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In a recent article on Medium called The End of the Ad-Supported Web, Julien GENESTOUX is putting the finger on a many things I was obsessing with these last few months about ad monetization. You may want to read the article first, the following are my extra comments:
The main gripe with ad monetization that we all think we understand, is that companies involved in this strategy disconnect their added value from what they invoice. This lateral move seems minor while it is quite critical. When Zuckerberg meekly declares that ads are the way to allow everyone on the platform he already has excluded the possibility to have tiers where some will pay and other not.
Why? Because he wouldn’t make nearly as much money. But the few degrees of difference in the initial trajectory have been now compounded over 14 years both in the culture, the strategy and essentially, what is Facebook as a product. Which means that it is an ad machine and nothing else anymore.
The risk for any new entrants (not only in social media) that find smart to monetize ads is that they will be running in the same trap if they ever be successful. While the irony of glorious incumbents such as the New York Times that where monetizing through both ads and subscriptions, is that they feel more and more the monetary pull to become also ad machines. But you also see this struggle with ‘famous’ Youtubers: is your content value is how much Youtube pays you, or how much Patreon pays you? Because the are not aligned.
As people working on innovation strategy the core assumption we always work on is that you monetize your added value and then decide of the shape, color and odor of your product. (A not-so-subtle way to prevent would-be innovators to spend months coding or working on the product, without taking care of what is their market.) This always removes ads from the table as a monetization scheme.
The ontological perversion we’ve been living with is that Google as one of the most successful company of the «news economy» embedded in our mindset is that any form of transaction based on content, information, news, or data is monetizable at the root through ads.
This is an original sin that still weights on the global economy.
I try to avoid talking mathematics when I address innovation strategy. As soon as I do it I’m victim of a very personal impostor syndrome (I’m not a mathematician) while realizing I’m going down deep, deep rabbit holes. As a matter of fact, when writing about Monthy Hall’s problems — which are key to understand uncertainty and innovation — I know I’m getting probably too technical.
Now I’m no mathematician, but I’m still a formally trained scientist. And one of the early mental model you integrate as such is to be deeply cautious about the difference in correlation and causation.
For all these reasons, I always find refreshing when others try to painstakingly try to reinject mathematical common sense for business executives. And, recently I read a delightful discussion on the McRib Effect:
My first MBA class a long time ago was about finance. I was explained that the simplest (and probably most accurate) definition of finance is « money over time ». It struck me yesterday that the simplest definition of #innovation is customers over time.
If you’re trying to understand how retail tries to adapt to an always-on, always connected customer base, US department stores are fantastic case studies. Macy’s, the largest of them, went probably through all the cycles of digital trends you can imagine. Specially when advertising was concerned.
In a dramatic recent turn of events, Macy’s started to strategically disengage from influencers campaigns, where high-profile Youtubers or Instagrammers would be paid to feature Macy’s products to their audience.
When we arrived in the Netherlands two years ago, we adjusted our mode of life immediately. The key thing was to get rid of our cars. Who needs one if you live in Amsterdam? But this mobility paradise didn’t happen just because « Dutch love bikes ». There were actually many factors that were involved in the seventies to turn the country away from a car-centric future.
These lessons should be learned. As I am in an event on the southeastern coast of the Arabian Peninsula today, to discuss new mobility business models, it seems appropriate to remind us of a few things:
I’ve seen and read lately a lot of non-sense on how China is building a global surveillance network of its citizens through social scoring. Truth be told, it is not a simple issue and I was glad to get myself a better perspective on what it means through Rogier CREEMERS summarizing his social research on the subject at SMC050 conference in July 2018. If you’re a global company with retail business there or an investment firm, these are 36 minutes worth your time.