Innovating Our Way Out of the Downturn

You know what the really interesting thing about the online advertising crash of 2001 is? There really wasn’t one. Clearly, things were not good and a lot of people lost their agency jobs. But in terms of real spending, there was no drop off. What seemed to happen was that the amount of money simply flattened out. Advertisers spent the same amount of money in 2001 as they had in 2000.

That, of course, was a really big deal. For the previous five years or so, Internet advertising had been on a stratospheric ride, posting triple-digit percentage gains year after year. Internet ads were very clearly the advertising industry’s fastest growing sector. The suddenly that growth stopped. I mean stopped. The sales pipeline in most agencies slowed to a trickle. Big, traditional agencies that had opened offices in San Francisco suddenly found themselves with a lot of expensive talent just sitting around. To make matters worse, a number of agencies had leveraged their future to dot-com startups: they had taken shares in companies in lieu of actual payment for work. By the time the banners were ready for these companies, the startups had long gone belly up and no one was getting paid.

And yet, within about two years, the industry came roaring back. Both advertising in general and the online space specifically began to show signs of life by 2003, and we were in full swing by 2005.

What happened?

And, more important, what does our history tell us about our present?

The Return of Online Advertising, Part 1

Google brought online advertising back to life. I don’t say this lightly, and I don’t say it because I’m some Google cultist. It is just a simple fact. Google began to offer its simple text ads, tied to searches, priced on auction, and payable only on value-generating actions at precisely the right time. And it’s still reaping the rewards.

Think about it. It’s 2003, and you are a brand manager. You try online ads, but everything is in the form of a banner, and banners are barely attracting any clicks. Rich media has promise, but it is expensive to create and can’t be trafficked on all sites. Plus, the buys themselves are complex and not every publisher is giving you data in the same way. Targeting in any meaningful way is also either prohibitively expensive or overly complex. Online advertising appears to be sinking under its own weight.

Then Google comes to you. Or, more likely, you went to it (Google’s ad sales force wasn’t quite as robust then as it is today) and truly makes you an offer you can’t refuse. The search ads are easy to set up, require zero production, run immediately, and offer you the chance to set your own price (which you pay only if the ad works). On this promise, we got not only marketing money flowing back into online advertising but also interest and desire to innovate. I know that Google didn’t invent search-engine advertising. But it certainly brought it to the world in just the right way at just the right time.

The Return of Online Advertising, Part 2

History, we hope, will repeat itself. We just need another good shot in the arm.

Google succeeded in saving all our hides by providing a new way to advertise online, which stemmed directly from the new way it searched the Web. That is, from a core technology innovation, a new way to advertise — which very precisely answered the existing needs — arose.

So if we want history to repeat itself, we must look at the current problems and see if there’s an innovator who can help us out. We need to see if there are some simple solutions that can help pull advertisers back into the fold, make them see the value of our space, and get the industry moving again.

Here are three candidates tied to technology that may have some promise as catalysts for the recovery:

  • Deep data from social media. Social media clearly represents a great opportunity for brands to communicate and interact with consumers. And just as search terms provided a very simple way to target a consumer, so should social media. The data that consumers are pouring into Facebook, MySpace, Twitter, and more about what they really care about must be leveraged to provide a simple and effective way to market.
  • Computing power everywhere. The decreasing cost of digital storage coupled with the increasing power of microchips is creating an environment in which many devices have computing power. Add to the mix the ability to toss in inexpensive radio and GPS chips, and we have an amazingly connected set of things. As these devices explode, there are bound to be new opportunities to reach people in new ways.
  • The dawn of the “full-screen mode” era.The most compelling new element of the Web experience is a small button that has appeared on many Web sites, offering you the chance to enter “full-screen mode.” This is primarily on video stream sites, but the idea is that you lose all of the window-interface of your computer and are totally focused on watching content. This is really a new way of using computers and is bound to offer some new ways to communicate, even if it is just a smart, efficient way to serve video ads.

No one knows exactly how long or how deep this economic pit is. But we’ll find a way out. Just like we did last time.

Join us for Search Engine Strategies New York March 23-27 at the Hilton New York. The only major search marketing conference and expo on the East Coast, SES New York will be packed with more than 70 sessions, including a ClickZ track, plus networking events, parties, training days, and more than 150 exhibitors.

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