Online Advertising is Dead...

... if it was ever really alive.

You know the main problem of advertising online? People hate ads.

Way back in Internet history there were banners... especially run-of site banners, which advertisers bought per thousand impressions. I think advertisers were paying up to $30 CPM for run-of-site banners. I remember selling some to Entrepreneur Magazine... although I don't remember how much I charged them.

After a while, banners were "tuned out" by site visitors, clickthrough rates nose-dived and the cost per thousand impressions fell through the floor.

What did advertisers do?

They started to pay Goto.com (now part of Yahoo) per click... and the Pay Per Click industry was born. Google took this form of advertising to new heights with their Adwords/Adsense system... and very clever it is too.

But the fact remains that people don't like advertising. Take a simple example... what do you do when you're watching a movie and the ads are shown? You head to the kitchen for a snack or drink, right?

Advertisers got wise to that trick, so they decided to "sponsor" a movie and have a little mini-ad before and after the movie segments. I guess you're more likely to see it because you haven't yet left for the kitchen, or have just got back from it to see the next movie segment. Also, the message isn't, "buy our stuff", it's more, "we're good guys sponsoring the movie you're enjoying". So it's more of a soft-sell.

Take that message online and it doesn't really work. How can you make an interstitial page into a "soft sell"? Apart from closely targetting it to the page the visitor last saw, and the page they'll see next, there isn't much you can do. It's still an ad.

So are Adwords/Adsense ads being "tuned out" like banners were?

Are website visitors rebelling against advertising in general?

According to the Telegraph, the huge "Web 2.03 properties are struggling to turn huge numbers of site users into cash. Apparently, "Mark Zuckerberg apologised to Facebook users for the "bad job" his company made of implementing Beacon, a controversial new advertising system that exploits the power of 'word of mouth' marketing."

Oh dear.

The problem, for Facebook, is that they have huge numbers of competitors... and those competitors will be quite happy to undercut whatever revenues Facebook generates... and Web 2.0 users will be quite happy to go to whatever Web 2.0 website that offers the least advertising.

So we're left with a dilemma which has existed since the Internet was born... if people are free to decided which websites they want to visit, and there's intense competition for website visitors, can website owners afford to put advertising on their websites? On the other hand, can they afford NOT to?