Why putting ads on the menu won’t pay for lunch

In last week’s post (So just how do you make money out of serving up a free lunch?) I examined the viability of the Freemium business model for the developers of web and mobile applications.

In this post I will examine the viability of Software as Media (SAM) and, specifically, software as an advertising platform.

As you may recall from the post from a few weeks back (Why newspapers need to get sticky) I examined the idea of Stickiness and how media content is actually not very sticky on the web when you compare it to search, social networks, email and software applications (e.g Freshbooks, NetSuite and Salesforce.com).

Software Applications are more sticky than online newspapers and magazines

The question is: Just because software applications (and we’ll include Email and Facebook in this category) are stickier than online newspapers does this mean they are a better advertising platform?

There has been a lot of discussion about this in recent times. Claire Cain Miller’s (The New York Times) and Phil Wainewright’s (ZDNet) posts earlier this year on Ad Revenue on the Web? No Sure Bet  and Web 2.0 and the end of advertising are indicative of the mainstream thinking in traditional media circles about the unsustainability of SAM advertising models.

In more general terms there is the post on Techcrunch by Eric Clemons, Professor of Operations and Information Management at The Wharton School of the University of Pennsylvania: Why Advertising is Failing on the Internet. In it, he argues that the Internet shatters all forms of advertising.  “The problem is not the medium, the problem is the message, and the fact that it is not trusted, not wanted, and not needed,”

Shelby Bonnie’s recent post on Techcrunch, Let’s Kill The CPM, and Jitka Petrickova’s (Three Minds) Should We Kill The Ads Or The Metrics? probably goes to the heart of the problem. Not only in relation to the future sustainability of SAM but for online advertising in general. Pages views are really the wrong metric for measuring (and delivering) the success of online advertising.

As I suggested in Why the NY Times 10% Problem is not a problem but a significant growth opportunity online banner advertising is very expensive. It’s significantly more expensive than advertising on TV during the Superbowl on an Average Revenue, Per User, Per Page, Per Visit (ARPUPPPV).

The real metric we should be applying is face time. Online advertising should be measured in the same terms as TV advertising. Both involve watching a screen after all.

There is also the problem of banner blindness that I first raised in The Real Problem is FLINK!: The idea that most people don’t even see the ads because they are to busy looking for the next hyperlink.

However the issue for SAM is broader than just the argument for and against Banner Blindness, CPM, CTR, Page Views and Face Time. It really goes to the heart of what advertising is all about.

Firstly let me qualify the discussion by suggesting that there are three distinct types of advertising.

The first is marketplace or classified advertising. Today this form of advertising is best represented online by eBay and Craigslist (See Farewell to the Ribbons of Gold).

The second type of advertising can best be understood as “buying prestige by association”. It is about seducing the customer into wanting to be associated with your product.

The third and final type of Advertising is simply about repetition. The idea being that if a prospect sees or hears something often enough they will remember it. Unfortunately the problem with this approach is simply that the prospect’s experience is something akin to being “bludgeoning the customer with a blunt instrument”.

Classical advertising theory was, and still is, first and foremost about building a brand by buying prestige by association.

Once advertising loses the illusion of prestige it just becomes unwanted noise.

In one of my first posts on this site (FLINK and they’re gone!) I stressed that The call to do (action), to implement, to solve is at the heart of the interactive medium.

This means that unless the advertising is directly involved in the action of using the software (e.g A character in an online game or a Mortgage Calculator) then advertising is superfluous to the activity. It is just unwarranted noise.

Advertising in software. Be it games, social media, applications, collaborative tools, email and even online newspapers is just that. Noise.

… and as noise it simply destroys prestige, not only for the advertising media (i.e. the software), but also the advertised product or service that is being promoted on the site.