Stop selling scarcity

You have to love – or at least pay attention to – Digg’s new advertising system enabling users to vote on ads: The more that users digg an ad, the less the advertiser pays. That’s a reversal of advertising but it’s the way advertising probably needs to go: The better your relationship (which springs from a better product and service), the more your customers will market it for you, the less you’ll have to pay to market it. That is the ideal. Advertising is failure.

Or look at it another way: We in media – including us online with our banners and buttons – are still selling scarcity – and pricing it that way – when there is no scarcity. Google sold performance instead and that motivated it to create ever more ads across more of the internet – aka Adsense – to get ever more relevant ways to be ever more effective.

I’ve been wanting for sometime to have users vote on ads and tell a site which ads are worthwhile to them and which are not. This creates data that valuable for the advertiser (who likes me, who doesn’t?) and it enables media and marketing to become far more effective (Google allowing us to correct the targeting assumptions it makes about us reduces our irritation with irrelevant ads and improves Google’s effectiveness).

When I tweeted this earlier, Angus Batey worried that popularity can be a danger, and that the better-resourced companies that can create better (more entertaining, popular) ads will win. Except I’d say that may be the case with old advertising – commercials – but it’s hard to do that with text ads on Digg: Fool me once (“Free Sex Now!”) and I’ll vote you down the next time. The Digg system rests on a Cluetrainy need to deliver authentic value and relevance – like Google’s ads.

The future of advertising needs to be selling – that is, enabling – relevance instead of selling scarce space, time, or eyeballs. The future needs to be about adding value – relevance – rather than selling scarcity (extracting what the market will bear). I’m not sure whether Digg’s system is a step in that direction; Batey’s right that there could be unintended consequences. But it’s worth watching. I hope Digg shares data and experience in its fascinating experiment.

  • http://www.angusbatey.com Angus Batey

    I hope you’re right; anything that can help add value to online interaction ought to help both advertisers and sites hosting ads. And I was definitely thinking of “commercials” when mentioning on Twitter that I feared the Digg model might end up skewing advertising towards a position where well-resourced companies with imaginative concepts would end up being able to accrue vast online acreages at an ever-diminishing cost while those advertisers with shallower pockets would find not just their access to eyeballs dropping but their ability to pay for that access disappearing too. Perhaps if it will apply to text/link-only ads such as those currently visible to the right, that won’t happen – and I’ve not seen enough detail yet to fully appreciate how this will work. Ultimately, if it means that unreliable advertisers are elbowed out of the way by relevant products or services, that should indeed be to everyone’s benefit: advertisers, people with inventory to sell, and visitors. Fingers crossed…

    Cheers,

    AB

  • http://outwithabang.rickwaghorn.co.uk RickWaghorn

    AB,

    ‘I feared the Digg model might end up skewing advertising towards a position where well-resourced companies with imaginative concepts would end up being able to accrue vast online acreages at an ever-diminishing cost while those advertisers with shallower pockets would find not just their access to eyeballs dropping but their ability to pay for that access disappearing too…

    Or the smaller/local businesses that don’t have time/resource to compete with the bigger, smarter guys…

    http://outwithabang.rickwaghorn.co.uk/?p=299

    Best, etc

    R

  • http://nevadaappeal.com Kirk Caraway

    I like the Digg ad system except for one thing. They have it backwards. If a company’s ad is getting voted up where more people see it, that’s added value that they should be willing to pay for, not the other way around. Whereas charging more for less popular ads is a sure way to lose those customers. This is the opposite of pay for performance.

    This also ignores the danger of gaming the system, a problem Digg has suffered with for a long time on the editorial side. I think it won’t take long for some savvy advertisers to figure out how to vote their ads up, especially when you give them a financial incentive.

    Google really has it right here. They charge more for popular keywords (thus more exposure) and popular ads (more clicks), while ads that don’t strike users’ fancies end up costing companies much less because no one clicks on them.

    I may be wrong, but I don’t see this working.

  • http://www.attentionmax.com Max Kalehoff

    JEff: Google’s Quality Score system rewards relevance (by its definition) by lowering the cost of placement — and vice versa. Digg seems to be doing nothing new, but simply a manual version of that. Importantly, ads are part of the overall media experience — the chinese-wall separation is kind of bogus. When ads and content work better together, the core media programming/content becomes more compelling. But AdSense? I’m still waiting for relevance on that one!

    On the topic of performance and relevance, following are the ten commandments I presented at the Brite conference, just prior to your presentation:

    1. Media are commodities, but media companies often fail to acknowledge.
    2. Defenders of “premium” inventory are losing because nobody can define it.
    3. Inventory may be remnant, but there’s no such thing as a remnant customer.
    4. CPMs will continue to drop amidst migration to performance.
    5. Media supply led demand, but now demand leads supply.
    6. Advertisers moving from optimizing clicks to optimizing profit.
    7. Advertisers garnering power to dial up or down — as they please.
    8. In deteriorating economies, tolerance for discovery and latent ROI decline.
    9. This is all happening fast, and economic volatility accelerates it.
    10. Like all preceding media, it will take decades to understand purpose.

    Cheers.

  • Andy Freeman

    > They have it backwards. If a company’s ad is getting voted up where more people see it, that’s added value that they should be willing to pay for, not the other way around.
    Do we know what “charge more” means? Does it mean “total bill” or rates?

    The difference is important. If Digg drops the rates for popular ads but increases the distribution, Digg may get more money from those advertisers and will give them more exposure. At worse, break-even/win.

    > Whereas charging more for less popular ads is a sure way to lose those customers.

    There isn’t a shortage of potential advertisers for Digg’s readers.

    Digg is trying to maximize the product of the number of readers and the lifetime value of each reader. Chasing away unpopular ads helps with the former. Increasing their rates helps with the latter. Either way, Digg wins.

  • http://nevadaappeal.com Kirk Caraway

    There’s no shortage of other places to advertise, either. I think the devil is in the details, how the rating works and just how easy this system is for advertisers and readers to understand. If their target market is high-end agencies that have time and resources to work the system, then maybe it succeeds. But if they are trying to go after Google’s small biz market, the complexity may work against them.

    I’m also not sure what voting on an ad does that isn’t accomplished by counting the clicks on the ad itself. Hey, maybe I think and ad is cool and vote it up, but I’m not interested enough to click on it? What good is that for an advertiser? Seems like an extra step to me. Why not just elevate the position of ads that get more clickthroughs?

    It will be an interesting experiment to watch.

  • http://www.angusbatey.com Angus Batey

    > Either way, Digg wins.

    I think this may be at the heart of why I’m not entirely sold on this concept. It’s all about the middleman, and doesn’t ultimately look like it’s going to work as well as one might have hoped for either publishers, advertisers or readers. This kind of thinking – apparently of the “well, it’s not quite what anyone in the whole shooting match wants, but it’ll do the job for us; so let’s work hard to sell it as a compromise to everyone” strain – is a big part of why the media and entertainment industries have got themselves into the messes that they’re in. The system that will succeed will be the one that looks first and foremost at what the, to use the dread term, “stakeholders” (and I include reader/user-ship in that) want and delivers it optimally.

    And Rick – thanks: a provocative post, as was your Age of Imposition one, which I’d recommend additionally to anyone else interested in this.

    http://outwithabang.rickwaghorn.co.uk/?p=297

    Cheers,

    AB

    • Andy Freeman

      Digg readers are proudly somewhat herd-like. Explicitly voting on what their fellows see enhances that experience.

      Voting which has consequences (ad price changes) also tells Digg readers that Digg is on their side.

  • Ben Lukoff

    “I’ve been wanting for sometime to have users vote on ads and tell a site which ads are worthwhile to them and which are not.”

    Facebook does this right now.

  • John Blasten

    Kirk: I’m also not sure what voting on an ad does that isn’t accomplished by counting the clicks on the ad itself.

    Exactly… and this is so ripe to be gamed as I can buy a day’s worth of clicks for pennies in India and China which will result in disproportionate sayings on my ad spend.

    But hey… Digg’s audience is not that valuable to advertisers anyway. I think everyone knows that, including Digg.

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  • jav

    .. I can see the golden age of the personal blogs comming

  • http://twitter.com/Towens149 Tom Owens

    The beauty of this model is that it forces clients to ratchet up the creativity of their advertising. This will lead to a creative renaissance and the end of committees killing great concepts.

  • http://www.joomlacafe.net e okul

    Hi,

    “I’ve been wanting for sometime to have users vote on ads and tell a site which ads are worthwhile to them and which are not.”

    Facebook does this right now.

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  • http://adrianmonck.com Adrian Monck

    Dickens in David Copperfield:

    “[H]ere is Mr. Micawber without any suitable position or employment. Where does that responsibility rest? Clearly on society. Then I would make a fact so disgraceful known, and boldly challenge society to set it right…” said Mrs. Micawber, forcibly…

    I ventured to ask Mrs. Micawber how this was to be done.

    ” By advertising,” said Mrs. Micawber, “in all the papers…”

    ” Advertising is rather expensive,” I remarked, dubiously.

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