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A possible future of online advertising

By Skippy in Op-Ed
Sat Feb 03, 2001 at 08:41:39 AM EST
Tags: Internet (all tags)
Internet

Several articles I have read recently, citing the death of online advertising supported companies, have been claiming to hear the death knell of online advertising. While there have been casualties, like AllAdvantage and rumblings of problems with the IGN network, I think its a little premature to be claiming to see the impending death of online advertising. I don't believe online advertising is going away any time soon, though with a year or so it may appear radically different.


It seems that the current rash of company deaths and funding problems is due to the stupendously stupid method that people are using to advertise online. Banner ads were a quick and dirty way to get advertising online in the days when the web wasn't so commercial. The point of a banner ad was to have advertising and keep it out of the way at the same time. When you think about it, that's really not a good idea from an advertising standpoint. Banner ads were--and are--a hack, and the hack just doesn't work anymore. To cite declining revenue from banner ads as the death of online advertising is silly.

A major cause of declining banner ad revenue is that the web isn't so novel anymore. It has become commercial and people don't just go clicking on anything that blinks. Back when the web was new there were non-commercial banner "ads". This meant there was actually the possiblity that there was a non-commercial entity on the other end of a banner click-through. Programs like Link Exchange (who have been subsumed by Microsoft) accepted non-commercial banners and they accounted for a large portion of the banners in circulation. This was a perfect opportunity for advertising as it was sometimes difficult to tell someone's lovingly crafted hobby from a commercial site banner and so click-throughs were pretty high. It's no longer new and after clicking-through a couple of thousand banner ads to find an even worse sales pitch on the other end has lost its appeal.

Many people don't care about advertising. It doesn't really affect them and they ignore the banners. These people are the ones that sites counting on ad revenue need, particularly if they run on a per view model rather than a click-through model. Recently, with the advent of programs like Junkbuster, blocking ads has become incredibly simple. This has let some of these formerly ambivalent people to expend a little effort for the purpose of having a little more screen real-estate or bandwidth. This is a minor cause of lost ad revenue but it scares the advertisers. What if more people blocked ads? This could become a reality with the continuing ease-of-use advances of ad blocking software.

What I think we'll see soon is that advertisers will come to realize that, at least now, advertising on the web is much like advertising in other media. It becomes difficult to gauge the effect the ad is having. Click-throughs tell only part of the story. I may see an ad and go to the site directly later when I'm finished surfing where I am. I may wait a few days until I'm reminded by seeing another banner ad for the same company somewhere else. Slowly, advertisers will come to see the web as medium no different than any other for advertising.

As advertisers waken to the realities of online advertising in the current market, they will get tired of having their ads blocked or completely ignored. Soon, we'll start seeing more inline ads tightly integrated into the content layout. Ads will also be served by the content provider. Inline ads, particularly if hosted by the content server, may be more difficult to block. If an ad is integral to the layout of the page then blocking it may have detrimental effects on the rendering of the content in the browser. If the ad is served by the content provider then it makes blocking trivially more difficult. It may be enough of a hurdle, however, to keep the marginally ambivalent from blocking. These two trends will end up making advertising on the web like advertising in the newspaper - more visually appealing ads that take up a little more real-estate and that are integrated with the delivery mechanism.

Finally, the click-through method of payment calculation will die. It benefits only the advertiser and it doesn't benefit them much. Currently some advertisers pay only on click-through. This means that the content provider is serving a great many "wasted" ads. Although payments on click-through ads seem higher than those of per viewing ads they can be unsteady at best. You may have many click-throughs one month and none the next. Payment for advertising will slowly move to number of eyeballs only, though perhaps at a lower rate than is current. This benefits the advertiser by giving them lower rates and it benefits the deliverer as their income is more steady.

Online advertising is not going away. People want the web for little or free and the only way they are going to get it is through advertiser supported delivery. As web users become more savvy and the effort of blocking banner ads goes down, advertisers will find new ways of catching our eyeballs and commanding our attention. Online advertising is here to stay, though very shortly we may not recognize the face it shows.

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Poll
Online advertising will
o Die 6%
o Continue to be banners for the forseeable future 13%
o Move to tight integration with content 30%
o Go in a direction none of us can predict 48%

Votes: 43
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A possible future of online advertising | 23 comments (23 topical, editorial, 0 hidden)
Google got it right (4.50 / 8) (#1)
by kcarnold on Fri Feb 02, 2001 at 11:41:26 PM EST

Google, the search engine we all know and love, recently started an advertising program. In my opinion their choice of format is both revolutionary (at least for popular sites) and right on the money (literally). They call it AdWords, and it is essentially text-based targetted advertising. Though their methods may or may not be applicable to other sites, it's a good example of thinking outside of the box (or copying someone else who is; in this case I see no problem if they indeed copied the idea).

Why AdWords is cool:

  • No banners: Most web-surfers have already trained their eyes to ignore the banners anyway.
  • Targetted: DoubleClick and friends spend huge amounts of effort and pastries trying to keep track of individual users' preferences and customizing the advertisements to those most likely to result in a positive click-through. Google found it much easier to provide relevant advertisements based on what you are searching for, and provide an advertisement as a possible answer. It accomplishes the same thing, can't be blocked by a single click in Konqueror like *.doubleclick.net was for me, and most people probably wouldn't block it anyway.
  • good
  • Lightweight: Google has always focused on content over layout, graphics, and advertisements. Gets me what I want, quickly and easily.
  • Relevant: Since the ad is based on target keywords from your search query, it is very likely releated in some way to what you were searching for, unlike other ads that are relatively random once you've blocked and banished The Cookie, and still not very useful when you have allowed It. Since the ads cost money (though not that much), it also tends to weed out the junk from the links, while not detracting from what Google has found purely as a search engine. I haven't clicked on any ads from Google, but granted I haven't searched for something I was planning to buy either. What ads I have seen have been relevant, and I would have followed through on them had I been interested in putting my money into something (I have no or at best sporadic income, so I spend carefully).
  • Text: It doesn't flash, move, blink, or want me to try to click on a moving monkey (have you seen that one? saw it on Slashdot once... cute but annoying). It makes money. What more could you want?

At Google's pretty-low-but-still-moneymaking rates ($8 to $15) for adverts, Google has finally found an elegant way to integrate a source of income with the rest of their l33t search engine. Though this is obviously specific to a search engine, perhaps other companies could find inspiration for their own forward-thinking advertisement strategies (Rusty, are you listening?).

maybe, but (3.75 / 4) (#3)
by klamath on Fri Feb 02, 2001 at 11:59:29 PM EST

... the 'advantages' you list of AdWords don't seem to be revolutionary to me. Sure, 'AdWords' is a fairly cool idea, but I don't think it's the next generation of online advertising.
* No banners
This will be a temporary advantage: if this technique is used frequently, surfers will simply ignore text in the 'Adwords'-style text box. So at the moment the novelity of this idea will help its success, but in the long run it's not really an advantage. One potential problem with AdWords is that it blurs the line between advertisement and legimimate search result. If users start to ignore AdWords placed in a fairly clear box (like they currently are), perhaps Google will make AdWords less conspicious. And from there, why not simply include the AdWords as the #1 search result? That will certainly produce revenue, and how would the user know? I remember AltaVista and other search engines being accused of this.

* Lightweight
Granted; but there is also the trade-off that it isn't as flashy, so the user is less likely to notice it, and thus less likely to click it. I'd say in the long run this may result in less revenue generated by these ads, even though users will be happy not to have to put up with neon, flashing graphical ads.

* Relevant
Exactly the same effect could be achieved by storing a list of keywords for each graphical ad you are paid to display. When the user enters a query reasonably close to the keywords on an ad, show it. This gives you exactly the same effect as 'Adwords' -- and I wouldn't be surprised if other websites, particularly search engines, have been doing this for a while.

* Text
Again, a text ad is far less visually distracting that a graphical ad. This means that while it is less annoying, it will also generate less revenue. So it is definately a trade-off, and possibly a bad one at that.

[ Parent ]
True, indeed (3.80 / 5) (#5)
by kcarnold on Sat Feb 03, 2001 at 12:31:59 AM EST

All good (counter-)points. Indeed, as I hopefully implied in my original post, the revolutionary part of AdWords isn't really the concepts, but the implementation. Some item-by-item rebuttal from that basic premise:

  • No banners: Remember that Google doesn't sit on their butts the whole day staring blankly at computer screens. They've already changed the AdWords format once as far as I've noticed, and if situations require it they'll change it again. But hopefully users will realize that the ads on Google are actually useful, and not blindly ignore them. In addition, you can't easily filter the ads (it's on-site and not a fixed-size image), and as I asked before, would you want to? And as for including it as #1, if it's a decent site it will already be near the top anyway, and giving a slight boost to the page's PageRank isn't too much of a crime against humanity.
  • Lightweight: I tend to think, as many web users do, that flashy content generally detracts from the overall quality and usefulness of a site. Sure it might grab attention, but will it keep the attention? The article poster is reponding to the concern that it typically doesn't keep attention long enough to elicit a click, yet alone a successful sale.
  • Relevant: Yes such association is possible, but it has not been implemented successfully so far; I still find all graphical ads not static and custom-selected to be of little relevance to what I might be looking for, and unlike many users I actually notice the graphical ads once in a while.
  • Text: If everyone filters banner ads, and those are all that is available, the graphical ads will provide no revenue. And placement can be as important as annoyance; locating the advertisement near applicable content (Google puts it on the side of the page next to the other hits) can prove more effective than an eyecatching ad at a totally different part of the page. It's all about the viewing process. Ever wonder why newspapers and magazines put ads near stories pertaining to the company or the product? AdWords does the same thing, and the rest of online advertising tries to, but has met with relatively low success in getting it all to work right.

Not that it matters, but I gave you a 4 because those are well-thought counterarguments and it was definately a non-trivial post.

[ Parent ]
brief reply (3.50 / 2) (#20)
by kubalaa on Mon Feb 05, 2001 at 01:02:47 AM EST

To respond to your complaints about the unobtrusiveness of text ads:

First, I personally will intentionally ignore anything flashy, and if I notice it it will only give me an unfavorable impression of the advertised company. Second, text ads can provide much more information, making viewers better-informed about the product or company than some random catchy image would allow. Finally, by subduing the ad and placing content over form, it shows more respect for the viewer, and that never hurts.

[ Parent ]

The effectiveness of most advertising (3.66 / 3) (#2)
by ucblockhead on Fri Feb 02, 2001 at 11:44:12 PM EST

It is my firm belief that at some point in the next decade or so, the increased ability of information technology to track the true reaction of people toadvertising is going to force the advertising industry to confront the fact that a large amount of advertising is quite frankly a waste of money and resources.
-----------------------
This is k5. We're all tools - duxup
*yawn* (4.16 / 6) (#4)
by regeya on Sat Feb 03, 2001 at 12:00:55 AM EST

When CS proved to be an impossible dream for me, I chose journalism with a specialization in advertising as my major. I know it's op-ed, but it seems to me that some people have started using op-ed as a way to circumvent doing research. Granted, I'm guilty of not doing adequate research too. :-} I rated it -1, and I must apologize because after I thought about it, this sort of thing needs to be discussed.

Finally, the click-through method of payment calculation will die. It benefits only the advertiser and it doesn't benefit them much. Currently some advertisers pay only on click-through. This means that the content provider is serving a great many "wasted" ads.

Duh. Waste is part of the game. The novel part of click-through being the rate determining factor is that it's the content provider, not the advertiser, who eats the waste. Contrast that with, say, television where determining advertising rate is little more than an educated guess. Effectiveness? How do you measure it? I've worked in the newspaper business as well...well, one paper. I can assure you that advertiseds circulation and pass-along readership rates are, at least in some cases, 100% bullshit. :-) Heck, billboards are usually have their rate determined by how much traffic passes by the sign.

I could go on, but I spent three years eating data and crapping so-called knowledge about advertising. Guessing game.

[ yokelpunk | kuro5hin diary ]

Sort of my point (4.66 / 3) (#7)
by Skippy on Sat Feb 03, 2001 at 01:01:51 AM EST

Duh. Waste is part of the game. The novel part of click-through being the rate determining factor is that it's the content provider, not the advertiser, who eats the waste. Contrast that with, say, television where determining advertising rate is little more than an educated guess.
That's sort of my point. Because of early results with high click-throughs on banners, advertisers saw the web as a perfect medium. "Wow, we can actually see in realtime how effective the ads are!" And at the time, they were pretty close. Now the novelty has worn off, people don't click banners and the real value of an advertisement on the web is the same as it is everywhere else - a moment of brain time that hopefully ads up with other moments to produce an action. Continuing to use the click-through model is the advertisers deluding themselves into thinking they are getting real, useful data and not, as you put it, an educated guess.

The fact that click-through waste is eaten by the content provider is exactly the reason I think this form of payment calculation will die. It's designed to appeal to greed with a percieved higher payout. Occasionally a particulary shrewd person may actually get a higher payout from it. But I think content providers are catching on. At least the major ones. Joe Six-Pack who just opened a site may still get suckered.

Personally I'd much prefer a 200x400 well designed, non-blinking, non-interactive advertisement over the crap that goes into banners today. If I have to look at advertisements, let them be like the more tasteful ones in magazines. I don't mind looking at advertisements. I do mind looking at blinky crap that's likely to give me seizures.

# I am now finished talking out my ass about things that I am not qualified to discuss. #
[ Parent ]

agreed (3.00 / 1) (#12)
by regeya on Sat Feb 03, 2001 at 03:33:06 PM EST

I do mind looking at blinky crap that's likely to give me seizures.

Couldn't agree more...and I can sympathize. When I was in high school, I was put on Tegretol (an anti-seizure medication.) My symptoms were kinda weird, where I'd just start staring off blankly into space, and for a few moments capable of little more than stammering and spewing nonsense...I've actually had that happen when visiting sites with evil banner ads.

No, I don't think you're unqualified to talk about it...sorry, I really didn't mean to be that flamey. :-/

[ yokelpunk | kuro5hin diary ]
[ Parent ]

No flames and and apology (none / 0) (#14)
by Skippy on Sat Feb 03, 2001 at 05:03:45 PM EST

I didn't find your comment flamey at all. That's my .sig because most of the time I participate in conversations where I have no idea what I'm talking about. I apologize for the seizures comment though. That was supposed to be hyperbole. I didn't realize that it really happened to people because of banner ads.

# I am now finished talking out my ass about things that I am not qualified to discuss. #
[ Parent ]
Best place to study how to do online advertising (4.00 / 3) (#6)
by Wah on Sat Feb 03, 2001 at 12:53:18 AM EST

is porn sites. Every major advancement has been made by this industry. Every one of your suggestions is being done by this industry. This is one of the few making major money with advertising.

As far as charging money by click or impression, I think both methods will stick around because both are suited to different types of environments. Rich media ad pop-ups are definitely on the way, but don't expect the banner to go anywhere anytime soon. It's a generally agreed upon size, shape, and implementation. And I think they work, although putting them at the top and bottom of a page definitely lessens their effectiveness. Like any commercial, people have to see it for any effect to be realized.
--
Fail to Obey?
Junkbuster is not that dangerous (3.50 / 2) (#8)
by tftp on Sat Feb 03, 2001 at 01:43:36 AM EST

I think Junkbuster and other ad-filtering proxies are not a danger to advertisers - now and in nearest future. It still takes some effort to find the proxy, install it and reconfigure the browser to use it. Majority of users don't do that. Those who do - yes, they may skip ads. But they are least likely to be affected by advertisements anyway. So no harm done.

Mozilla (3.00 / 1) (#11)
by vectro on Sat Feb 03, 2001 at 11:46:56 AM EST

Don't forget that Mozilla includes some anti-advertiser features, such as "never accept a cookie from this server", "never accept an image from this server", "block this image", etc. It's not as comprehensive as junkbuster but makes in much easier for Joe Average to block doubleclick. And that <EM>should</EM> scare advertisers.

“The problem with that definition is just that it's bullshit.” -- localroger
[ Parent ]
Re: Mozilla (3.50 / 2) (#16)
by tftp on Sat Feb 03, 2001 at 05:46:06 PM EST

True, Mozilla has that feature and I use it. But it is in "Advanced" preferences and requires decent understanding of concepts involved (what is a cookie? what is the purpose of a1.iworld.com? what is images.mynewsservice.com?)

If you answer incorrectly and the setting is saved then the page will not display really important images (like ones accompanying news articles, or even navigation buttons). Then you have to go back to preferences, dig up that table of blocked sites, locate the necessary site (if you still remember which one!) and delete it manually. In my estimate, approximately 0% of non-geeks will ever do that.

[ Parent ]

Ads and the internet... (2.60 / 5) (#9)
by physicsgod on Sat Feb 03, 2001 at 03:18:17 AM EST

seem to me to be mutually exclusive. IMNSHO the internet is all about me getting the information I want when I want it, while advertising is trying to give me information I didn't ask for. Instead of advertising companies should just put up a good webpage and get it registered on the search engines.

--- "Those not wearing body armor are hereby advised to keep their arguments on-topic" Schlock Mercenary
Sometimes I just don't want to buy stuff. (3.00 / 6) (#10)
by DeadBaby on Sat Feb 03, 2001 at 07:40:52 AM EST

I think it's time advertisers understood that I just don't want to buy stuff from them. Banner ads are about as good as online advertising can get. You show me what you have to offer, I make a choice. No amount of flash, music, pretty colors, contests, etc will make me change my mind.

Internet advertising should be based on consumer interest. If I want to buy a new car I will seek car sites out. If I want to punch the monkey in order to win cash prizes I will seek such a site out. The only type of advertising that should be done is brand awareness.

My prediction is that in a few years (probably starting soon) sites will be sponsored by one company. Kuro5hin, presented to you by Home Depot. Slashdot.org, presented to you by Kitty Fresh kitty litter.

For this to work sites need consolidate. I can see a time where the internet is made up of 3 big networks which sponsor and promote hundreds of sites. Very much like TV is setup now.


"Our planet is a lonely speck in the great enveloping cosmic dark. In our obscurity -- in all this vastness -- there is no hint that help will come from elsewhere to save us from ourselves. It is up to us." - Carl Sagan
Through Alice's glasses (none / 0) (#23)
by aphrael on Mon Feb 05, 2001 at 11:03:20 PM EST

My prediction is that in a few years (probably starting soon) sites will be sponsored by one company. Kuro5hin, presented to you by Home Depot. Slashdot.org, presented to you by Kitty Fresh kitty litter.

In a world where almost nobody --- including, say, the New York Times --- can make money off of a website, how would single companies be able to afford to have sites that weren't related to their core business, just to advertise? I realize that this is similar to the way television worked in the early days, but unless you speculate that (a) someone will figure out how to make money on the net; or (b) some big non-tech companies will decide to float unrelated websites as loss leaders, it's difficult to envision how this scheme would work.

[ Parent ]

Farther out... (3.20 / 5) (#13)
by interiot on Sat Feb 03, 2001 at 05:01:24 PM EST

Farther out, I see the death of advertising altogether, due to several failings of advertising as a whole:
  • Advertising is 1st-party information, and so is more biased than 3rd part information.
  • The advertising model is too skewed towards companies with the most money, thus slowing the rate of innovation because old companies have momentum.
  • Advertising is shallow, allowing only a short amount of time to grab the consumer's attention and get them to inquire more.

The primary benefits of advertisements to capitalism are: 1) to introduce new products to the consumer, and 2) to give consumers a sense of which products might be better for an individual's use.

Both of these goals can be accomplished via less intrusive 3rd-party means, due to advances in technology. (eg. trust-networks such as Epinions, while additionally providing incentives to a few people to try a new product and review it)

And if advertisements cease to have any practical use, perhaps they can be socially or forcibly restricted.

Comments? (4.50 / 2) (#15)
by interiot on Sat Feb 03, 2001 at 05:29:54 PM EST

Could people comment a bit before you mark this stuff down?

Is it too offtopic, AND there's a better place to put this? Too far out to discuss at all? Too JonKatzian? Too many unexplained assumptions to understand well?

heighting in particular appears like s/he could critique this well.

[ Parent ]

reply (3.75 / 4) (#17)
by Anonymous 6522 on Sat Feb 03, 2001 at 11:24:52 PM EST

Companies aren't going to give up advertising for independant reviews, unless someone forces them to. Why? They want control over what gets said about their products, they don't even want to take the chance that the only info consumers will get could come from negitive reviews.

Looking at 3rd party reviews is better for consumers, I don't doubt that, but corporations are only going to think in their own intrest. They won't do something that could be harmful to themselves like giving up ads.

[ Parent ]

Romantic (4.00 / 3) (#19)
by kubalaa on Mon Feb 05, 2001 at 12:52:05 AM EST

Obviously advertisement is bad. Do you seriously think any consumers intentionally base their purchasing decisions on ads? Advertising has never been about the interests of the consumer, so none of your "failings" apply. Rather, it's about making companies money, and at this it works rather well; it allows them to draw customers despite having an inferior product. In fact, as I think about it, the reasons you gave all work in advertising's favor:
  • More biased -- the better for the advertisers, eh?
  • Skewed towards companies with money -- you mean the ones with the most power? Power to keep anti-advertisement legislation from passing, and to keep advertising in use even if customers dislike it? Right.
  • Shallow -- this works both ways. Obviously the more a company has your eyeballs the better, so we may see ads getting longer. On the other hand, shallowness means the ad can target emotions instead of rationality, and nobody has a very long attention span anyways.

    [ Parent ]
Analytic problems (4.50 / 2) (#22)
by aphrael on Mon Feb 05, 2001 at 11:00:47 PM EST

Advertising is 1st-party information, and so is more biased than 3rd part information.

This is a good reason why an individual might ignore advertisements. But there's a problem with projecting into the future from it: aside from the fact that advertisers are still going to be interested in selling themselves, as long as they have even an infinitesmal margin for doing so, the unbiased third-party information generators have to be able to stay in business.

That is to say --- sure, third-party information is better; that's why UL and Consumer Reports exists. But the third-party companies have to make money some way, and there appear to only be two viable models for that: (a) get paid by the producers of the products being reviewed; and (b) get paid by the consumers of the information. (A) has obvious conflict-of-interest problems.

(B) is problematic for other reasons --- how much would you pay for an independant rating service? How could you trust it to be unbiased? Maybe that's not a problem if it is biases align with yours, but ... and either way, the producer of the product is still going to have an incentive to market their product.

The advertising model is too skewed towards companies with the most money, thus slowing the rate of innovation because old companies have momentum.

This sounds like a reason why advertising should go away rather than a reason why it will. What's the process by which being skewed towards those with the most money and slowing innovation causes advertising to self-destruct? Wouldn't the innovative new companies need to advertise to get noticed?

The primary benefits of advertisements to capitalism are:

I detect an analytic problem here --- but it's one that's common in popular discussions of economics. The driving force behind advertising is not that it benefits capitalism, it's that it benefits the companies that are advertising. Capitalism be d****d; companies do what is in their self-interest, by and large, and the government regulates their behavior and the market in the interest of capitalism or society as a whole. Unless you have government advertising regulations, there is no way to make advertising meet anything other than the interests of the sellers of advertising space or the purchasers thereof.

And if advertisements cease to have any practical use, perhaps they can be socially or forcibly restricted.

This depends on the country you live in. In the US, this would be difficult --- commercial speech is still speech, and so restricting it runs into constitutional issues.

[ Parent ]

It still has to make money (4.00 / 1) (#18)
by hstl on Sun Feb 04, 2001 at 11:44:09 PM EST

I quite enjoyed this post. I was hoping for some novel way to make advertising on the net work, but it was insightful regardless.
I think the main problem with web advertising is it has to make the advertiser money. If you are shelling out for banner ads you need to be making a return. I guess that is why (as one comment pointed out) Porn hosts seem to be one of the few it works for. As you may have noticed, this is also one of the few web catagories people will shell out money to view. If your selling tangables its a lot harder to market over the web, and there is a glut of free content for most catagories.
Finding something people will willingly pay for seems the important factor (eg. Amazon).
Anyway, great article! - Hostile
"If you want an image of the future, imagine a boot, stamping on a human face, forever." -- George Orwell, "1984"
Does that imply (4.00 / 1) (#21)
by aphrael on Mon Feb 05, 2001 at 10:50:53 PM EST

that the real problem that market researchers should be investigating is what people are willing to pay to have online, and why? There's another thread that implies that people would be willing to pay for music online; Stephen King demonstrated that books online don't work as a money-generator; and only the Wall Street Journal has been able to make money on subscriptions online.

What I don't understand about this is <why. Why are people who are willing to pay $.35/day to have a newspaper delivered to their house not willing to pay the same thing for instant access on the web from anywhere? And how can that mindset be changed? Until it can be, advertising on the we isn't going to be succesful either, I suspect.

[ Parent ]

A possible future of online advertising | 23 comments (23 topical, 0 editorial, 0 hidden)
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