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And Now, a Word from Our Sponsors
It seems that Jakob Nielsen is encroaching on obvious turf: the title of the SunSoft Distinguished Engineer's latest Alertbox argues that "Advertising Doesn't Work on the Web." While I've enjoyed a great number of Nielsen's Alerts in the past (his "Top Ten Mistakes of Web Management" should be required reading for newly minted webmasters), Nielsen's latest piece does nothing except show just how out of touch he is with what's happening with both Web content and technology, and the effect they're having on advertising and business models.
First, let's look at the one thing Nielsen got right. He starts his piece by postulating that "advertising is almost irrelevant for the success of the Web." Technically he's correct -- I agree that advertising won't be the driving factor that determines the success of the Web as a whole. Rapid consumer adoption and the evolution of bandwidth would top my list of critical success factors. But what was probably mean to be an incendiary statement comes across as foolish when taken in context.
"Advertising is currently the only way for sites to generate a direct revenue stream," writes Nielsen. Tell that to Amazon, or anyone else doing business on the Web. In the long run, most sites aren't going to depend on advertising for more than 20% of their overall revenue stream; the rest will be made of up of some combination of subscription fees, upsells and electronic commerce. As subscription sites like The Wall Street Journal is learning, those other sources of revenue turn into qualifying agents that make the site more attractive to advertisers. They know exactly who they're reaching, and what they're buying.
I'd agree with Nielsen that "only the top 0.01% of websites can generate sufficient revenues from advertising," but what about the 99% of sites that aren't looking to advertising for any sort of revenue stream? Corporate sites and media promotional sites aren't expected to be profit centers, unless there's some sort of commerce going on. And the ever-present self-published vanity domains, being labors of love, aren't like traditional ad-supported media, and they never will be. No one expected paper-based zines to be ad-supported, did they?
But the core of Nielsen's argument isn't related to business models at all, but around his belief that the web is a "cognitive medium." "The user is not on the Web to 'get an experience,'" writes Nielsen, "but to get something done."
With these words, Nielsen shows just how out of touch he is with what is happening on the web these days. Sure, the FedEx site is exciting, if you're into tracking packages. And E*Trade could just be the reason that Web growth rates around the world are what they are right now, but then entire brokerage houses would be folding left and right. I believe it's the interactive "experience" sites that are pulling new users on to the web -- chat, gaming, and, of course, porn. Some of them are even making money.
Maybe Nielsen can be forgiven for being out of touch with the latest "experiences" available on the Web. But as a "Distinguished Engineer" it's surprising how out of touch he is with the latest browser offerings. "The user owns the Back button. Get over it," writes Nielsen. "There is not way of trapping users in an ad if they don't want it." Maybe it's because Nielsen is trapped in the bowels of Silicon Valley, where even mentioning Microsoft products is considered an act of treason, but it's clear that he hasn't spent any time with Internet Explorer 4.0. The new browser, which is due to ship on September 30, can embed content -- and ads -- directly in the user's desktop, where there's no back button. Furthermore, IE 4.0 default channels are selling at a premium for a reason: if there's one thing that Microsoft's figured out, it's that for most users typing in URLs is far too difficult.
(Come to think of it, I wonder if Nielsen's even seen Pointcast.)
It seems that Nielsen needs to spend a bit more time out on the web exploring advertising models that do work. Banner exchanges, while not major revenue producers for individual sites, do help drive traffic, even when the click-through rate is less than 5%. Of course, it's the site's job to keep the user there once they've arrived, but at least they've made it through the front door.
Finally, I'm enamored lately of some of the more useful "banner" ads that have begun popping up around the web. These are branded pieces of functionality that even Nielsen could love. For example, Barnes and Noble is running a search form in the space of a banner ad on The New York Times book site. Type in a book title or an author name, hit submit, and voila. A customized payoff, and you're one step closer to buying.
But let's be real -- even functional banner ads aren't going to determine the success of the web. Only when combined with other revenue streams, they could help determine the success of individual sites. And it's the success of those sites, combined with the continued evolution of technology and "experience" offerings, that will determine the success of the Web.
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