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史蒂夫·哈蒙独家中文博客

互联网风投与管理者,创业企业是谷歌Adsense概念创造者之一

 
 
 

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我是美国风投创始人和管理合作伙伴,曾担任过Jupiter Media公司VP,Paul Kagan Associates机构分析师,我的创业企业Applied Semantics2003年被谷歌收购,是谷歌Adsense概念创造者之一。现着重投资互联网领域,对中国互联网和网络新媒体有深刻研究。我写的《零重力1.0》和《零重力2.0》成为彭博社最畅销书籍,比尔盖茨、杨致远也读过我写的商业报告。在中国,我给网易科技独家供稿。hapn.cool try it!

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Why Groupon Exists, Advertising Is Dead  

2010-12-11 04:58:47|  分类: 默认分类 |  标签: |举报 |字号 订阅

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When's The Last Time An Ad Actually Worked For You?

I was scanning the news and saw that Google wanted to acquire daily deal site Groupon for about $6 billion. Apparently the two sides had been chatting over movies and popcorn before Groupon got up mid-way through the movie and left the cinema.

A further scan of the landscape reveals something that the media and venture capital guys just don’t see.

It’s there in your gut, your intuitive sense of what works and what doesn’t.

The reality is that advertising is dead. All ads. Like a big beached whale.

TV, radio, banner ads online, print and any other kind.  There’s $300 billion spent on advertising in the U.S. every year to try and convince all of us to buy a product.

It’s done in clever ways with funny stories, skits, online soap operas, etc. Companies huddle with agencies and try and dream up fantastic stories about how to get consumers to buy something. We end up laughing at the commercial and forgetting the product.

And none of it works.

When was the last time you saw an ad in ANY medium and responded to it?
Bought the item based on the ad?

Next to never. Let’s look at the stats:

The click through rate for online ads is about 0.2% (way less than 1%).
If we were measuring that in flea lengths then that’s fine. 2 clicks for every 1,000 banner ads served. On social networks like Facebook the click through is subterranean, about 400 clicks for every 1 million views.

It’s because advertising doesn’t work. It’s the big dead elephant in the room of every media company.

The U.S. Postal Service delivered more than 6 billion pieces of direct mail in the first quarter of this year. Of those direct mail pieces most ended up in the landfill or recycle bin. That’s a lot of printing, postage, handling, trucking, gasoline used, and boxing for something to end up in the trash or returned to a recycle plant.

When was the last time you received a direct mail piece and bought an item from it?

Now YouTube has ads. Overlays and Pre-roll. In fact, many online video have ads now, following in the footsteps of how TV ads are done. Which is to say, show as many ads as possible and hope someone notices. But are they clicking?

DoubleClick (part of Google) serves billions of video ads every year and reported that click through rates for online video ads are between 0.4 percent to 0.74 percent.

Like banner ads, nobody is clicking video ads. I don’t. I close the window anytime a video site wants me to endure their ad. I just don’t have time for that broadcast TV-era game any more.

The holy grail is supposed to be mobile ads. That’s why Google bought AdMob and Apple bought the company that became iAds. If you’ve used an iPhone or gPhone (Android) then you’ve seen these ads. They are similar to any Web banner ad. That is to say, most are general and have nothing to do with your intent, location or much else. The same folks that convinced the TV networks to create an ad for Axe about clean balls also sold them on the mobile ad.

And, you’ve likely ignored these ads also.

Let’s put this all in dollar terms.

If $300 billion is spent on ads every year and 0.5 percent are actually “hitting the target” then it’s safe to say advertising doesn’t work.
$300 billion spent but only $1.5 billion (0.5 percent) was effective.

Let’s use some analogies to better understand this.

If you asked a rifle marksman how many times he hit a bullseye and he said 1 time for every 200 attempts you’d say he wasn’t a marksman and should find a day job.

If a restaurant had 2 paying customers for every 400 that walked into the door it would be out of business.

It’s like Hollywood generating 250,000 in ticket sales for a $50 million budget movie. Ticket sales @ $10 each would yield $2.5 million. Not enough to pay Angelina Jolie’s makeup and wardrobe bill.

If any other industry in the world generated as poor of returns as advertising then they wouldn’t exist.

The problem with advertising is that it operates according to the way it has for centuries: mass market. One size fits all. Even newer ways like “retargeting” which tracks your behavior over sites to make ads more effective are just building on that model. Bombard and submit.

Google opened the door to performance advertising with Ad Words and Ad Sense (of which I was an investor before Google acquired it). While those results are better “relative” to banner ads and other mediums they are still in single percentages in terms of effectiveness.

Now a company like Groupon exists precisely because other forms of advertising are so poor. Businesses desperate to bring in customers have given Groupon up to 50% of the sale because their advertising in other venues was not effective.

But giving away that much margin isn’t sustainable for any business over time. The fact is that if other mediums were delivering customers cheaply and reliably through advertising then Groupon wouldn’t even exist. And even Groupon isn’t the perfect ad model.

The question I ask is “what if advertising was flipped around, if click through rates were 99.5%?” What if every ad was welcome to the user in ways no ad is today? What if there wasn’t an “ad” at all?

As an analyst with more than 20 years in media, and as an entrepreneur and investor, I’ve debated banner ads/text ads vs. aiming for a superior experience that will benefit users.

Said another way, the entire $300 billion advertising industry is up for grabs since today’s advertising just doesn’t work.  It is my belief that a huge opportunity exists here – and one we’re working on – to give users something better than ads.

Beyond advertising.
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