Why do businesses (advertisers) have to pay for placing their ads? Why do they need intermediaries to reach potential customers? Why does advertisement, in itself, not have a business model? Why is advertisement always part of someone else’s business model (revenue channel)?
The answer to these questions is buried in a seed called “push-based attention” that condensed ads to merely being a conduit for grabbing our scarce attention and becoming nothing but a product’s cosmetic visual derivative.
A couple thousand years ago:
The advertisement was designed to strike engagements rather than to grab attention. Ads were products in themselves.
A craftsman never paid for placing his ad: the distance between the craftsmen and the “cavemen” was within the same neighborhood. As such, there were no distribution costs.
Unfortunately, technological development during those days didn’t allow “engagement” to germinate in a fertile environment. The scale was impossible from an economic viewpoint.
A thousand years later:
A new model emerged, known as middlemen or “ad agencies.” They planted the seed of push-based attention.
· The shift from engagement to push-based attention meant further reach: distribution costs were inevitable (donkeys and horses to take ads wherever potential cavemen might reside).
· The craftsmen got lots of attention and lucrative trades: paying a fee was justifiable.
A few thousand years later:
The ad agencies’ push-based attention started to show a diminishing return: Cavemen no longer were interested in ads. Over time, their tastes elevated, and they were craving other content: arts, sports, news, literature, etc.
As such, a new business model emerged, “Media Businesses,” which leveraged the push-based attention by bundling content with attention: news and entertainment bundled with the advertisement.
The media businesses consolidated the distribution channels (e.g., printing presses, broadcast licenses, radio airplay, movie theaters, cable channels, etc.) and where necessary, integrated backward to control the supply side of the economy, marginalizing ad agencies. Controlling the demand side’s attention was a matter of time; as such, they introduced taxes on ads: the deeper the craftsmen’s pockets are, the further they can reach.
Back to our present days:
Along with the internet, a new model surfaced: the platform-based model, “platforms/aggregators.” Empowered by the realities of modern economics, those platforms were able to penetrate the entire surface of the long tail.
They democratized the supply side, enabling any caveman to create content. As such, they hijacked the media industry’s monopoly on the flow of data, and they allowed almost any craftsman (irrespective of their pocket size) to place ads and get in touch with an expanding caveman population.
They focused on elevating cavemen’s experiences; as such, cavemen kept migrating to those platforms, leaving advertisers with no other channels but to follow their footsteps.
Apparently, advertisers are convinced that paying ads’ taxes is their destined reality; the only way to squeeze their ads into cavemen’s social graph (in stories on Facebook, newsfeeds on Twitter, search results on Google, videos on YouTube, etc.) is to target every niche and every vertical.
But, what if this reality is flippable? Instead of placing a commercial layer on top of the social layer, what if we can place a social layer on top of the commercial layer?
Freedom of Ads:
As long as those platforms are in full control of the data flow (attention’s chokepoints), they will be an existential threat to advertisers; they can cut anyone from their grids (exchanging lucrative revenue for evaporated attention is not a fair proposition). No middlemen should be entrusted with cavemen and craftsmen’s economic destiny. It is time for a new pathway: cavemen’s economic migration to a “Pull-based Ad Platform.”
Customers deserve a new economic architecture: an open centralized operating system for their economic graph. Likewise:
- Google for being the online search’s operating system;
- Facebook for being the social connectivity’s operating system;
- Amazon for being the retailing operating system.
Customers, too, need an operating system for their consumption: An economic architecture that can redefine production’s subsidization, experiences’ elevation, interactions’ commoditization, modularization, differentiation, and network chain integration.
Now that we can envision a new reality, we only have one step before diving into the platform thinking domain: we need to reimagine an ad as a product, rather than merely a derivative of a product, and as a destination rather than a vehicle.
When ads are viewed as stand-alone value propositions, then subsidization is easy to think of as follows: subsidization means divorcing ads from conventional metrics (e.g., return on investment, customer acquisition costs), as such, becoming free (free flow of ads). Likewise:
· Google’s search is free;
· YouTube’s videos being free;
· Twitter’s tweets being free.
Ad subsidization can be a reality once we are able to view (ads) them from Clayton Christensen’s lenses: the Jobs-to-be-Done theory. What might be an ad’s job to be done? What is the job an advertiser hires ads to do? Perhaps educate, reach, target, support, improve, facilitate, compete, promote, increase, encourage, attract, expand, and/or motivate.
Different jobs have different underlying economic rationales and various distribution channels: knowing ads on such a granular level is a prerequisite for applying platform thinking.
Onto the Platform Thinking
Let us start by taking the Platform Eligibility Test, which is a simple diagnostic tool that aims at excavating a deeper level of understanding of the units of economics: economics of production, distribution, and consumption.
If a product can be digitized through the above stages (production, communication, purchasing, delivering, and consumption), it will no longer gravitate to the conventional economic rules. Ads are eligible to enter the exponential era.
- Ads can be produced digitally; thus, the supply curve will be empowered by zero-marginal costs;
- Ads can be communicated and delivered digitally; thus, ads will enjoy almost zero distribution costs;
- Ads can be purchased and consumed digitally; thus, ads will benefit from minimal transaction costs.
When such economics forces intertwined, ads can be detached from a centralized value chain and be integrated into a more extensive network chain: migration of value creation from a centralized platform (return on shareholders) to an entire ecosystem (return on coreholders), in other words, liberating ads from taxes. As such, it will be easier to reconfigure the whole ecosystem:
- What can be replaced, raised, or created on the supply side?
- What can be replaced, raised, or created on the demand side?
- What can be done to the logistics? (e.g., eliminate/reduce dependency on 3rd parties)
- What infrastructural changes can be applied?
For a long time, the logics behind advertisements evolved around controlling:
- The means of production,
- The distribution channels, and
- The attention scarcity.
The future of advertisement is not about “control.” It will be about nurturing “Engagement Desirability.” Unlike the former three logics (production, distribution, and push-based attention), which share a common characteristic (all being zero-sum resources), engagement desirability is not.
Those platforms (via the push-based attention) are not competing with each other; they are in direct competition with their users: the opportunity cost of being on Facebook for one minute, does not merely mean not being on Twitter; it means being away from family, kids, work, etc. (Not sure if competing with your customers’ time is a rational business proposition).
To shift advertisers’ mindset towards the engagement desirability, they must embrace an opportunity-based narrative (a concept theorized by John Hagel). The narrative must enable customers to experience:
- consumption being liberated from push-based attention,
- engagement desirability as the new rule of engagement, and
- experience improvement via pull-based attention.
The Platform Narrative Framework is designed to help in visualizing how to align the core-holders’ forces towards enabling and unlocking opportunities in a much broader context — beyond the reach of any individual player.
The core-holders must understand:
- Why is it in our best interest to join the platform?
- What can we accomplish by joining the platform versus not being part of the platform?
- How should we connect with other stakeholders within the platform’s ecosystem to significantly enrich our experiences?
Every experience on the platform must be designed (e.g., every function, feature, filter, feedback, notification) to amplify the platform’s narrative. For example:
- How will the platform leverage its data through its infrastructure to help customers to make prudent decisions?
- How will the platform aggregate the right experiences of third-party professionals and match them (via a robust curation mechanism) to benefit the customers?
- How will the platform expose advertisers to a spectrum of the new customer base?
The narrative must manifest that the real value to customers is to enable them to get connected to and to be engaged with a much broader range of expertise and resources.
Platform Value Proposition
The Platform Value Proposition Canvas is designed to help in understanding how platforms can amplify value creations: enriching the core value proposition, by enabling multi-core interactions to take place within different layers — where each layer operates under different ideologies.
The Jobs to be Done (“J2BD”) Layer: This layer is the entry point. Advertisers will place their ads to fulfill customers’ jobs. However, it is the customer who decides when and where to engage with ads. Likewise, when you click on:
- LinkedIn (scroll up/down) for professional/work-related content;
- Twitter (scroll up/down) for news content;
- Facebook (scroll up/down) for social content.
The pull-based ad platform will enable customers to scroll up/down ads content. Welcome to your Ads’ feeds.
The J2BD is about findability, security, privacy, transparency, and accessibility.
Findability — today, if someone want to know the latest news, most probably S/he will click on Twitter rather than Google. So why we still must go through Google for our consumption? This layer will do what Twitter did for news. Almost zero-friction exists between you and your jobs to be done.
Security — one dashboard (accessible to only you) that securely consolidates your consumption history and search history.
Privacy — full ownership and control over your economic graph (consumption history, searching history, recommendations, likes, comments, complaints, etc.).
Transparency — a complete set of information (substitute products, complementary products, competing products, social feedback, etc.) appears to you to support your consumption decisions.
Accessibility — personalized dashboard with a centralized interface that enable you to interact directly with venders, producers, retailer, etc.