Seth Godin has a post Do Ads Work that makes the case that the only reason why there are “ad budgets” is because the advertiser really has no idea whether or not the ads are paying off. They limit the potential down side.
If your ads work, if you can measure them and they return more profit than they cost, why not keep buying them until they stop working?
And if they don’t work, why are you running them?
There are some businesses that do follow that rule. In one of my dad’s businesses they knew that more than 60% of their business (at the time) came from their Yellow Pages ad. But in my production businesses I could never find an advertising outlet that measurably gave results better than the cost. (My own digital video business ad in the same Yellow Pages drew two enquiries in a year and broke even.)
So, we basically have a whole bunch of advertisers who don’t know if the advertising they’re placing is paying off, that’s cluttering up “new media”.
I think Doc Searls is right when he posts:
What we need is for demand to find supply, not just for supply to “drive” demand. We’re not cattle, and we don’t like being herded, even if it’s by friendly chutes like Google’s. This was true before online advertising went nuts, and it will be true after the chutes get trampled.
In that he echoes what I posted from Dave Winer last week.
Advertising is on the decline in relevance and usefulness because we are no longer dependent on advertisers to push information at us all the time, in the hope they hit the few that might want to buy their product right now.
As a result of the Internet, control = power is moving from the advertisers and their network appointment economy, to one where information about desired product, as well as entertainment content, is delivered on demand. On the schedule of the viewer and consumer.
Advertising budgets are necessary because most advertising doesn’t work. It merely devalues the content. Back to Doc Searls for a final comment:
It’s 2008. Isn’t it time we thought past advertising, toward revenue models based on serving customers, rather than guessing at them?
Advertising is not going to power new media. It may not even power old media for very long if we project forward from the way that print media is being displaced by online content.