talk about digital advertising sales.

Many online advertising industry people do not know what brand promotion is, and do not know why brand promotion exists, why companies are stupid enough to invest so much money in the brand promotion. These people only know how to read, live in a world where all worthwhile things are quantified, and things that cannot be quantified are considered worthless. In other words, what they do is direct marketing.

That's why TV ads don't translate into online advertising budgets: Online advertising can't achieve the effects of TV commercials. The latter is a large-scale production process, the implementation of a better, more expensive, in the delivery to the audience without any interference, displayed in a beautiful big screen: full of the entire screen, a good 30 seconds of time.

Online advertising is not a good thing: readers can easily ignore, there is no interesting, and in a disturbing way to gain the interest of the reader-prevent you to continue to read or see what you are looking for. Although the so-called original ads (native ads) content readers are willing to read, watch or click, but the production of this advertisement is not so easy: need to invest a lot of work for advertisers, and can not guarantee the effect of return. Selling native ads means more work for publishers.

There is another big problem with selling online ads, especially for native ads: too expensive. The production of online news is cheap, but the sales team of online advertising means a small amount of investment. Online advertising computing spending is flowing into a lot of websites, and a large part of the money is just walking between the people who sell the ads, and the rest is in the pockets of different ad networks or middlemen, which is an intricate space (see chart):

This is not the case in television media--television is a simpler, more accessible medium for content navigation. Of course, you can also do brand promotion on the Internet, or buy online advertising bits. But don't forget that the key to the Internet is to disintermediates: The Internet is good at building direct connections. This is also the reason for the rise of "content marketing": Why buy ads from publishers when you can be a publisher yourself?

Don't forget Google and Facebook, which are two of websites that are extremely adept at targeting audiences for advertisers. The thing that Facebook has to do is enter a few numbers, and there will be billions of of dollars of ad exposure generated, positioned in any location that advertisers want. Google, too, is done by searching (especially mobile search). This is a buyer's market and the seller has no room for bargaining.

A large proportion of the Web site has a very simple business model: "The release of good content, millions of readers will want to read or see the content, advertisers want to cover this part of the crowd, and then can sell the audience to advertisers, make profits." It is true that some people have succeeded in this business model, but the number of winners is less than the ranks of the losers, and the threshold to win advertisers has become very high this year. When you pay the cost of content production and advertising sales, the surplus is getting less and more, and this is still increasing.

(Original from Reuters Opinion, Tiger sniffing compilation)