The Salmon Fallacies: Felix Salmon’s Unexamined Assumptions
In his recent column on Wired (“The Future of Advertising”), Felix Salmon, a wonderful reporter and blogger, especially on economic issues, suggests that he wants to “push back a bit against some of the unexamined assumptions” which he encounters “most of the time when I meet online-media people.” Funny thing is that in examining these assumptions, Salmon reveals some of his own assumptions that are worth examining.
Salmon’s first assumption:
“there’s something necessary and inevitable about ad-driven models dominating the online media industry.”
Felix Salmon describes the fallacy of this assumption as being held mostly because micro-payments haven’t worked out so well due to a missing infrastructure. While the emergance of a payment infrastructure might help publishers build additional revenue streams, the case for micropayments as a compelling business model is far from clear cut. As for Salmon’s point that, when this payment infrastructure is in place “the online advertising industry will face a major threat” completely misses the point that most paid content still carries ads. With few exceptions, it’s not an either or model: even his examples of offline magazines like Vogue which have created wonderful environments where the ads are part of the content mix, still charge consumers for the magazine. A hybrid form, where there are consumers pay for the bundle but individual parts have associated advertising is still the most likely model to emerge.
Even more telling is that there are very few examples of mass mediums that have evolved without advertising being a large, or even dominant, part of the business model. An ad free content site: sure, it works in limited cases like consumerreports.org but even public radio stations now run ads (albeit dressed up as “sponsorships”). Will Wired magazine go ad-free since 794,195 people and I pay for it each month? Doing the math, I doubt that this circulation revenue even comes close to covering the full cost of what it takes to run Wired. There is no reason to believe that wired.com would fare any better.
Salmon’s second assumption:
“It’s a known fact in advertising circles that only idiots click on ads”
My mind is boggled over this one. This sums up a disdain for consumers who click on links to such a degree that it’s hard to believe that Salmon is actually employed in media. A couple weeks ago I was reading some articles about solar energy for homes, trying to figure out if the economics made sense yet. Not surprisingly, there were ads on some of those articles. Also, not surprisingly, those ads made it easy for solar companies to get in touch with me. The best of those ads even had little solar calculators that gave me some ballpark estimates of what kind of costs and savings I might be looking at. I clicked on those ads. I must be an idiot.
Salmon then goes on to describe an editorial box on Reuters as an ad (never mind that Reuters doesn’t get paid for that box and that if this kind of ad is what Reuters.com based their business on, then there would very quickly be even more out of work web journalists and editors). People click on this self-described ad, but somehow I don’t think Salmon would consider these folks idiots.
Salmon gets something right with this: if people find content that is great, if links point to something that they need or want, then people will click on those links. Unfortunately, Salmon doesn’t really raise what I think are the better questions that follow from this:
- why don’t businesses create ads and content for their products and services that are compelling, artful and interesting and
- why don’t web publishers create environments and eco-spheres where the most interesting and useful ads for a particular reader on a particular page are displayed?
At least part of the answer to that question is that it’s hard, but part of it is also that the online display advertising industry has been scared away from clicks as a measure because then advertisers and publishers would be both be accountable for improving those clicks, honing the message, creating ads that are compelling enough that the reader wants more and creating content environments and targetting systems that make the advertising work better. Hard work, all of it, for both publishers and advertisers. The problem isn’t that “only idiots click on ads,” the problem is that advertisers and publishers don’t create and target ads that are interesting or useful.
Salmon’s solution
“create an ad unit which is primarily links to third-party sites”
Here is where it gets interesting. Salmon’s solution is to use a variation of the Counterparties link box on Reuters and hope that providing links to high quality content from trusted providers will create a halo around the company. And for some advertisers that might work (Amex’s “Open Forum” site recently started using the same technology that helps Salmon find links for the Counterparties ad). That strategy, while interesting in some cases, is limited.
A better strategy, one that certainly has worked for Google, is for publishers to create environments and targeting strategies that let ads compete for positions on the page using concrete metrics and measurable results. Like Salmon, and his counterparties link box, Perfect Market has technology that helps publishers find links to great content. Unlike Salmon, we’ll also measure the click through rate, engagement and, yes, revenue potential of those links. And unlike Salmon, I believe that people who click on ads aren’t idiots, they are people who’ve seen a link that offers them something great that they want or need.
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