Tuesday, June 1, 2010

Is it worth trying to 'improve' advertising?

I wrote something for AdExchanger today. John asked me whether media and data should be bundled. I said, at the end of a bit of a rant,

[We] need a bit more idealism. We need to be trying to make the world a better place. We need to move beyond our defensive posture of being a necessary evil to the actual fact of being an indispensable part of the modern economy. If what we're doing is less about convincing people to buy things and more about helping people navigate a complicated world, then innovation will emerge from all corners.

Becoming an ad network may be inevitable for many of today's companies. But it means our segment of the industry gets absorbed into the rest of it and most of what we've invented disappears. I would never tell any of the companies I've invested in or work with to forgo viability for a principle, but I think we should all be urgently asking each other "how can we make this round of innovation a base on which to build further innovation?"

Okay, so yeah, maybe I hijacked the question to make a point. Here's the point:

Advertising and economic growth are correlated*. Yes, yes, correlation is not causation, and I'm not making a claim about causation, I think that would be silly. But, OTOH, absent some plausible explanation to the contrary, I assume that advertising is a crucial ingredient in making economic growth work. If this is true, then doing it well is more important than the small size of the industry would make it seem.
* Sorry, bad chart, no time. Real ad spend per capita left axis, from Douglas Galbi based on Coen numbers, http://purplemotes.net/2008/09/14/us-advertising-expenditure-data. Real GDP per capita, right axis, from Louis D. Johnston and Samuel H. Williamson, "What Was the U.S. GDP Then?" MeasuringWorth, 2008. URL: http://www.measuringworth.org/usgdp/


Greg said...

My main take-away from your AdExchanger piece was that acquisitions tend to kill innovation. The secondary theme seemed to be that the necessary ad knowledge know-how is selfishly hoarded, rather than being distributed.

I myself have noticed that the advertising industry tends to be less collaborative and do less knowledge sharing than other parts of the tech start up scene. I also think zero-sum economics perspective -- the idea that you can't make a dollar without taking a dollar from someone else's business -- seems pervasive in ad tech. Maybe this is because so many ad dollars are allocated based on relationships, person to person negotiations, and gut feel. Perhaps naively, I assume that's what guided the recent $8bn 2010 TV upfront.....I don't know many TV buyers.

In any event, I think market participants are much more likely to share info in an open community when new markets are being opened up all the time for new products and services -- think consumer web -- rather than when we're fighting over the same pie. You yourself show how the pie grows in line with the economy, but I think most investors want to do better than track general economics growth.

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