Publishing and Advertising 2.0 – Part 2

The Internet will continue to drive major structural change into the advertising and other digitizable media for the next 25-35 years. (The Carlota Perez book previously mentioned explains paradigmatic technology diffusion; Ray Kurzweil, referenced below, builds on the same concept to posit that technology/human change has accelerated since time began and will continue to do so, resulting within 30 years in implanted brain chips that leverage our thinking capabilities the way our foot on the gas petal leverages our muscular capabilities). Anyway, back to the present. Broadband connectivity (medium band, really – until we get more competition in telecoms, the 100MB/sec links available throughout Seoul, Korea and other foreign cities will be a figment of our imagination here) just recently hit critical mass in the US. Broadband mobile phones (again, medium band vs other nations) will reach critical mass in the next three years. That $200/household for Internet ad spend represents only that revenue that has been derived from the move of print ads to the web; audio/video related advertising is at its inception (and is why Google paid $1 billion for the largest market/mind share position in that market. Audio search is well developed and will begin to be monetized via ads soon. Video search has further to go, but I have no doubt that Moore’s Law will bring the processing power required to do it to an economically viable level. The number of doublings in processing power/unit ($) of resources consumed just recently passed thirty. Given the exponential nature of this growth, however, the absolute gain from each doubling has now reached the point of delivering stupendous economic impacts (same applies to storage, where you can now easily buy Terabyte storage servers for less than $1000). For more on the law of accelerating returns associated with technology advances, see Ray Kurzweil.

Some talk about buying/selling advertising in terms of the current industry participants like Fox News. Although Rupert does get it regarding broadband Internet, very few organizations with the size and longevity of any of the existing broadcasting/media companies are ever able to make transformative changes to their business models. See Clayton Christensen, The Innovators Dilemna, for hard proof. The companies that break standard price points will have a different view of the economics/business model, just as Bill Gross (Idealabs) did when he invented the pay-per-click Internet advertising business model that Google has leveraged into a $150 billion market cap. Remember, Google did not even begin to sell search advertising until the 2001-2002 timeframe.

A final point about change in content/advertising markets – the Internet evidences and enables statistical distributions commonly known as the Pareto principle (80/20 rule). Chris Andersen of Wired wrote the signature piece on this phenomenon which he dubbed The Long Tail (link to his website, which links to article, book, Wikipedia, etc.) Andersen’s point is that for digitazable products/services, the changes wrought by the growth in interconnected and ever mor powerful communication/computational processing devices will enable the exploitation of demand that was previously unexploitable due to the lack of sufficient market scope to spread the fixed costs of production and distribution over. The fixed costs are now already incurred, in terms of the infrastructure of the Internet, and the marginal costs of distribution are virtually nonexistent. An Amazon employee described the Long Tail as follows: "We sold more books today that didn’t sell at all yesterday than we sold today of all the books that did sell yesterday."

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