Wednesday, November 09, 2005

Banner ads: prosperity or extinction?

Ray Ozzie and Bill Gates see bright future for the advertising-supported model:
Online advertising has emerged as a significant new means by which to directly and indirectly fund the creation and delivery of software and services. In some cases, it may be possible for one to obtain more revenue through the advertising model than through a traditional licensing model. Only in its earliest stages, no one yet knows the limits of what categories of hardware, software and services, in what markets, will ultimately be funded through this model.
Gordon Parker analyzes the economic effect of the Compensation paradox and views advertising-supported model as an accident:
Web services become free for users because to the extent they are commodities the price converges on marginal cost which is essentially zero. On the other hand fixed costs are nonzero resulting in the effects described by the author. The result has been an explosion of advertising to cover the gap which leaves us in essentially the state of broadcast television twenty-five years ago (less regulation.) The only reason we have such a paradoxical situation (i.e. modern technology and old model) is because of the "compensation paradox."
Advertising on the Web ranges from informative to obnoxious. Would Bill Gates pay a flat access fee of $10/month to make all the ads opt-in? More to the point, would you pay a flat fee to make all the ads opt-in?

5 Comments:

Blogger Na said...

Yes, my husband and I were talking about the rise of the internet advertising as a whole recently. He seems to think that this would eventually become more profitable than our traditional print mediums for the amount of potential traffic involved.. rightfully so I suppose.
I guess we both expect it to become prosperous here. But it is interesting to think in time that it may be. Only time will tell though.

4:24 PM  
Blogger newthinker said...

I believe the banner ads are here to stay--for the forseeable future anyway. Savvy web users have gotten used to the "free" services and expect some level of payment in terms of living with banner ads. For the most part, users have also learned to tune out ads; we tend to develop a tunnel vision that focuses mainly on the main content of a page. However, with targeted ads getting more fine-tuned, ads will actually help users rather than hurt. Targed ads will bring to a user's attention products and services they may not otherwise have known about. The way the human mind works; repetition of the targeted ads will seep into the our conciousness over time--even while we conciously try to tune the ads out.

10:26 AM  
Blogger Gordon Parker said...

The idea that targeted advertising "helps users" is a subtly dangerous concept. Targeted advertising means putting more offers in front of users given their interests or "cross-selling" them based on their recent purchases. Getting more targeted ads "into our conciousness over time" might be a good idea if, as a society, we were suffering from underconsumption. Unfortunately, the contrary is true: overconsumption has become the biggest problem facing the world today. More and better online advertising simply makes the problem worse and is a very inefficient way to pay for the pervasive benefits of online communities.

6:28 AM  
Blogger Onlinealways said...

I agree ads are here to stay, but you have to realize that some banners and popups are the carriers of viruses and spyware, as i've learned in my time on some computer forums. Most ads are safe, but I wouldnt reccomend the *GET A FREE IPOD! OMGZ!11* or *Shoot t3h munky!*. Many peoples computers have been reformatted because of viruses and spyware, and I know by experience it can be a hard and annopying process to remove it. I guess im just trying to say be careful which ads you click if any.

10:17 AM  
Anonymous Anonymous said...

Although ads may be neccessary to those who put them on the Web, however, what I really think is that they take up space from the main page and shows a real wide range of rubbish, and most are just lies. But sometimes I really wonder at the motive of tricking people into downloading viruses into their computer when they have almost no gain for it, apart from a little bit of sadistic pleasure.
Ah, but then, it was the Web host to allow advertisements, and I guess that we must put up with them then, fortunately and unfortunatly.

10:09 PM  

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