The decline of ad-based internet sites is reaching a critical point

[KurtNYC]

The wake of the FaceBook IPO has brought something clearly into focus. As the world picked through FaceBook's business model to determine what the business model of FaceBook is really worth we had collectively a moment like the end of the fable "The Emperor's New Clothes" (aka "The Emperor has no clothes&quot

'Look at the fine business model that FaceBook has' said the underwriters. 'They know so much about so many consumers! Surely all that info will translate into ad revenue.'

And then a tiny boy (named General Motors) stood up and said 'but the Emperor didn't deliver customers. We spent $10 mil with FaceBook and not only will we never do it again, we don't recommend that anyone market through FaceBook.'

It was as if all the air had been sucked out to room. GM diss'ed FaceBook on the eve of their glorious IPO ?!

And now everyone can see, just like after the dot com implosion, that having lots of non-paying users clicking on content does not translate into profit. All the signs were there for those who follow such things. The NYTimes and many similar sites started last year a major push to get online users to "subscribe" and...PAY FOR IT (?) Even discussion boards are being forced to change their revenue model and look for more from users because there is less coming from advertisers.

In terms of supply and demand what is happening is that advertisers, like GM, are becoming more selective and want to see measurable results from the internet marketing dollars. Meanwhile supply, the number of webpages viewed daily and available for advertising, grows constantly.

The cost of delivering our eyeballs and minds to advertisers is now above what smarter advertisers are willing to pay. This is not just the end of FaceBook's model, it is the end of most ad-based internet business models. The future of the internet is subscription based sites which have a loyal user base and deliver a sense of community. We will have to pay something but as we make this transition, we finally become the customer that we thought we were all along. Many websites will have to stop selling us to advertisers and start selling their services to us.

[Iris]

1. Confession!

I clicked this despite the fact that I actually clicked on a personalized Macy's ad yesterday while playing Words with Friends on Facebook AND bought the product. Not something I would normally do, but I have a clothes-horse type event I'm attending next week and have been shopping all week anyway.

[Brickbat]

2. I find this interesting.

And what you're talking about here is the main reason I don't really give a crap about Facebook selling/using my "information." At the end of the day, I make my purchasing decisions using a lot more information than what I simply "like" on Facebook, and the targeted ads I get are laughable. AdBlock does the rest, such as here on DU or my gmail account.

[kentuck]

3. This sort of advertising assumes people will buy what they do not want or need...

It's like reading the yellow pages just for fun. You only look at them when you need something.

[KurtNYC]

4. That's a good analogy

The response rate on FB is believed to be less than 1 click per 1000 impressions and Google is 1 per 50. FB is not a site where people go to shop and Google is. It's about getting your ad in front of people when they are ready to buy and Google does that better than most.

[kentuck]

5. Yep.

Common sense.

[Zalatix]

9. Yup, and when people want something they look for e-commerce sites

or coupon sites, consumer reviews, that sort of thing.

The LAST place they would look is some online ad.

People don't go to amazon.com because amazon.com advertises; they go to amazon.com because they're looking for something.

[randome]

6. I've become quite adept at closing popups without reading them.

And with knowing which sections of a web page to purposely not see. I find it hard to believe that ANYONE but a few large companies are getting their money's worth out of Internet advertising.

[KurtNYC]

7. The internet offers an ability to target customers more exactly than ever before

We are seeing in the Presidential race that all the money being raised will be spent only in the 9 swing states. And they can use a different message for different audiences (unless Romney gets confused and pops off about firing firefighters in front of the peasants).

The internet is even more specific. A marketer can use FaceBook data to target people using each of these things as a filter:
- age
- college grad
- income
- political leanings
- "likes" competitor
- "likes" hobby, brand, product, etc.

If for example I want to put offers in front of only college educated women with incomes over $75K who have expressed support online for Mitt Romney and live the state of Nevada I can do it. And I will be able to use my ad budget more effectively than if I carpet bomb the world with general ads.

A lot of advertising doesn't look like advertising. It's embedded in content, for example "Extreme Home Makeover" is like a 60 minute ad for Lowe's and Disney. Fox News is a 24/7 ad for the GOP fan club.

Ads on Google are a great buy for the companies that know how to use them.

[eridani]

10. Instead of advertising, just make it easier for us to find what we need

Sometimes this is so hard I feel like I'm begging or something. I want to give someone some money-pleeeaase let me give you money!

[Zalatix]

8. Aw, sh*t, here we go AGAIN.

This is what led to the big tech collapse in 2000.

The subscription model will also collapse - no one wants to pay for access to information that is now free. Moreover, people don't have the money to blow on silly website micropayments. LEAST OF ALL on discussion boards.