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Attention economies and the ad-driven business model 05/20/2008

Posted by Paul Daigle in Advertising, Attention Economy, Internet Business Models.
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AttEcoThe value of most online companies will remain tied to their ability to turn usage and page-views into dollars. This makes the creation and sales of effective advertising opportunities as important as winning users for many companies.

Pursuing an ad driven business model isn’t a sure path to profitability, as even big online successes struggle to attract and grow ad revenue. So, how viable is the online advertising model for most companies?

I believe online advertising is both viable and important for a majority of Internet companies that serve more than 10,000 users per month.  Advertisers do more than pay for linked real estate. By associating themselves with your brand they substantiate the value you’re creating, and the value of the users you’re attracting. When done right advertising also gives  users access to a wider range of relevant products, services and resources. Building a healthy ecosystem of paid advertisers, business partnerships and affiliates can make your site more valuable and attractive to users and potential buyers.

To qualify your ad revenue potential, first take a close look at your audience membership and what they share. What ties your community together? What distinguishes your content or technology. Are you able to  locate a healthy universe of advertising and business development prospects that can help your users and communities succeed in their common pursuits? Is so these are the very companies that you can help succeed through comprehensive and custom-tailored ad programs.

If your site or site channels are built to serve specific user missions, affinities, demographics or activities you’ll have an easier time selling ads and keeping rates high. Synergistic environments in which site operators, users and marketers share closely aligned missions and purposes create ecosystems of interdependent concerns. Good examples of these are sites that focus specifically on woman, job seeking or music,  or channels that deal specifically with auto, gaming or finance related content. Targeted usage provides the opportunity for companies to compete for placement, which is instrument in sustaining and increasing ad rates over time.

Anyone who has sold advertising has heard prospective advertisers say “I don’t pay attention to banner ads and I don’t think other people do either.” How many of us would say that we actually pay attention to advertising? When we think about online advertising we think about loud, alluring, provocative, predatory or otherwise distracting ad content found on most websites. We have all become conscious of having to withdraw our attention in order to stay on mission. If we don’t do so, we can’t focus. But when users see ads of high interest, the thought that they are being targeted or distracted goes away completely because relevant messages often feel more like points of interest or valuable opportunities than distracting sales pitches.

“Attention economics today is primarily concerned with the problem of getting consumers to consume advertising. Traditional media advertisers utilize a linear model that consumers go through – Attention, Interest, Desire and Action. Attention is therefore crucial. -WikiPedia”

Consider user attention the new online currency. When your users give you their attention, repaying that attention with relevance will earn you and your advertisers more and more of their future attention. This creates conditions where your users and the advertisers who are capable of serving them can come together. The more relevant the content that each user experiences, the more attention they will be willing to spend in the future. Because most users have conditioned themselves to consume web content without investing their attention outside the content well, creating tailored environments where users are comfortable experiencing the entire page is important to maximizing the value of your inventory.

Within an attention economy advertising is considered consumable content. Therefore you must learn to view the kind of advertisers you work with and the types of ads they run on your site as important to your economy’s long term health and sustainability. Most of today’s online ad creative screams for attention because it must fight to compete for attention in economies built on distraction. It’s your job to help your advertisers understand that screaming ads in a high-quality and high relevance attention economy will only communicate desperation. Keep it clean, keep it tasteful and most importantly, keep it focused on the needs of the user.

So how to begin? Start by understanding that you have to start somewhere.  Most sites are best served by starting with business development relationships and affiliate programs that help create a advertising foundation and set the tone for what distinguishes the site’s community, channels and assets. It’s also better to start with small advertisers who can succeed with your audience than larger, less targeted campaigns that will fray user attention. You’re goal is to work to keep your ads and business partners aligned with your site mission and audience. When large “eyeball” marketers with big budgets come calling, always consider whether their participation on your site will help you build an economy of attention or distraction. When your environment leans towards distraction, every participant of your community and economy will pay a price. Remember, having dozens of competing and relevant advertisers will produce a competitive marketplace where your ad rates can go up. These relationships are much more important than those big budget “eye ball” advertisers that will never pay top dollar for your audience.

The following describers are helpful in assessing the health of a website’s attention economy. As you visit websites ask yourself if their economy is based more on attention or distraction. How do these characteristics effect your relationship with the site, and the way your attention is spent there?

Attention Economies are:

  1. Focused
  2. Relevant
  3. Personal
  4. Engaging
  5. Safe
  6. Interesting

Attention Economies create:

  1. Purpose
  2. Options
  3. Value
  4. Community

Distraction Economies feel:

  1. Unfocused
  2. Random
  3. Isolating
  4. Noisy
  5. Suspect
  6. Predatory
  7. Distracting
  8. Diverting

Distraction economies create:

  1. Fatigue
  2. Confusion
  3. Wilderness

If you can succeed in keeping your attention economy healthy, and in building synergistic environments that are sustainable, reaching a critical mass of marketers and users should provide the following Network Effects:

  • Advertiser response rates, conversion rates and renewal rates that are well above industry averages.
  • Users that visit more often and stay longer.
  • An advertising market place where competition for your best inventory justifies healthy rate increases.

These are the attributes that keep effective CPMs and total ad revenue potential on the rise, leading to a healthy and profitable Ad Driven business.