Advertising and the Bubble
In a response to Chris Dixon, Rick Webb, COO of The Barbarian Group, makes some very good points about internet advertising that I think are widely overlooked by the tech world. First on data:
The endless quest for advertisers to know everything about their customers may never end, but its budgets will not increase forever. We will pick the best 3-10 data sources and stick with them. And in the meantime, the VCs will have effectively funded a massive R&D effort to radically improve those sources (THANK YOU) but in the end, we’ll still be paying about the same amount a year for the same 3-10 (say 100 if you’re P&G or WPP).
He’s right on there. While there is certainly an appetite for data within large brands, it exists in small pockets without much budget (certainly not part of the media spend).
The two things I’d add to Rick’s post are this:
- He talks about Google and big brands and how other startups look to that as success. While I agree, I’ve heard (though not actually seen the data), that the reality is big brands account for a very small part of Google advertising revenue (~10 percent).
- I’ve got a whole other post in this point, but the part that kills me about startups and advertising is how little startups tend to know about the how the industry works. Understanding your customers is the key to selling and most startups don’t know the difference between a creative and media agency. It’s okay to say the agency business is all screwed up and advertisers don’t know what they’re doing, but if your livelihood is based on selling them things, you should probably figure out who does what. If I had a quarter for every time I got pitched something at The Barbarian Group that was clearly not under my purview as head of strategy, I’d probably have a few hundred bucks.