The Case for In-Stream Advertising

Posted on Nov 22, 2009 | 84 comments


in-stream advertisingThe topic of whether in-stream advertising has heated up.  I just read well written pieces on the topic by Ross Kimbarovsky, Robert Scoble, Paul Carr and the NY Times.  I myself recently covered the topic when I spoke about why GRP Partners invested in Ad.ly.

Let me lay out my defense of In-Stream Advertising because I believe the topic is really important.

1. People feel angst about advertising in any form – I feel the same feeling about advertising as most consumers.  I feel it’s a necessary evil.  Yes, I often skip commercials when I watch on my DVR.  But I also accept and appreciate the ads in Hulu because I know that I’m watching shows for free.  I know that advertising is important to inform consumers of offers – the same reason many tech companies use SEM.

2. This debate is awfully familiar - This debate is so familiar to me.  GRP Partners invested in GoTo.com which rebranded as Overture.  At the time Google said it was against sponsored links because it confused the person searching for content – one of the main arguments people are again using about in-stream advertising. John Batelle profiles this well in his book The Search.  Our portfolio company did so well that Google copied this approach and out executed Overture.

It was still a great financial result for us but we clearly didn’t become Google.  But our investment and the thesis of the team led to huge leaps of innovation that all consumers now benefit from.  It led to the creation of Google Maps, Gmail and many other projects that without ad dollars wouldn’t exist.  Are you horrified when you search for an address in Google Maps and ads pop up?  Why not?  Probably because it has become the norm over time and it is handled in a tasteful and acceptable way.

3. In-Stream rewards the content producer, Contextual just the technology provider – The funny thing about contextual search like that in Google is that it benefits the tech company and NOT the  content producer at all.  Think about this – bands and stars helped bring people by the millions to MySpace.  Having amassed a following they realized that MySpace was able to put ads everywhere and make all of the money.  Some goes with Google.  All of us bloggers and journalists create content that gets indexed and allows Google to serve up ads alongside us that we don’t benefit financially from.  When a content producer promotes an ad in-stream the revenue flows mostly to the person who published the content.

4. Transparency, authenticity and quality are what matters – So should everybody be sending out loads of Tweet Ads?  I would argue that they already do.  What does it mean when Michael Arrington sends out a link driving you to his latest article on TechCrunch? That’s not a “conversation” – it’s content driving you to his website where he monetizes based on the number of eyeballs he drives there.  You could argue that his banner ads are transparently advertising and are therefore OK. But people complained as loudly about HotWired when they started with banners (they were the first website to do so in 1994 – 15 years ago. This industry is now worth $24 billion / year.).  Here’s a piece in the New York Times questioning, “An Ad (Gasp!) in Cyberspace?” written in 1994. People complained about contextual search when Overture (then GoTo.com) innovated the model. And now everybody is laying into in-stream advertising.  The more things change …

At Ad.ly we believe that in-stream ads need to be as transparent as banner ads.  So we mark everything clearly.  We restrict the number of Tweets so that we can control quality.  We encourage publishers and advertisers to match based on authentic promotions.  If Robert Scoble sent out a Tweet that is clearly denoted talking about RackSpace would  people really be offended?  Should he remove the RackSpace logo from his Twitter picture or is that type of advertising OK?  Who decides?  I find it totally acceptable because I believe Robert has high integrity and manages church / state issues himself.  If he didn’t, I would unfollow him.

When Jason Calacanis opens his TWiST show talking about his sponsors to you gag and stop watching?  No.  You think, “I get it.  He needs to speak about these guys to fund a show that is seriously high quality so I’ll put up with ads.”  Why is that acceptable but Twitter isn’t?  I assert it’s just because Twitter advertising is new and we’re trying to sort out the norms.

When Brad Feld lists a book on his blog with an affiliate link that he monetizes is that wrong?  I don’t think so.  We all know and trust Brad to be authentic.  How is that different from an ad in the Tweet stream?  Should affiliate links to Amazon be acceptable in a blog but not in Twitter or Facebook?  Why?  Why not?

When Facebook puts contextual ads on your pages is that wrong?  Oh, I see, it’s Ok because it’s not in-stream.  So only the technology companies can make money from ad links and not the creators of content?  I think we need to be careful that any in-stream links are clearly marked as an ad – but reject them all outright?  Seems an arbitrary demarcation to me.

When TechCrunch 50 has sponsors and those people get to speak on stage does that mix church & state?  It sure pushes the boundaries.  But we all accept it because  we know that it is the norm for conferences.  No prizes for checking the correlation between panelists and TC50 and sponsors.

Again, I personally trust Michael and Jason to manage this quality.  If they crossed the line we’d stop attending.  If Twitter publishers cross the line we’ll stop following them.  But if they mark a Tweet as an ad I can choose to click the link or not.

5. In-stream does not equal spam – I sometimes get @ replies from people unsolicited with a link to an ad.  That is spam – full stop.  I haven’t chosen to follow this person.  But if someone that I have chosen to follow has an ad I am ok with that if it’s labeled.

6. Let innovation happen and the market decide -  I don’t how all of this will end up.  I’m hopeful that Ad.ly will be a prosperous addition to the Internet ecosystem.  But it is very important that we let young companies like this experiment.  I assure you Ad.ly will take the high ground and control quality.  We care deeply about that.  I have a vested interest – not just due to an investment in Ad.ly but also because I care deeply about innovation and the evolution of the Internet.  Rejecting new business models for pushing boundaries does not encourage innovation.

If the market rejects in-stream then the market wins.  I’m fine with that.  But let’s have an honest discussion about the topic.  Vitriolic attacks on in-stream advertising obfuscate the issue.  And if the market rejects in-stream then we still win.  Strike one up for entrepreneurship, innovation and pushing the boundaries.

And before you attack me in the comments as some people feel compelled to do when the topic of advertising comes up, please have a quick read of Seth Godin’s latest post on how to win an online argument.  I am absolutely open to debate and have enjoyed reading most of the counter articles on the topic thus far.

  • http://markgslater.wordpress.com/ markslater

    i have said this before – and i will say it again. Ads that are pushed – no matter what the source, or 'authentic' you want to dress it up – are still instances that i have not implicitely asked for, and are therefore- to me – strategically flawed. your examples too – are very confusing – Brad feld is Not advertizing a book – he is referring a book and there is a big difference. Brad actually takes first person action to mention a book (good or bad) and let the viewer decide on whether to take action – he does not have a 3rd party dynamically insert an 'authentic' or 'contextual' ad.

    i dont reject this model for pushing new boundaries as i dont believe it truly is pushing new boundaries. Its taking a new platform (twitter) and applying an old set of rules – this is why its flawed in my view.

    Truth be told i am influenced by Umairs work – where he called out each silo and explained why its broken. This includes the entire notion of unsolicited ads. essnetially placing the power of control in the hands of the consumer, and juxtaposing with the implicit choice of 'no ads' if possible – i see this as strategically flawed.

    the bottom line is the vast (and i mean vast) majority of people – if given the choice – will unsub any ads. Its been proven across all silos.

    Now if you were to read an article – and tell me it was good, and provide me with a link – then that in my view is not an ad – its a referral – its wholly authentic – and its not intrusive. I get these from people all the time.

  • http://markgslater.wordpress.com/ markslater

    it has a chance if i initiate. It does not if i don't implicitly ask for it.

  • http://arnoldwaldstein.com awaldstein

    No argument.

  • http://arnoldwaldstein.com awaldstein

    Well argued.

    Push advertising is as old as the world. Sticking it on top of a stream is only a transport innovation. True but I like the ideas of the content owners getting their share.
    Mark says people will tolerate.
    You say no way.
    I'm not sure about people, but I wouldn't once annoyed.

    The thing that you've spurred me to think about is the lack of new business models. Affiliate works. Subscription works. Premium bump up charges work. Microeconomies in games work. Advertising based models for big brands to sit on top of our Facebook feeds will work.

    Those who figure this out win. Not hard to understand the dynamics of the social web. Creating value and a model when all is free is what makes this interesting.

  • http://bothsidesofthetable.com msuster

    No, I think they will have several strategies including ads. Dick Costolo (the COO) even hinted at ads last Friday. Watch this space.

  • http://bothsidesofthetable.com msuster

    Gotcha – thanks for the input.

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  • http://alanpritt.com/ Alan Pritt

    Adverts are almost universally annoying in a stream of content because they interrupt what you're interested in. I think for that reason they are more acceptable in magazines or websites because you can skip over them far more easily. Many websites place an ad bang in the middle of content and that is irritating. Some create a splash page and force you to look at them before you reach the content; that usually sends me to the back button unless I'm pre-sold on the content. Animated ads also distract me from content, so they are particularly annoying. The more an ad interrupts the more annoying it is. Ads in the Twitter stream will interrupt to a certain degree. And to a certain degree they will be annoying.

    Ads on video shows are also annoying. When Jason Calacanis stops This Week in Startups to 'thank the sponsors' I understand and accept it. He does it in a reasonably interesting way and is pretty quick. But I'd prefer the adverts not to be there. I just get so much value from the content that ads are something I'm willing to watch to pay for the great content. If he had 20 sponsors, I'd probably get annoyed and switch off. If he had no sponsors, the show probably wouldn't exist. The value/annoyance balance feels right.

    For ads on Twitter the value/annoyance ratio strikes me as a little more difficult to balance. But perhaps the value is not there because nobody can afford to produce anything too valuable on a Twitter stream because there is no income available from doing so. Thinking it through, there are probably things I would accept adverts for. In fact, straight away I'm reminded of the Twitter feed my train service operates. I thought it would be useful to let me know about delays, but it covered too many routes so the noise ratio made it annoying. If they could provide me that information, but tailored specifically for the route I took, I'd be quite happy to have some ads on that. The key is that they would be providing me with genuinely valuable content in return

    Why do I follow people on Twitter if they don't give me valuable content? Because most of it is not content; it is a conversation. I think the line between content and conversations has become so blurred that people are starting to think of them as one and the same; or are at least arguing which is which. Usually on your blog I would consider the post to be the content and these comments to be a conversation. In the case of this post I would say everything is a conversation, although that is surely debatable. I'm not quite sure how I would make the distinction, but perhaps the difference is that content stands by itself and a conversation has to have context to make it valuable. Just because our words are written down and put on the internet doesn't turn them into valuable content. I worry that some people won't grasp that and will put ads on their conversations. This will ruin the conversations.

    Yes, many people promote their own work on Twitter but that's different to an ad. When I follow someone, I've already decided I'm interested and want to know what they are up to. It can also be irritating if they do it too much, but a certain amount garners genuine interest. Ads are different. You put up a link to your own blog post, and I'm likely to click. You put up a link to Paul Carr's post and I may click. But if Paul pays you to link to his post, the link will instantly lose its credibility, I won't click and it will be viewed as an interruption. Same link, but you've ruined the credibility of the link because I can no longer trust if it is worth looking at or not. Self promotion and ads are psychologically different.

    I come down close to Paul Carr's view that Twitter is more of a conversation with little to no content. However, I think ads will encourage more content to be produced. The reason I feel a little less enthusiastic is I think that also risks devaluing the conversation side. I don't know if the net gain will be a better or worse Twitter. We will see.

  • http://twitter.com/mikecane Mike Cane

    Con Artists, Sell-Outs, Whores
    http://ebooktest.wordpress.com/2009/11/22/con-a

  • http://bothsidesofthetable.com msuster

    Thanks for your contribution, Alan. I understand your logic. I can't say that there is a clear case of how all of this will break and what will be acceptable and what won't. But in the end the market will speak and norms will set. From there I think there will still be an in-stream ad business but we'll see.

  • http://markgslater.wordpress.com/ markslater

    here is another problem – the difference between being part of a delivery payload – and being THE delivery payload. web banners – are b and large ancillary to the page (the payload) while in stream ads – are themselves a 'payload'. thats a major problem. Its not like i can tweet and have it 'brought to you by XXXXX” – that might just get by – but being the primary payloads is the major problem here that only implicit requests will solve.

  • http://bothsidesofthetable.com msuster

    I get the “payload” problem. However, the only solution would be for Twitter to allow an API that allows for ad insertion below the payload like you can say which Twitter client it is. I get that this would be less intrusive. But it would surely be controlled 100% by Twitter thus tipping the balance to monetization by big tech cos rather than content producers.

    I know we won't see eye-to-eye completely on this and your arguments have merits. At some point in the next 24 months norms will form and we'll see where it ends up.

  • http://markgslater.wordpress.com/ markslater

    well i can see this in some way working on twitters web side – but the SMS delivery platform should remain no ad as it is. i could see a web tweet appended, not a text

  • http://arnoldwaldstein.com awaldstein

    Mark and Mark

    My favorite discussion so far on this blog because it is both not resolved, can't be by us. And has far ranging effect.

    In abstract Marks's arguments are irrefutable. If you can't 'sponsor' you can't separate yourself from the ad. Msuster's say, the road is only so wide and that is the only way to play.

    On first blush, I'd say that a fallback to what human nature tolerates is more powerful than what the pipe will allow. That being said, human nature in relationship to new technologies is changing.

    Good use of my time, thanks.

  • http://twitter.com/KellerII JT Keller

    I think that points 4,6, and 5 (in order of importance) are the strongest in making the case for in-stream advertising. I would add that for point 4, you should also add frequency. There's definitely a threshold for in-stream ad occurrence that is either tolerated or triggers an individual to select unfollow. I think that ad.ly is managing this correctly by only publishing 1 ad per stream per 24 hour period. Hopefully they've done some legwork in terms of market research to find out exactly what that threshold point is. I would think that it could in fact be higher. As an advertiser, you have to wonder about the efficiency of a 140 character tweet every 24 hours…what's the recall, memorability, persuasion, etc…I know there's a dashboard for tracking quantitative metrics such as click through but are you making a qualitative impact as well?

    I would also like to see ad.ly using a direct endorsement advertising methodology instead of the current passive or at least have it available as a viable option. Flip the model upside down and allow me to actively endorse a product or service that I truly believe in and/or use. Once I've acknowledged that endorsement, allow the associated company to make an offer to advertise in my stream. They can then submit the copy and I can approve or disapprove and move forward accordingly. I think this method is truly a value add to my followers. I would have no problems with this type of advertising. A devil's advocate would say that you're going to have publishers who abuse this method and my answer is, “of course you will”. You're going to have abusers no matter what method you utilize but if you've chosen those that you follow well, you should see less abuse. There's always the ability to unfollow which I would hope would keep most publishers “honest” for fear of loosing followers.

  • http://twitter.com/KellerII JT Keller

    I think that points 4,6, and 5 (in order of importance) are the strongest in making the case for in-stream advertising. I would add that for point 4, you should also add frequency. There's definitely a threshold for in-stream ad occurrence that is either tolerated or triggers an individual to select unfollow. I think that ad.ly is managing this correctly by only publishing 1 ad per stream per 24 hour period. Hopefully they've done some legwork in terms of market research to find out exactly what that threshold point is. I would think that it could in fact be higher. As an advertiser, you have to wonder about the efficiency of a 140 character tweet every 24 hours…what's the recall, memorability, persuasion, etc…I know there's a dashboard for tracking quantitative metrics such as click through but are you making a qualitative impact as well?

    I would also like to see ad.ly using a direct endorsement advertising methodology instead of the current passive or at least have it available as a viable option. Flip the model upside down and allow me to actively endorse a product or service that I truly believe in and/or use. Once I've acknowledged that endorsement, allow the associated company to make an offer to advertise in my stream. They can then submit the copy and I can approve or disapprove and move forward accordingly. I think this method is truly a value add to my followers. I would have no problems with this type of advertising. A devil's advocate would say that you're going to have publishers who abuse this method and my answer is, “of course you will”. You're going to have abusers no matter what method you utilize but if you've chosen those that you follow well, you should see less abuse. There's always the ability to unfollow which I would hope would keep most publishers “honest” for fear of loosing followers.

  • http://twitter.com/headup Headup

    Hi Mark,

    I read this post at a time when we're trying to figure out how to monetize our service.
    We debate the issues you've covered daily.
    Thank you for helping me remember which way is North…
    :)

    Mike
    @headup
    http://Semantinet.com

  • http://www.sceneclips.com John Dugan

    Completely agree with Justyn. Point 3 is the real sticking point in my view – this is where the in-stream model has legs. Though, I do believe that Google would argue that adsense does in fact reward the content creator and that many online publishers make a living/generate supplementary revenues through adsense.

    To me, Twitter is simply word of mouth on steroids. I do not look at it as a content publishing platform. I view it is more of a ratings platform. If you produce great online content, Twitter is fastest way to spread it. While I welcome the opportunity to make some coin from twitter, it doesn't piss me off that I not making money from Google.

    I think your outlook and spot on – letting the market decide encourages innovation. Like you said spammy @ replies infringe on my user experience far more than in-stream ads.

  • http://www.sceneclips.com John Dugan

    Completely agree with Justyn. Point 3 is the real sticking point in my view – this is where the in-stream model has legs. Though, I do believe that Google would argue that adsense does in fact reward the content creator and that many online publishers make a living/generate supplementary revenues through adsense.

    To me, Twitter is simply word of mouth on steroids. I do not look at it as a content publishing platform. I view it is more of a ratings platform. If you produce great online content, Twitter is fastest way to spread it. While I welcome the opportunity to make some coin from twitter, it doesn't piss me off that I not making money the Google SERPs.

    I think your outlook and spot on – letting the market decide encourages innovation. Like you said spammy @ replies infringe on my user experience far more than in stream ads.

  • http://www.sceneclips.com John Dugan

    Completely agree with Justyn. Point 3 is the real sticking point in my view – this is where the in-stream model has legs. Though, I do believe that Google would argue that adsense does in fact reward the content creator and that many online publishers make a living/generate supplementary revenues through adsense.

    To me, Twitter is simply word of mouth on steroids. I do not look at it as a content publishing platform. I view it is more of a ratings platform. If you produce great online content, Twitter is fastest way to spread it. While I welcome the opportunity to make some coin from twitter, it doesn't piss me off that I not making money from Google.

    I think your outlook and spot on – letting the market decide encourages innovation. Like you said spammy @ replies infringe on my user experience far more than in-stream ads.

  • http://www.sceneclips.com John Dugan

    Completely agree with Justyn. Point 3 is the real sticking point in my view – this is where the in-stream model has legs. Though, I do believe that Google would argue that adsense does in fact reward the content creator and that many online publishers make a living/generate supplementary revenues through adsense.

    To me, Twitter is simply word of mouth on steroids. I do not look at it as a content publishing platform. I view it is more of a ratings platform. If you produce great online content, Twitter is fastest way to spread it. While I welcome the opportunity to make some coin from twitter, it doesn't piss me off that I not making money the Google SERPs.

    I think your outlook and spot on – letting the market decide encourages innovation. Like you said spammy @ replies infringe on my user experience far more than in stream ads.

  • http://twitter.com/StoneAtwine Stone Atwine

    Nice write up. I like letting the market decide what's good for them.

    People are up in arms just because twitter ads have just began. They said the same about blog ads.

    I believe if a company/individual doesn't follow standards and ethics while advertising on twitter, they will automatically suffer. People aren't stupid.

  • http://twitter.com/timschulz Tim Schulz

    Good point. Video of the conversation here: http://www.ustream.tv/recorded/2603127

  • http://twitter.com/StoneAtwine Stone Atwine

    Nice write up. I like letting the market decide what's good for them.

    People are up in arms just because twitter ads have just began. They said the same about blog ads.

    I believe if a company/individual doesn't follow standards and ethics while advertising on twitter, they will automatically suffer. People aren't stupid.

  • http://howhealthyisyourpersonalfinance.blogspot.com/2009/11/challenges-of-online-small-business.html scheng1

    As a blogger, I agree with the points about monetizing. The ads are only irritating to those who are not searching for products and services. They are useful to the consumers in the shopping mood.

  • http://howhealthyisyourpersonalfinance.blogspot.com/2009/11/challenges-of-online-small-business.html scheng1

    As a blogger, I agree with the points about monetizing. The ads are only irritating to those who are not searching for products and services. They are useful to the consumers in the shopping mood.

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  • http://watch-onetreehill.com watch one tree hill online

    I will bookmark and continue reading your blog in the future! Thanks alot for the informative post!

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  • http://bothsidesofthetable.com msuster

    Thanks, Jenny. I'll try not to disappoint ;-)

  • http://bothsidesofthetable.com msuster

    Yes. Our goal is to keep the ads clearly denoted and to keep the quality high.

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  • http://bothsidesofthetable.com msuster

    Thanks, Jenny. I'll try not to disappoint ;-)

  • http://bothsidesofthetable.com msuster

    Yes. Our goal is to keep the ads clearly denoted and to keep the quality high.

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  • http://twitter.com/PadduG Paddu Govindaraj

    There is nothing called 'free lunch'; some one has to pay for it. Advertising is the only way to sustain the social media / networking tools. In my opinion, advertisement based model reduces the pricing of the services. If people look for advertisement free public television, then everything should be run by the government. Then we all know what the result will be !

  • http://twitter.com/PadduG Paddu Govindaraj

    There is nothing called 'free lunch'; some one has to pay for it. Advertising is the only way to sustain the social media / networking tools. In my opinion, advertisement based model reduces the pricing of the services. If people look for advertisement free public television, then everything should be run by the government. Then we all know what the result will be !

  • http://twitter.com/PadduG Paddu Govindaraj

    There is nothing called 'free lunch'; some one has to pay for it. Advertising is the only way to sustain the social media / networking tools. In my opinion, advertisement based model reduces the pricing of the services. If people look for advertisement free public television, then everything should be run by the government. Then we all know what the result will be !

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