Is Ad Singularity Near?

Capsule: Do ads work anymore?  Can we ensure the sustainability of the advertising business through a better alignment of distribution and content with our evolving economics?

Ray Kurzweil on Artificial Intelligence

Technology futurist, inventor and evolutionary thinker Ray Kurzweil believes that humans are transcending biology with technology more quickly, expansively and interdependently than our imaginations allow. If such miracles are possible, why can't we figure out the advertising business? Beyond Google et al, nothing new is happening in the ad world and our anemic economics are calling for a revolution (or at least, a transformation.)


Kurzweil believes we have incorporated our intelligent tools--computational analysis, processing, molecular biology, chemistry, engineering and physics--into our physical evolution as a fusion of mind and machine, aided by the exponential growth of technology, its products and artifacts. The best adjunct capacities for thought and analysis we've built into our computing machines have already become part of how our minds work. Kurzweil believes that the explosive rate of technological development begun in the 20th and 21st centures has already transformed the human and the distributed societal "mind" with its mind-blowing evolution. The exponential growth in the rate of technological development and resulting human evolution Kurzweil refers to as "singularity." He quotes McLuhan: "First we build the tools, then they build us."


If Kurzweil is right, when will we reach ad singularity? When can we expect to fuse what our brains believe ads should deliver with what ad units produce? We've got more ads on tv, online, in print and on air than ever before; and, our ad ecology is suffering. Instead of producing new sustainable ad environments, the ad business seems to have exhausted its atmosphere. Ad currency hasn't transformed itself along with explosive unit growth. Ads continue to be valued by traditional media CPM's--the cost to reach 1,000 viewers--or digital CPC's--the cost to get customers to click on and, assumably, read an ad. If CPM's and CPC's are delivering reasonable proxies for ad value, why is so much ad-supported media falling apart?


It may be that ads have lost their effectiveness because their content has evolved, but their distribution hasn't. Magazine ads look as enticing and intelligent as ever and they meld with careful relevance into magazine content. Linear TV ads continue to use their talents to build brands that complement their TV hosts and, as direct-response, they do no harm. Radio ads blend with the personalities of their content as they push messages through car and office radios.


But digital advertising carries a heavier load, requiring its ad units to complement new forms of distribution as well as to complement content. Search advertising fills the bill: it's completely about distribution, bringing customers and products together quickly and efficiently. Search ads are so powerful that the ads bring the customers to the content, rather than the other way around. How common is it to look something up online only to end up shopping the online ads, rather than research content, rewarded by the utility of the experience?


Looking at newspapers and their sandy ad foundations, could new online ad forms help? When newspapers moved their content online, they created two distinct ad universes, each of which required sales attention to survive and neither of which comfortably related to the other. At the same time, newspapers mostly threw subscription revenue under the bus, putting even more pressure on online ad generation, which they knew very little about.


When they moved their content online, newspapers took the support of online display ads as their new revenue base just like every other online site, without any special attention paid to the form of these new ads and how they failed to complement the new digital content and distribution of the news. Historically, the major news advertising categories in print included: autos and homes; job listings; entertainment; and, local retail. Newspaper ad sales staffs knew how to push these categories and the print content teams knew how to complement the ads. But online advertising carried its own requirements--including a vicious search-enabled scale requirement--that very few newspaper sales staffs understood.


In their current state, newspapers online should consider broad experiments with national and local retailers linking promotional ads with in-store and online fulfillment. Newspaper sales staffs know how to sell the wares of local businesses, including the local outlets of national chains. If online retail newspaper ads could complement print by enabling shoppers to click through and buy specially priced merchandise, we'd all have a reason to read the ads and, maybe, the content. We'd also begin to associate the local news in our favorite news brands with local shopping, favoring where we live by supporting where we shop. Why couldn't we reserve delivery of a Chevy Volt through our local auto dealer by clicking on a geo-targeted ad in the online Autos section of The New York Times?


For TV and online content brands where grand scale and efficiency make the most sense--which of course is mostly everywhere--the Amazons and eBays of the digital world could become perfect advertising partners for the most aggressive news and entertainment businesses. Why shouldn't Amazon be one of several major digital advertising partners (and ad aggregators) for Time Warner's cable and satellite networks? Why not click on a CNN ad for something you'd like to buy, knowing that Amazon will ensure quality fulfillment? If big content relies on the major digital aggregators of merchandizing and fulfillment as their new ad sales force and clients, the tv and online ad unit will be transformed. The focus of most ad units will be on direct sales and the supply chains driving large scale fulfillment will likely be redesigned for greater environmental efficiency and sustainability along the lines of local and regional media markets.


How would big distribution gain from this new ad model? Given the enormous, unharvested data-base wealth that major distributors share and can use through an opt-in model--inferred if a customer is choosing to make a purchase, pay for it through a credit card or COD and pick it up or have it shipped to his home--distribution economics are sure to improve; as will big distribution's share of and respect for advertising.


Right now, subscription revenue is king amongst the major distributors. These are the guys who are linking media technology with what they think we want, building our future news, information and entertainment products. A new healthy advertising business could do a better job of pointing to what customers want than surveys. And a healthy balance between advertising and subscription revenue could release some of the pressure on rates and costly subscription growth schemes. Maybe, with the right respect for content and distribution, the ad as a tool we built could help rebuild the media business.