The Because Effect and the Demise of Advertising

This 2007 contribution by Doc Searls, deserves a close rereading.

It explains two things well:

1) why advertising cannot possible be a reliable funding mechanism for much of peer production

2) why in the future economy, in many fields, the ‘because effect’, making money because you are doing something, as an after effect, will displace the ‘with effect’, i.e. making money directly with what you are doing.

The discussion centered on journalism, but is applicable more widely.

It is a fine echo to Adam Arvidsson and my own ‘Crisis of Value’ thesis.

Doc Searls:

While all these are good, the larger trend to watch over time is the inevitable decline in advertising support for journalistic work, and the growing need to find means for replacing that funding — or to face the fact that journalism will become largely an amateur calling, and to make the most of it.

This trend is hard to see. While rivers of advertising money flow away from old media and toward new ones, both the old and the new media crowds continue to assume that advertising money will flow forever. This is a mistake. Advertising remains an extremely inefficient and wasteful way for sellers to find buyers. I’m not saying advertising isn’t effective, by the way; just that massive inefficiency and waste have always been involved, and that this fact constitutes a problem we’ve long been waiting to solve, whether we know it or not.

Google has radically improved the advertising process, first by making advertising accountable (you pay only for click-throughs) and second by shifting advertising waste from ink and air time to pixels and server cycles. Yet even this success does not diminish the fact that advertising itself remains inefficient, wasteful and speculative. Even with advanced targeting and pay-per-click accountability, the ratio of “impressions” to click-throughs still runs at lottery-odds levels.

The holy grail for advertisers isn’t advertising at all, because it’s not about sellers hunting down buyers. In fact it’s the reverse: buyers hunting for sellers. It’s also for customers who remain customers because they enjoy meaningful and productive relationships with sellers — on customers’ terms and not just on vendors’ alone. This is VRM: Vendor Relationship Management. It not only relieves many sellers of the need to advertise — or to advertise heavily — but also allows CRM (Customer Relatinship Management) to actually relate, and not just to capture and control.

As VRM grows, advertising will shrink to the the perimeters defined by “no other way”. It’s hard to say how large those perimeters will be, or how much journalism will continue to thrive inside of them; but the sum will likely be less than advertising supports today.

The result will be a combination of two things: 1) a new business model for much of journalism; or 2) no business model at all, because much of it will be done gratis, as its creators look for because effects — building reputations and making money because of one’s work, rather than with one’s work. Some bloggers, for example, have already experienced this. Today I have fellowships at two major universities, plus consulting and speaking work, all of which I enjoy because of blogging. The money involved far exceeds what I might have made from advertising on my blogs. (For what it’s worth, I have never made a dime of advertising money by blogging, nor have I sought any.)

On the with effects side — money made with journalism, rather than because of it — perhaps the new institutions of journalism will become more accountable as journalism’s consumers pay its producers directly. I don’t know how we’ll get to that, but it will necessarily involve VRM, and I would love to help build it.

One sure thing: a primary building material for the future institutions of journalism will be the work of amateurs sort, the best of which will honor that adjective’s original meaning: one who loves a subject, but does not require payment for obsessing constructively about it.”

1 Comment The Because Effect and the Demise of Advertising

  1. Pingback: 21st Century Spirituality · Hyperstream of 2008-09-17

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