Web 2.0 makes an end of Advertising?!

The idea that software on the Web is going to be largely funded by advertising is just so wrong-headed, I hardly know where to start. It had me spluttering in the latest BriefingsDirect Insights analyst podcast hosted by Dana Gardner — more on that in a moment. Let’s move on from 1.0 notions of the Web as just a publishing medium, with ads on the side. Doc Searls already pronounced what I consider to be advertising’s epitaph way back in March 2006: “Why build an economy around Attention, when Intention is where the money comes from?”

Instead of competing to grab attention, the way to sell on the Web is to align your selling proposition with buying intention. The Web makes that easy, because it’s a platform for software automation. So use software to build automation that brings buyers and sellers together on the Web. Not just as a broker that matches deals with no added value, but by putting relevant sellers conveniently at hand at the moment when a buyer is ready to buy, making the discovery and transaction process a smoother, better, cheaper experience for all concerned. I’ll expand below on some examples of how that might happen, but here’s how I summed it up in the podcast (quoting from the transcript):

“… the Web enables people to reach potential consumers and business prospects directly, rather than having to go through this advertising. So, the idea that the software industry is going to get funded by advertising has got it completely the wrong way around. Actually, what is going to happen is that business is increasingly going to use software in order to get closer to its consumers and its prospects. It can actually skip having to spend the money on advertising in order to make that connection.”

I’m not saying advertising will go away completely — I think there’s still room for brand-building and attention-seeking around the fringes of traditional content such as entertainment and information — but software vendors (such as Microsoft, apparently) who stake their financial futures on earning the bulk of their revenues from that form of advertising are making a fatal strategic error. Here are three compelling arguments why I believe advertising is going to get sidelined by intention-focussed selling on the Web:

• Advertising is the creation of a disconnected era when businesses needed some way to get a message out to prospective customers that they couldn’t reach directly. The purpose of an ad is to motivate the prospect to get in touch. The Web, as we all know, puts us all in direct, real-time contact with each other, wherever we are in the world. Instead of advertising a message and waiting haplessly for a response, businesses can proactively connect directly with their prospects, reaching out to them in contexts where they’re ready to buy. What counts on the Web is product placement, merchandising and other forms of direct promotion.
• Placing ads in software is the height of absurdity. It’s software for goodness sake — people use it to get things done, not to read ads. Instead of wasting valuable screen space publishing banners and text ads, why not embed some functional links, buttons and menu options that add some value to the task in hand? Cut out the ads and substitute a direct connection to a useful service. Add a pay-per-use clipart library to an online slideshow editor, embed a link to a live tax expert in an online accounting application, build workflow into an online travel booking service that conveniently helps the buyer choose and book flights, transfers, hotel and dinner.
• There will never be enough online advertising in the world to support the software industry, let alone the entire Web. Below is a slide taken from a presentation I gave a couple of years ago to an auditorium full of marketing professionals, called (you guessed it) ‘Web 2.0 and the end of advertising’. While it’s true that software is a smaller industry than advertising, both of them pale into significance when you look at the entire value of the retail industry — or even more if you measure the total value of a year’s global trade. Instead of trying to carve up the bite-sized advertising pie, on-demand providers should claim a slice of all those real-world transactions by making it easier for sellers to find buyers.