Tuesday, July 05, 2005
Yahoo Vice President Observes Outlook of Online Ads
For consumers, the Web is just another media experience. The problems start with the marketers. That's the view of Yahoo's senior vice president of international operations, John Marcom.
"Lots of big marketers think they have to do something different online," he says. "The biggest negating factor to our growth is traditional marketers thinking this isn't the same as TV so they need a specialist agency." Instead, Marcom points to the way Hollywood is using the Web: "Very much like TV, with the benefit of this clickable thing where you can get show times or buy tickets. Other sectors will get there, too. It has to happen, it just takes a long time for people to embrace the medium."
In fact, Marcom believes online advertising has reached the tipping point. "It's getting very hard for conventional marketers to ignore it," he says. "They do so at their peril." But he doesn't subscribe to the view that the rise of online advertising and the factors that have boosted its growth mean that the days of interruptive advertising are over. "The split is never going to resolve itself," he says. "There are no rules against an interruptive approach or a permission-based approach -- some people will respond to one and some to the other. Our perspective is that we want to give the user maximum control over their experience."
Marcom believes much more in identifying what mode people are in when they're online and delivering an experience that suits that mode. "So if you're in MTV or Yahoo music, it's one experience, but if you're organising your personal stock portfolio, it's probably another that's appropriate," he explains. "Some Internet things are service products, some are games, some are much more quiet, so they have different virtues." He cites use of video advertising as something that's particularly dependent on the user's mode of behaviour. Someone watching music videos online, he believes, will happily watch a video ad; someone managing their stock portfolio would reject it. But with his background in print, at The Wall Street Journal and Forbes, he recognizes the pressures that are driving some Web publishers to more and more intrusive advertising.
"If you compare the New York Times site to its print business, the level of intrusiveness it allows online is extraordinary," he says. "The revenue pressures on people like that are very acute. They want the response and they have to compete with destinations like us, who reach more people. Are they making the right choice? That's going to be something that people have to figure out, because the traffic will fall pretty fast if it's not right." He cites the example of U.S. radio, which was deregulated in the 1990s. "They let local stations program as many ads as they wanted. On some stations, the advertising has gone up to as much as 22 minutes an hour. At the same time, the formats have gotten very homogenised. But it's created this great opportunity for satellite radio, which is growing faster than any medium ever has in the U.S., and it has no ads whatsoever. Consumers are paying US$12 a month not to have ads. So these things tend to self-correct."
While Marcom doesn't see a consistency of experience emerging across online advertising, he does believe that Yahoo is getting better at understanding how to deliver effective ads. "Any advertising expert knows that at some point the effectiveness of a message diminishes once you've heard it a few times," he says. "There's a lot of argument about how many times is right, but we've gotten better at it and at how often we change a message. And we've found that if you do it the right way, responsiveness increases."
At the same time, he believes the industry still hasn't worked out how to deliver the promise of online advertising. He's sceptical that true personalization will ever be possible, because of the cost involved in producing a creative for each consumer. He's equally doubtful about the industry's ability to use the information it's currently collecting about consumers. In fact, Marcom goes so far as to describe it as "awash in data but bereft of insight," and warns of the privacy issues in collecting further user data. Instead, he sees a future based on studying user behaviour. "Search is the first place that works by behavior identifying itself," he explains. "We'll get much better at personalization, but not because we've asked all these questions. It'll be because we're aggregating the data that's been collected on people's movements online."
Marcom explains that there's a lot of thinking going on within Yahoo at the moment about merging search with new forms of user-generated content. The company has a product called 360 in beta-testing in the U.S., which started as a response to social networking sites but has evolved into a way for users to publish only to whom they want to publish. Marcom also highlights the photo-sharing site Flickr, which Yahoo bought earlier this year. "There's a lot of activity in the company around these new ways of users sharing information and generating information of their own," he says. "It's sort of blogging plus."
"Conventional journalists look at this stuff and say it's not edited, it's not authoritative, people aren't interested in it. Well, it turns out they are interested, and what's more, the search dynamic puts things at the top of the list that you don't expect to find there. So why not embrace that and let people do the things they want to?" "It can be hard at Yahoo, because there's a set of people who are driven by the ad business and they look at this stuff and wonder how it works. A lot of my work is educating internally to make sure that we stay open to these things and not become reflexively protective. Because it's probably true that the next ten years are going to be more exciting than the last ten."
"And the key to that is to make it happen in other societies. We can't be deterministic and say what's happened in the U.S. is what the UK will do. What we're trying to do in all these markets is to tee things up and let users and businesses figure out what works for them, and make it easier for them to do it."
Brought to you by the Guardian eCommerce Safe Site Privacy Seal Program.
"Lots of big marketers think they have to do something different online," he says. "The biggest negating factor to our growth is traditional marketers thinking this isn't the same as TV so they need a specialist agency." Instead, Marcom points to the way Hollywood is using the Web: "Very much like TV, with the benefit of this clickable thing where you can get show times or buy tickets. Other sectors will get there, too. It has to happen, it just takes a long time for people to embrace the medium."
In fact, Marcom believes online advertising has reached the tipping point. "It's getting very hard for conventional marketers to ignore it," he says. "They do so at their peril." But he doesn't subscribe to the view that the rise of online advertising and the factors that have boosted its growth mean that the days of interruptive advertising are over. "The split is never going to resolve itself," he says. "There are no rules against an interruptive approach or a permission-based approach -- some people will respond to one and some to the other. Our perspective is that we want to give the user maximum control over their experience."
Marcom believes much more in identifying what mode people are in when they're online and delivering an experience that suits that mode. "So if you're in MTV or Yahoo music, it's one experience, but if you're organising your personal stock portfolio, it's probably another that's appropriate," he explains. "Some Internet things are service products, some are games, some are much more quiet, so they have different virtues." He cites use of video advertising as something that's particularly dependent on the user's mode of behaviour. Someone watching music videos online, he believes, will happily watch a video ad; someone managing their stock portfolio would reject it. But with his background in print, at The Wall Street Journal and Forbes, he recognizes the pressures that are driving some Web publishers to more and more intrusive advertising.
"If you compare the New York Times site to its print business, the level of intrusiveness it allows online is extraordinary," he says. "The revenue pressures on people like that are very acute. They want the response and they have to compete with destinations like us, who reach more people. Are they making the right choice? That's going to be something that people have to figure out, because the traffic will fall pretty fast if it's not right." He cites the example of U.S. radio, which was deregulated in the 1990s. "They let local stations program as many ads as they wanted. On some stations, the advertising has gone up to as much as 22 minutes an hour. At the same time, the formats have gotten very homogenised. But it's created this great opportunity for satellite radio, which is growing faster than any medium ever has in the U.S., and it has no ads whatsoever. Consumers are paying US$12 a month not to have ads. So these things tend to self-correct."
While Marcom doesn't see a consistency of experience emerging across online advertising, he does believe that Yahoo is getting better at understanding how to deliver effective ads. "Any advertising expert knows that at some point the effectiveness of a message diminishes once you've heard it a few times," he says. "There's a lot of argument about how many times is right, but we've gotten better at it and at how often we change a message. And we've found that if you do it the right way, responsiveness increases."
At the same time, he believes the industry still hasn't worked out how to deliver the promise of online advertising. He's sceptical that true personalization will ever be possible, because of the cost involved in producing a creative for each consumer. He's equally doubtful about the industry's ability to use the information it's currently collecting about consumers. In fact, Marcom goes so far as to describe it as "awash in data but bereft of insight," and warns of the privacy issues in collecting further user data. Instead, he sees a future based on studying user behaviour. "Search is the first place that works by behavior identifying itself," he explains. "We'll get much better at personalization, but not because we've asked all these questions. It'll be because we're aggregating the data that's been collected on people's movements online."
Marcom explains that there's a lot of thinking going on within Yahoo at the moment about merging search with new forms of user-generated content. The company has a product called 360 in beta-testing in the U.S., which started as a response to social networking sites but has evolved into a way for users to publish only to whom they want to publish. Marcom also highlights the photo-sharing site Flickr, which Yahoo bought earlier this year. "There's a lot of activity in the company around these new ways of users sharing information and generating information of their own," he says. "It's sort of blogging plus."
"Conventional journalists look at this stuff and say it's not edited, it's not authoritative, people aren't interested in it. Well, it turns out they are interested, and what's more, the search dynamic puts things at the top of the list that you don't expect to find there. So why not embrace that and let people do the things they want to?" "It can be hard at Yahoo, because there's a set of people who are driven by the ad business and they look at this stuff and wonder how it works. A lot of my work is educating internally to make sure that we stay open to these things and not become reflexively protective. Because it's probably true that the next ten years are going to be more exciting than the last ten."
"And the key to that is to make it happen in other societies. We can't be deterministic and say what's happened in the U.S. is what the UK will do. What we're trying to do in all these markets is to tee things up and let users and businesses figure out what works for them, and make it easier for them to do it."
Brought to you by the Guardian eCommerce Safe Site Privacy Seal Program.
