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In the bubble that is now deflating, there was both rational and irrational exuberance.
Exuberance related to the social web was rational. If you don't believe it, go to Washington on Jan. 20. Our new tools to connect are changing the way we live.
Advertising-related exuberance was irrational. Far too many companies were launched with unrealistic assumptions about the size of the online advertising market. (I was certainly an offending party.) New ad networks like AdSense made it possible to think of revenue as a constant that you plug into your product after it generates traffic.
Now two problems with that approach are clear:
1. The advertising market became oversupplied. Lots of new social networks and tools were selling undifferentiated inventory, so advertisers were able to drive the price of that inventory down.
2. Demand for advertising decreased. As inventory available to advertisers increased, its effectiveness as a marketing channel decreased. When media consumers were captive audiences, advertising worked. Now that consumers have choices, it's less effective. It's mostly irrelevant, or an interruption.
You can see these dynamics at work on both Facebook and YouTube. Facebook is still struggling to find an advertising revenue model that works. It has an enormous supply of ads, but can't charge much for them because consumers ignore them. Online video sites like YouTube have a similar problem.
There are wonderfully stupid things being done to try to solve these problems -- and wonderfully smart things -- but nothing will fully reverse the declining effectiveness of online advertising. It will persist in more relevant, targeted formats (I don't agree that it is "now dead"), but it is fading from the center of the online marketing world.
As Dave Winer puts it,
advertising is just information, and there are now far more efficient ways to collect information.
Photo: tylerc on flickr
The flat, green line below represents devices authorized to use licensed spectrum; the purple line represents devices for unlicensed spectrum.
"my partner Brad called this 'one of the best proof points that decentralized innovation trumps centralized innovation'"
"Note the flat line of devices being invented to use the licensed frequencies vs. the explosion of devices including WiFi, Bluetooth, and many other technologies we now take for granted in the unlicensed space.
The innovation leads not only to new devices but also very low prices and brand new services and products like WiFi hotspots and Bluetooth cars.
The need for over-the-air broadband and expanded cell service is greatest in rural areas where there also happens to be the greatest amount of unused former TV spectrum. But there is a significant amount of white space available in every market including major cities – note the 22 channels in LA. That's important because it means that devices and services designed for the white spaces will have a national market which includes urban areas.
If Horace Greeley were alive today, he'd say "Go unlicensed, young people, go unlicensed." The opportunity is priceless."
Barack has already launched a transition website, Change.gov.
As Jeremiah Owyang put it on Twitter, "Our president has a blog."
What a change.
Here's what's best about Change.gov: There's a lot missing. The blog only has one post, the Share Your Story page is a lame form, the content is thin, and a lot of social features are missing.
This is a good sign -- it means the Obama team lives by the release early and often credo.
They're acting like a startup, not a lumbering 20th-century corporation. They're comfortable on the web, and they realize that it's better to have something up that gathers data and feedback than to be silent.
Hi. I'm Rick Burnes. I live in Cambridge, MA.
This blog is about things I'm thinking about -- sometimes work-related, sometimes media-related, sometimes unrelated.
