Is Online Advertising A Waste of Money?

Posted February 11, 2022

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Above all else, we humans are creatures of habit.

Once we have found a way to do something, it is very hard for us to change, even if the advent of a new technology makes the old way of working impractical, or sometimes even deadly.

In 1914, when the First World War rolled around, new technologies suddenly found themselves on the battlefield. One of these new technologies was the machine gun.

A wonder of mechanical engineering, the machine gun brought the efficiency of the Industrial Revolution to the dirty process of killing people. Instead of the slow and tedious process of firing one bullet at a time (and the concurrent need to actually aim), the machine gun could fire off round after round after round at the touch of a button. A true killing machine.

It’s not like the British (or the Germans for that matter) weren’t aware of what this amazing invention could do. The British had taken machine guns with them to the Battle of Omdurman in Sudan in 1898. There, a small force of the British Army, armed with machine guns, took on a massive Arab army armed with old rifles and sword. By the end of the battle, which did not take too long, the victorious British had suffered 47 casualties. The Sudanese, on the other hand, 12,000 killed, 13,000 wounded, 5,000 captured.

That’s technology for you.

You would think then, that when they started to drag machine guns into the battle field in the First World War, everyone would have figured out what they meant. The knew, but they could not bring themselves to change the way they thought. That’s human nature.

So they kept marching directly into the spray of bullets from those machine guns, the way they used to march at each other for 1,000 years previously. The results were predictably disastrous. At the Battle of the Somme (1916) the British suffered 420,000 casualties; the French 200,000; the Germans 445,000. And that was just one battle. Never the less, they just kept on marching (or running) directly into machine gun fire, because they simply could not figure out any other way to fight a war.

Really dumb.

Now, what does this have to do with advertising?

For the entire history of media, more or less, revenue was generated by selling advertising space. Newspapers, magazines, radio and TV. Well, it made sense, and it worked. (Just like lining your soldiers up and marching them into the enemy worked — until it didn’t).

The idea behind advertising made a lot of sense. You captured your reader (or listener or viewer) with content, and then, once you had them, you slipped in your advertiser’s message, which they paid you to do.

Then, if the ad worked, you planted an idea in the viewer’s head — Dial Soap. So that the next time they went to the store, they bought Dial Soap. It worked. It worked really well. And manufacturers paid ad agencies a fortune to create catchy ads that would then convince millions of people to buy Lucky Strikes or Marlboros or Fords or whatever. It was the product of a linear world.

When the digital online world arrived, like the arrival of the machine gun, the networks and the newspapers and the media companies just stuck to the same model — run an ad along with the content. But now, in the digital world, you could pretty much skip or ignore the content. This was a problem, but what are you gonna do? Pre-rolls, banner ads, we’ll fine tune it until it works.

But maybe the technology presents an entirely different way to sell stuff- which, after all, is what the ads are for.

In the online environment, you can buy stuff right away, right there on the same page as you are watching Netflix or sports — right there. Click and you can make a purchase. Immediately. No need to go to the store (bye bye Main Street — or the High Street here in the UK).

Marry content to commerce.

Why not?

Let’s say you’re watching the Olympics. But instead of watching them on NBC, filled with annoying advertising, you are watching them on Nike.com.

Why not?

NBC paid $7.75 billion for the rights to the Olympics through 2032 — that’s 10 years, or $775 million a year.

NBC is owned by Comcast, which as a market cap of $224 billion — that’s a lot.

But suppose Nike bought the rights to the Olympics, and the only place you could see the Olympics was on Nike.com? Then, Nike could run the Olympics ad free (so far, so good), and simply stream the Olympics but instead of running commercials, could simply populate the edges of the screen with click and buy Nike sports stuff. You know, impulse buy. While you’re watching, how about this? They could also lease that valuable real estate to say, K2 or Rossignol skis? I bet they would like it.

Can Nike do that?

Why not?

Comcast may have a market cap of $224 billion, but Nike has a market cap of $225 billion. No problem.

And the Nike Olympics as NO ADS. None!

Sounds pretty good.

Like they used to say at Omdurman, ‘we have the technology.’