Beyond Inefficiency in Web Marketing

My last article, “Web Marketing’s Efficiency Problem,” discussed root causes for the development of intrusive Web advertising, such as pop-up and pop-under advertisements. The article drew a thoughtful response from Barry W. Dennis, an Internet marketing consultant. Here’s his response, with my thoughts following: By its very nature, the Internet is “inefficient.” Any medium, open to everyone at no cost, with little if any limitation to usage, is bound to be inefficient in the process of targeting, finding, and motivating consumers. This inefficiency is economic in nature, in that too many sellers are competing for too few buyers in a venue in which presentation costs are minimal.

Think of the National Park Service and all that it offers. It has only recently come to realize that there must be some limitation to access, otherwise the beauty that we all admire will be destroyed for all of us. Therefore, [we get] higher costs leading to reduced access.

Similarly, I can think of magazines that, because of the quality of their audience, became so popular that their pages became 70, 80, even 90 percent advertising. Guess what happened? The editorial content so prized by readers [who] attracted advertisers became lost, reduced in perceived value by readers, leading to reduced readership and a reduction in advertising, leading to reduced thickness in the magazine, leading to increased awareness and perceived value from consumers, leading to…? You get the idea.

The efficiency of Web-based marketing will increase when buyers can get a cost per order that allows profitability, both in the short term and in the long term (lifetime value). This can happen when sellers allow buyers to evaluate results fairly by giving them a fixed cost per order, allowing buyers to determine in advance profitability. Sellers, in order to offer this method, have to become adept in evaluating and valuing offers and campaigns and becoming a gateway that presents those offers most likely to maximize revenues.

Unfortunately, sellers are greedy and buyers are sharp, and the result is that sellers won’t turn away any business, even if the business isn’t good for the seller’s clients, in the sense of a mismatch between the campaign and the audience. It’s happening now with porn links and email marketing, similarly [to] gambling.

I certainly coach my clients to not only use cost-per-order techniques but [also] limit their marketing to those sites that have a pretty strong direct, or closely related indirect, content that client research indicates [has] a reasonable possibility of creating good value long-term customers.

There will always be speculative buys of space, sometimes to expand the universe of potential buyers, sometimes because sellers have excess inventory at a very good price. We look at these with anticipation.

Dennis has a great point. Sellers of Web inventory outnumber buyers. Their solution has been to attempt to increase the volume and brashness of advertising. Prices will logically fall to become cost per order, and the best buyers will differentiate even among this inventory, by buying cost per order on sites with product-relevant content. That way they can increase the lifetime value of newly acquired customers.

This paints a bleak picture for Web media. If this is what the interactive advertising industry has to look forward to, media companies such as Yahoo should just throw in the towel now.

Current practices among Internet advertising companies lead to a spiral similar to that of oversold magazines. Web marketers have at their disposal something print magazines do not: interactive, adaptive, dynamic technologies that can stop the death spiral of Web advertising. They can use technology to become more efficient at closing the gap between ad and sale. This can be achieved by posting content that is relevant, tested, and proven every step along the way. This can be done if advertising analytics are finally embedded into site content servers.

The relationship between marketing and content on the Web will change. It may not be for the better. Consumers may chafe at dynamically served content that blurs the line between marketing and editorial. It’s not enough to assume all Web advertising will be based on cost per order or that this will solve the problem. The problem will be solved when everyone — consumer, advertiser, and marketer alike — benefit.