Advertising in Web Apps Is So Last Century

If you look at pictures of public transit systems in the late 1800s, you'll see a lot of horse-drawn streetcars.

Today, these pictures seem like weird snapshots taken in the middle of an evolutionary leap -- a fleeting intermediary step between the eras of horse-drawn carriages and self-powered streetcars.

Ads in today's web apps are similarly weird. Web apps are our modern street cars. They're the beginning of something big that will be with us for a while. But just like those horse-drawn street cars, web apps with advertising are flawed with an anachronistic power source. Most advertising on web apps is an inefficient means of matching a buyer and a seller. It's an interruption that's expensive for the advertiser and annoying for the user.

This incongruity struck me as I read Ken Auletta's profile of Google in  last week's New Yorker. Google -- the company that's done more than any other to launch the era of low-cost web apps -- seems set on monetizing its software with advertising, pulling these new streets cars with horses.

Of course, the horses won't last. Google's tools like Reader, Blogger, Gmail and Analytics are part of a foundation of new tools that give businesses an alternative to advertising. Instead of going out and interrupting potential customers, businesses now create content and communities that attract customers. The more businesses use Google's free tools for marketing -- the more they attract people via Google Reader and analytics -- the less they'll want to pay Google to interrupt people via AdSense.

If you look at young, growing companies you'll see a new approach to revenue evolving. Twitter is adding premium features. Visible Measures charges for access to video analytics. At HubSpot we charge for access to tools that simplify the process of attracting customers.

We're evolving towards a world where companies don't pay for the right to interrupt people, but for the tools they need to attract them.

Evolution happens slowly. There are a lot of people who own horses, a lot people who like horses, and a lot of people who will resist the idea of putting engines in our streetcars.  But it will happen.