March 11, 2008
The Coming Ad Revolution - WSJ.com
The Coming Ad Revolution - WSJ.com
By ESTHER DYSON February 11, 2008; Page A18 While the big news in the online world focuses on Google, Yahoo and Microsoft, a more profound revolution is taking place on the online social networks: The discussion about privacy is changing as users take control over their own online data. While they spread their Web presence, these users are not looking for privacy, but for recognition as individuals -- whether by friends or vendors. This will eventually change the whole world of advertising.
The current online-advertising model will become less
effective, even as it gets increasingly sophisticated. New players are
emerging to devalue the spaces that the ad giants are currently
fighting over. Companies you've never heard of called NebuAd, Project
Rialto, Phorm, Frontporch and Adzilla are pitching tools to Internet
service providers that will enable them to track users and show them
relevant ads. This approach (called behavioral targeting and already in
service by ad networks that track users through so-called tracking
cookies) undercuts traditional online publishers, who employ content to
lure users and to sell adjacent ads. Now, the ISPs can sell advertisers
direct access to the same users.
Take user number 12345, who was searching for cars
yesterday, and show him a Porsche ad. It doesn't matter if he's on
Yahoo or MySpace today -- he's the same number as yesterday. As an
advertiser, would you prefer to reach someone reading a car review
featured on Yahoo or someone who visited two car-dealer sites
yesterday? His identity is still private: The ISP and
behavioral-targeting networks don't know 12345's name and don't care.
They just know what they think he wants.
This market will get more competitive, and users will
be barraged by ads to which they will pay less and less attention. Call
that public space, a world of billboards and cacophony. Even though the
ads will be more "relevant" than ever, users will increasingly tune
them out.
Now consider the new world of social networks.
Facebook, unwittingly or on purpose, has been teaching people to manage
their own data about themselves. Facebook's launch of the Beacon
service -- which informs Facebook of members' activities (i.e.,
purchases) on other sites -- was a PR fiasco. But it still familiarized
millions of users with the notion that they can control information
about themselves online -- and determine to whom it is visible.
What might seem like a horribly complex and tedious
task to their elders -- categorizing "friends," managing news feeds,
handling intersecting communities of contacts -- feels natural to the
Facebook users of today. They want more granularity of control, not
less.
Each user determines who will get into his own garden,
whether friends or vendors. Look at Dopplr (where I plan to become an
investor), a site for travelers. I list my trips, and see how they
intersect with my friends' itineraries. "Oh, we'll both be in London
April 4? Let's get together!" Or, "Juan and Alice will be in town next
Tuesday. Let's hold a dinner!" You can imagine or visit equivalent
approaches for books (a hypothetical Amazon 2.0, new and more
personalized), clothes (Glam.com and Stardoll.com), and even money
management.
So what's the business model? I'll "friend" British
Airways, which will say, "We see you're going to Moscow next month. Why
not fly through London and we'll give you 10,000 extra miles?" I'm no
longer in a bucket of frequent travelers, my privacy protected. I'm an
individual with specific travel plans, which I intentionally make
visible to preferred vendors. British Airways, of course, will pay
Dopplr a handsome sponsorship fee to be eligible to be my "friend"
(just as a Nike rep might pay to sponsor a basketball game and be part
of the community). Someday NetJets may show up, offering to ferry me
and my friends to a conference we'll be attending together.
I'm far more likely to respond to BA or NetJets within
a trusted site, and for a specific offer, than I am to heed their ad
while reading a newspaper article on the troubles in Russia. (As for
Orbitz, my old standby: After five years, it still doesn't acknowledge
my preferred airlines.)
The new model creates a more trusted environment for
reaching high-value, frequent purchasers, whether of airline tickets,
electronics, clothes or other items. Where does that leave the
less-frequent purchasers? Probably looking to their friends rather than
to advertising for advice. I'm an expert on travel; my friends may look
to me for hotel choices. When I'm in the mood to buy a book or a new
computer, I'll check out what my friends on Facebook are doing.
This does not mean that traditional online advertising
will go away, just that it will become less effective. Value is being
created in users' own walled gardens, which they will cultivate for
themselves in real estate owned by the social networks. The new value
creators are companies -- like Facebook and Dopplr -- that know how to
build and support online communities.
Ms. Dyson is an investor in companies including 23andMe, Eventful.com, Meetup Inc., WPP Group and Zedo.
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