Advertising To The Rescue?
3/24/2009 2:15:44 AM by John McCallum
It seems ironic that we are enduring a period where convincing companies to advertise is harder than ever and yet advertising seems to be providing the answer to one of the internet’s great conundrums; how to make money from it.
I discovered Spotify last week.Spotify.com is the music industries answer to illegal downloads and it’s great. If you haven’t seen it yet you need to make it a priority because even if you hate music the premise behind it is clever and will affect you eventually. You are probably aware that the entire music industry is controlled by record labels, or at least it was until very recently. Record labels made or broke acts, they engineered bands, promoted albums and basically controlled an awful lot of what you and I listened too whilst taking the lions share of the profits from the music we bought. Whether this was a good thing or not is moot, that’s just how it was. The advent of the internet has not been good for record labels, some big acts such as Simply Red and Radiohead have dispensed with record labels altogether and sell their music themselves, online, very successfully. Social media sites have helped launch acts into the mainstream without the need for a record label marketing machine and, most importantly, music has been downloaded, illegally, free of charge. When this happens no one makes any money, however in many ways the record labels have only themselves to blame. They kept the price of albums artificially high for a long time and as you can now see if you can still find any shops that sell CDs they are considerably less expensive than they were a few years ago; that’ll be the power of competition for you then.
So Spotify is their answer of sorts. Basically they’ve accepted that it is hard to get people to pay for something they’ve got used to getting for nothing, so they’re giving it away too. Their aim is to have every piece of music ever recorded available on the site, free of charge. You’ll never actually own it though, you can’t download it to your own computer, rather you listen to it from their site, you can save it to ‘playlists’ though so it’s there the next time you log in. And to make money from this they are carrying advertising. You listen to music and you listen to advertising, the advertising pays for the music and the people involved in operating the site. This is not a new idea, this is the business model for every commercial radio station in the world, you do wonder why it took them so long to figure it out.
Likewise The Guardian, the UK broadsheet bastion of left of centre, politically correct, hand wringers like me did something quite clever recently, it figured out how to make people pay for it’s online edition. Its online edition has outperformed its printed edition for some time now in terms of readers and it has invested quite heavily in its web presence. But the ad revenues just weren’t enough and of course as fewer people buy the printed paper ad revenues there drop too. So what they’ve done is give you the option of reading the online edition of the paper without any advertising; but for a fee. You basically pay not to see advertising. Again this isn’t a new idea, subscription cable TV stations have done this for years. And if you don’t want to pay you can still read all the content but with advertising in place.
Whilst both cases are different they are similar too. They both use advertising to pay for something their customers don’t want to pay for, and they are both harnessing advertising to fund the publishing of creative work. Both are using tried and tested business models too, just in a different environment from where we usually find them.
So what does this mean for us, the creators of the advertising; what affect, if any, will this have on us? If the business models work we can surely expect others to copy them perhaps leading to a plethora of new advertising opportunities and a further crowding of the marketplace, will this mean a greater need for advertising professionals than before? Will the reaction to the illegal downloading of songs actually be music to our ears in the long run.