My foray into the Web began four years ago, and my friends and family asked, “What’s that?”
From 1998 through the first quarter of 2000, friends and family members looked at me with envy, as they said, “Hey, that’s a great field to be in. You’re in a great spot.”
But as the market correction of April begins to feel more like the 2000 dot-com crash, the “can’t miss” tag has been replaced by a “falling meteor” sign. The Monday morning quarterbacks that played by the traditional rules are snickering, “I told you so,” as they return to a dot-com game that bears little resemblance to the fourth quarter a year ago.
To all of you gloating doubters, the game really has just begun in earnest. This is not the gold rush of the 1800s. This is an exciting, promising new medium that has no tried-and-true revenue model. This is a medium that will not make bad products good or weak advertising strong. It will not make flawed business models or strategies sound.
What is obvious is that “shoot then aim” does not work. New technology for new technology’s sake was fun, but it does not sell product or convey a promotional message better than traditional media. Businesses that are Web-centric are doomed if they do not have a sustainable competitive advantage, or if they do not leverage the unique and evolutionary attributes of the medium itself. These and other critical failings have been documented, debated and discussed ad nauseam for the past nine months.
The investment community and Wall Street have thrown up their hands and said, “Time’s up.” The only real dot-coms that are given the slightest benefit of the doubt are multimedia conglomerates that can afford to do business at a loss on the Web (as long as the rest of their businesses are healthy), and a select few of the category leaders and pioneers in some of the larger categories.
This is the very antithesis of what the Web started out to be. Part of the Web’s captivating spirit was its entrepreneurial roots, and the idea that smaller companies even held an advantage over larger companies, and that pure dot-coms could outmaneuver traditional companies.
Beginning with the second quarter of 2000, the investment community and Wall Street demanded profits and revenues, and when companies failed to deliver, they began to fall. Whereas a mediocre idea and a few slick, tech-savvy 25-year-olds could easily draw a few million in venture capital years ago, brilliant ideas and a diversely talented executive team will have trouble bringing in a few thousand today.
The industry has the potential to turn this perception around, but it is unlikely to happen through the discovery of a new technology, or a single great new success story, like Amazon, eBay or Yahoo. We have proved that enough advertising will bring visitors to a site, but we have not proved that advertising, commerce or a fee-based structure can bring in enough revenue to support all that goes into content development and distribution, and running a dot-com enterprise.
Last year, much of the criticism of online advertising was based on declining banner click-through rates. Several alternative delivery forms, including Web- and e-mail-based solutions, have come into prominence since that time. There is still no clear winner in the advertising game, and it is almost impossible to find an article that expresses optimism regarding online advertising.
So here’s one. Expectations have dropped at about the same rate as Internet stock prices. This is a good thing. No one is throwing good money on bad ideas, so most of the advertising dollars will come from companies that have proved their business concept offline. It may take a while to standardize metrics, but advertising accountability will improve considerably. Advertisers will create programs that take advantage of the Web’s versatility and interactivity so that the digital component becomes invaluable. Digital advertising will be integrated into the rest of the advertising mix so that it is used more efficiently and evaluated equitably.
The most ironic element is that the knights in shining armor in this scenario must and will be the traditional marketers. They will be the ones left with most of the chips, and once they grasp the opportunity, they will understand how to make the medium effective. The entrepreneur’s primary role will be to facilitate this change through development of better tools and accelerating the knowledge transfer, but new businesses will rarely be able to compete as Web-only retailers, or Web-only magazines or hubs dependent on ad or subscription revenue.
It all will happen in 2001. Web advertising will survive and ultimately thrive. It will not look dramatically different than it does now (until broadband connections reach closer to 75 percent rather than the current 6 percent), but it will become an integral part of most Fortune 500 companies’ marketing strategy. Just don’t forget that I told you so.
• Michael Lubell is director of marketing services at Winstar Web Development Group, New York. Reach him at [email protected]