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New Rules for the New Advertising Economy

WIRED
By Chris Anderson
June 10, 2002

Over the past year, a small company called X10 has practically become a household name, despite the fact that it sells little the average household would want.No need to explain how it did this, or what it's pushing; you already know.Its ubiquitous pop-under ads have made X10.com one of the most visited sites on the Web. And in the banality of billions of slightly suggestive webcam pitches lies the future of advertising - a radically different model that will challenge many of the presumptions about online media.

Thanks to a savage online-advertising downturn, a few choice deals won X10 blanket coverage.It managed to do what was once unimaginable - it bought the Internet.You can run, but you can't hide from those cheesy spycam offers.

It also spawned copycats, from Orbitz and Netflix to several online casino operators.These companies pay as little as $1 million a month to reach about 5 million unique users.(Even more impressive, most pay only after their ads succeed, measured by clickthroughs or even sales.When a company pays for advertising after a sale is made, marketing ceases to become a cost center.It's a commission.)Compared with television, this amounts to three times the reach per dollar.For the advertisers, at least, Web marketing works great these days.

But there's more to the X10 approach than a smart media buy. The company's ads are especially intrusive, which is precisely what it takes to get noticed online. X10's ads open in a separate window, requiring you to take note at least long enough to close them.Other advertisers prefer big, elaborately animated interstitials, hijacking your browser between pages. Some even crawl over content, forcing you to simply wait helplessly for the nightmare to end.

In other words, it's not unlike the average TV viewing experience (TiVo users and other time shifters aside).Many commercials are well done; some are even entertaining.But whether good or bad, they work because you're pretty much forced to watch them.Compare that with the latest pop-up ad window, which uses Flash technology and faster connections to be more like video every day.In exchange for hijacking your screen, it tries to entertain - or at least engage.

However, there's a big difference between the two media. Television viewers have no expectation of being able to control the pace of their experience. They will put up with what amounts to 16 minutes of interstitials for each hour of content. Web users will not.

As a result, Web advertisers and content sites are increasingly forced to ration their most effective ads - limiting them to, say, two pop-unders per user per day, or one outrageous content-crawler - lest they alienate viewers entirely. Though it may seem like a small thing, this could change the face of Web media. The new equation for success in online advertising is simple: Effective advertising must be intrusive. But intrusive ads must be used sparingly to avoid ruining the medium. From this axiom comes a host of surprising implications - the new rules for the new advertising economy.

1) Shallow is good. The key metric in Web advertising is unique users, not minutes per site. "You want users to come to your site every day - and then go away," says Roy de Souza, CEO of Zedo, a leading ad-serving network. Web publishers should hit each new user with a big, lucrative ad on arrival, but after that pageviews probably cost more to create and deliver than they can earn in banners. Front pages rock; inside pages stink. From this core observation, other corollaries emerge:

2) Forget stickiness. Web sites once bragged about their lingering users. Now a site is better operated like a fast-food joint: no loitering. Loyalty is still good, but only when it means being a brief part of a daily routine. Think cats, not dogs.

3) Real time is risky. What could be worse than a stock-quote site, which users check and recheck constantly? Better to focus on less-ephemeral content that rewards a single visit - sports scores, weather, or newspaper headlines.

4) Communities are overrated. Do you really want to encourage hours of chat in your expensive online salon? Same goes for webmail. Free Internet service providers, such as NetZero, are already limiting users to just two hours a day - when the law of diminishing returns kicks in hard.

5) Chase dilettantes, not obsessives. Just ask the game sites. Gamers spend hours reading hints and cheats; from an ad perspective, that makes them parasites. A passing interest in, say, movie listings is, economically speaking, a lot more desirable.

Such rules are hard to swallow for the majority of sites today; many are hoping that the ad market will recover quickly enough so they can stick with the model they know, which includes the venerable banner. But viewer attention is waning by the day. Online advertising is already changing to reflect this; media winners will be those that follow suit.

Thanks for the tip, X10 - we almost forgive you.