IP Democracy: Intention, Attention, Advertising, Media & Markets

Today I read Doc Searls “The Intention Economy” in Linux Journal and Scott Karp’s blog post “The Coming Search Advertising Crash.” Together, they got me thinking about the relationship between Media 1.0 and Web 2.0.

Doc’s perspective seems to envision an evolution where what we’ve known as advertising no longer plays a significant role in much of the economy. That’s a pretty big stretch, but it makes sense to me as a desirable and, over some hard-to-predict time horizon, a quite possible development.

The Intention Economy is about markets, not marketing…about buyers finding sellers, not sellers finding (or “capturing”) buyers…In The Intention Economy, the buyer notifies the market of the intent to buy, and sellers compete for the buyer’s purchase…The Intention Economy is built around truly open markets, not a collection of silos…customers don’t have to fly from silo to silo, like a bees from flower to flower, collecting deal info (and unavoidable hype) like so much pollen…The Intention Economy…leverages the simple fact that buyers are the first source of money, and that they come ready-made. You don’t need advertising to make them.

I…believe we need to start viewing economies, and markets, from the inside out: from the single buyer toward the surrounding world of sellers. And to start constructing technical solutions to the buyer’s problem of getting what he or she wants from markets, rather than the seller’s problem of getting buyers’ attention.

Doc began his column by distinguishing the Intention Economy from the Attention Economy, which he described as a perspective that’s “anchored with sellers, not buyers,” and may be “just another way for advertisers to skewer eyeballs.”

Scott’s post struck me as grounded in an Attention Economy worldview that was in the process of transitioning from traditional media to what he and others (myself included) sometimes refer to as Media 2.0.

Scott argues that because search activities account for only about 5% of users’ time online, search’s large share of online ad revenue is in jeopardy:

Advertising does not work this way in other forms of media. On television and radio and in newspapers and magazines, adverts are sold according to ratings and circulation…If internet advertising followed suit, revenues would not be concentrated overwhelmingly on a small portion of internet traffic, but spread more evenly. In practice, however, it is hard to find sites with enough traffic (and therefore advertising potential) to attract large blocks of advertising. There is fierce competition to place brand advertisements on the few that do exist, such as the home pages of Yahoo or AOL.com.

This is media economics 101. Ad dollars follow audience. If search only represents 5% of online media time, it shouldn’t have 40% of the dollars, no matter how measurable search advertising is.

Derrick at the Absolute Value blog thinks Scott’s missing the point, and it has to do with “intention.”

Trying to measure the value of search advertising against time spent or stickiness” in Scott Karp’s post misses the point and uses the wrong measuring stick at the same time. It doesn’t matter how long someone spends on a page if their intent is not commerce. Google is the big search winner precisely because they move their users to their destinations faster than the competition.

What search advertising does so well is capture traffic of good intent as I research and price purchases. The real question is really one of “response marketing” vs. “brand marketing” and whether the dollars are being spent effectively. I’m not sure how useful it is to interrupt me while I’m reading the news or my mail with a floating ad that obstructs my view of the content.

Doc & Derrick are talking about a shift toward creating systems that help buyers gather information that can help them make efficient buying decisions (i.e., getting the best value with the least effort). Scott, in contrast, is talking about the “brand” advertising model that seeks to aggregate attention by delivering appealing media content and mixing it with advertising messages that, in general, tend to be more emotive and entertaining than informative. Since it has historically been based mainly on one-way communications, media advertising has targeted its messages on the basis of demographics and, depending on the medium, somewhat more sophisticated consumer profiling.

Thanks to the Internet and other digital technologies, “attention-based” advertising is becoming more targeted. At the same time, online media is starting to become less of a one-way communication and more of an interactive and multifaceted exchange of various forms of “content” and “conversation.” The more this happens, the more appealing and feasible will be a transition of online “media advertising” from seller-centric, attention-based brand advertising to buyer-centric, intention-based provision of information that is relevant to a buyer’s intent and, in some cases, actionable not only in the form of a click, but also in the form of a purchase or other transaction.

And while Scott and others may be right in arguing that Google and search in general may take a short-term hit in terms of their advertising revenue growth, the bigger picture is that this migration in advertising and market models is likely to continue, and be welcomed by both buyers and sellers. While Google makes its share of mistakes and may still have an overvalued stock, its leadership seems to understand this pretty well, and the company is clearly working to build new intention-based revenue streams on the foundation of search advertising. And, even if Google stumbles (and even if it doesn’t), others big and small are working toward the same general goals and may end up developing better next-steps in the evolution than Google.

Though I’m no expert in advertising, I’m inclined to agree with Doc that the old brand-advertising statement “I know half the money I spend on advertising is wasted, I just don’t know which half,” is an understatement. And while click-fraud remains a serious problem in today’s pay-per-click (PPC) online ad business, I think it’s ultimately more measurable and fixable then the problem reflected in this ad-business cliché, especially as intention-based markets evolve…and that advertisers/sellers will ultimately recognize that.

In a 12/30 post, I discussed a piece in Wired by Charles Mann which, at the time, I said “left me with a sense that Google Wallet could emerge as a powerful tool to enable Google to once again lead (and perhaps dominate) the transition to increasingly efficient forms of ROI-based advertising.” In light of the brouhaha over Google’s preliminary settlement of a class-action click-fraud case, Mann’s words seem worth quoting again:

Bill Gross, the man who invented PPC back in the late ’90s when he presided over the startup incubator Idealab, has argued that, despite the cleverness of the various methods used to fight it, click fraud will continue to cast a shadow over PPC advertising. Ultimately, he believes, advertisers will switch to another model, which he calls cost-per-action (others use terms like cost-per-transaction or cost-per-acquisition). Whatever the name, though, advertisers pay only when a click results in a specified action, such as a sale or a Web site registration. Gross started a CPA search engine, Snap.com, in late 2004.

Yahoo! is not looking into cost-per-action [says Michael Egan, the company’s search-marketing director of content strategy], because such a system requires businesses to share sensitive cost data with their advertising partners. “We start having to ask how much they’ve sold and what their margins are,” he says. “And if we carry ads for their competitors, we know about them, too. This is not information that businesses like to share with third parties, and for good reason.” For the near future, he says, “I don’t believe PPC is going to be supplanted…”

A possible answer to the privacy worries may be something called Google Wallet. This new initiative, not yet unveiled as of early December, is believed to be a payment scheme that surfers would use, for example, when they bought something after clicking on a Google ad. In theory, at least, Google could process the payment to the advertiser without having to know anything about its costs, profit margins, or other sensitive data. Like Gross’s cost-per-action, Google Wallet would be immune to click fraud - zombie machines could click away, and the system would simply ignore them.

Posted by Mitch Shapiro on March 10, 2006 12:12 AM to IP Democracy