The advert is becoming the product

The idea

This is the idea that we are at an inflexion point in the development of new forms of advertisement.  These new “advertising objects” are hybrid models: a mixture of a number of existing methods and media: part website, part TV commercial, part live event, part community.

“Online advertising may be sexy – but its hardly penetrated the big advertisers.  It takes a long time for people to shift inertia and legacy systems.  The white sheet of paper brigade has an enormous advantage”. Martin Sorrel, WPP, May 2007

The opportunity

The advertising industry today is today characterized by both incredible sophistication and complete naiveté:

•    Advertisers are incredibly sophisticated about creating brands & ideas that resonate with the subtleties of consumer psychology.   
•    There is naiveté and (in places utter confusion) about how the still new medium of the web, can be used to help consumers buy products in the short, medium and longer term.

So strategically we’re state of the art Bang & OIufsen, but tactically we’ve only just discovered the LP.

How is advertising so sophisticated?

Brands are moving further and further beyond plain old vanilla adverts. Russel has a great blog post on this and here are some more examples :
Events: Innocent have the fruitstock event to identify with all that’s middle-class and wholesome. O2 & Virgin have their festivals.
Social campaign: Dove have a pseudo-pressure group “campaign for real beauty” to get us all to realize that Kate Moss isn’t the pinnacle of beauty (thanks for that).
Sports events. Nike manage to persuade thousands of runners to become giant advertising hoarding for them in twice-yearly races (for extortionate entrance fees).
Charities. Amex Red and Starbucks with Perk up Your Life are piggybacking the current consumer trend for social responsibility with compelling charities.

Advertisers are only just starting to “get” the web

There are masses of examples of terrible ad ideas on the web.  My favorite example is the Pepsi worldwide multi-million on-can promotion with a Youtube-esque site during the world cup encouraging customers to upload their own versions of the Pepsi TV.  Just 23 were submitted, 14 of which were from the same family in Romania.

NikePlus is the single best example. This is a website which synchs to your pedometer and ipod so that when you come in from a run you will automatically get linked into a social network of other runners.  Customers have gone mad for it.  People are joining simply so they compete against other people in the social network (for more on getting a social network to work right see here). The convenient thing about competing in the network is that more running shoes and ipods are also bought.

So it’s one big advert for Nike.  And a very good one at that. Its not a TV ad, its not a social network, its not an event.  Yet it has elements of them all. It’s a completely new advertising object.

Widgets are of course the other big web and advertising crossover.  Want to get your brand embedded half a million myspace pages?  Sure, just write a nice widget and the kids will ship it out for you.  Just think of what that inventory would cost you….

Web2.0 = advertising2.0

Some commentators go so far as to say that Nikeplus is a case of the advert becoming the product itself.  As a venture capitalist I am fascinated by this concept.  When we look at backing a web-app or publisher we always look for some virality inherent in the web property. I’ve never looked at web2.0 as a series of advertising objects and the future of advertising, but I’m beginning to think it might be.

Opportunities for venture backed businesses?

When we first started looking at this area it was hard to see how VCs could make money from new advertising objects.  They are currently being made by small innovative young agencies.  Going forward all the signs are there that they’ll be being made by large innovative agencies.  Agencies are people businesses with no scale nor operating leverage: not traditionally great hunting ground for venture capital-esque growth.

Having seen the way that the ad is becoming the product, the growth of widgets and the vitality of many web2.0 companies, I’ve realized that we’ve already been investing in advertising2.0.

Comments

[James Penman]

Using your format ...

The argument:

The most successful business model on the net is that of 'the advert-as-the-product'. The advert is part of the product on Google (and other search engines), the advert is the product on eBay, the advert is the product on shopping engines, the advert is the product on travel engines, the advert is the product in finance engines, the advert is the product in property engines, motor engines, classifieds engines, the list goes on. Stretch the concept and the advert is the product on social networks (ie the indivudual's page), on job sites, on niche sites centred on community forums etc, etc.

The opportunity.

Advertisers, via ad networks/platforms, need to be encouraged to give website owners/entrepreneurs more advertising tools and resources such that those website owners/entrepreneurs can either structure new business ventures around advertising or better to embed that advertising in the core function of the site. Much as companies have been encouraged to seed power to the users in Web 2.0, advertisers need further to be encouraged to seed power to website owners/entrepreneurs and even individuals to unlock creativity. Call it advertiser generated content as opposed to user generated content.

Your angle is VC investement and this should ensure a nice pipeline of sites from which to choose with solid revenue models. Indeed, it provides an opportunity to invest in the advertisers and ad networks/platforms themselves.

[PaulSweeney]

with regards the nikeplus: (1) they surface like people you would not have met before (2) who are inherently competitive, (3) gave them a hard-wired competitive comparison chart! The psychology of this is brilliant, and I don't think it's a mistake that it was nike that got it (i.e. they are sophisticated psychological marketers). The whole idea of "conspicious consumption as THE product" has deep roots in Marketing literature, and is at the core of the ideas behind Facebook beacon (I think).

[Jamie Murray Wells]

will web 3 be product adverts for products advertising products then?

[Peter Gold]

Or is the relationship the product that the customer values? If you can buy the same product e.g. Nokia phone why choose Orange or Phones4u? Is Facebook or Bebo a product or are the relationships you maintain via the platform the product?

If you are in a social media environment are you more open to targeted advertising? Does Mothercare get better value from Gurgle than it does from Mothercare.com? Does MC have a separate business to sell - one day? Consumer facing niche networks will sprout up everywhere looking for an angle as per Nike or Mothercare but only certain brands have the power to compete with Facebook et al. But those that do could create yet another space for product/consumer interaction.

Interesting debate........