Three Digital Business Models That Could Rock Your World

The following is also my column in next week's AdAge.

During a recent exchange with one of my colleagues he posed a thought-provoking question that I hadn't quite pondered. "What new digital business models might take hold over the next four to five years," he asked.

This question should be on every marketing and media executive's mind. As we've seen, the Net is so disruptive that big ideas can come out of nowhere and reinvent advertising overnight - even in a recessionary climate. Google, for example, commercialized pay-per-click ads just after the dot-com crash in 2000.

Here are three models that might evolve over the next few years.

Advertiser-Supported Advertising: Brands are increasingly launching their own content platforms. Some, like Budweiser's BudTV, go it alone. Others partner with online media properties. P&G, for example, embedded Capessa inside Yahoo Health.

In the future some of the more successful marketer-sponsored content sites will accept advertising. The retail space is especially ripe here. Barnes & Noble's media site, in theory, could partially support itself by allowing publishers who they already co-market with to buy ads. Under such a scenario, transparency is critical.

Advertiser-Subsidized Devices: Content is a commodity. The barriers to entry are obliterated. Still, this means we all need to make choices - human attention doesn't scale. So how do you get consumers to choose your stuff? Simple. Use incentives.

Marketers will partner with consumer electronic companies to co-brand white-label gadgets. For example, a Gap-branded set-top box could come with exclusive video podcast subscriptions. Upstart device manufacturers that are looking to enter markets with entrenched players will be the first to dabble with this approach.

Just-in-Time Advertising: Digital advertising creative and planning, like any marketing discipline, follows an arc. It's planned, placed, measured and eventually evaluated, tweaked or tossed. However, in the digital world, brands need to be more nimble.

With the help of new technology, marketers will rely on "just-in-time" campaigns that adapt to conditions. Basically, this takes the Dell manufacturing model and applies it to advertising. Ad creative will morph based on certain triggers. This will include sales/ERP data, blog chatter/consumer feedback, weather/external conditions and more.

Comments

[Don Lafferty]

Your models are all valid, Steve. Reading through them I’m reminded of The Minority Report where advertisements interact with passersby based on an historical user database, customizing the messaging, the images and the delivery of information, with complete tranparency.

As usual, breaking down solid ideas in sci-fi leads us right to the work we’re doing today in so many walks of life.

[Don Lafferty]

P.S. - Advertiser-Subsidized Devices ~ Mobile service providers have this figured out already, incenting kids predominantly through co-op strategies, cross marketing by mining pop culture for ring tones, backgrounds and other teenage bling. Conside the hands in that pie. Sprint, Disney, Sony, etc...

The beauty of this strategy is the micro short shelf life of the pop culture tie-in, creating demand for the next hot thing - for which I pay $3.99 per download!!

[Amanda Chapel]

RESPONSE: 1) not a chance; 2) too expensive; and 3) requires tracking info that oversteps privacy.

As to Edelman's track record here, remember Rick Murray gleeful quote about Second Life: "fake people spending real money on fake things" (http://tinyurl.com/34txge ). That said, it is comforting that at least one of your colleagues is now thinking about "actual" business models.

- Amanda

[Kin Lane]

I agree with you that Advertiser-Subsidized Devices will be huge in building out a companies social media marketing strategy.

Empowering their partners / super-users to blog, publish video, and audio to social networks can quickly add value to your network and strategy.

If you can equip these users with standardized, company branded tools that accomplish the job, you can build an army!

[Rich Pearson]

I'm skeptical of JIT advertising becoming reality until the production issues get sorted, although you could argue we are already there with 1:1 email marketing.

I'd suggest another breakthrough model - one where your advertising follows your content regardless of where it appears. It follows your earlier 'cut and paste' assertion which, to me, is one of the strongest challenges facing media companies.

Martha Stewart and a few others have started towards this by launching their own ad networks. The technology is emerging to make this happen - both in terms of identifying where your content appears and the ability for publishers to collect a share of revenue from the "host" sites.

[C Dornfeld]

All of the concepts you list speak to a larger theme of convergence, collaboration and speed. I think each has some merit but for the most part the future will center more around a growing diversity of business models that will specialize toward certain products connecting with certain customer segments. And all of these models will be driven by a diverse body of almost real time data - privacy is/will be irrelevant.

All of what you describe will appear in some form (some already is), but change and evolution will become the only constant. It is also worth asking, "what business models will not be around in five years, and why not?”

[Ed Kohler]

I think the most effective advertiser supported advertising to date has been Google's "Advertise on this site" or "Ad by Goooooooogle" links found embedded in the display of AdSense ads.

[Mark]

Great article Steve,

the concept of advertising supported advertising of course already exists in the offline world.

As we all know every time we go into the supermarket, all the brands have paid various amounts of money for shelf space, position and promotional areas.

Whether it's advertising or marketing, the concept is the same.

What I expect to see is the more popular online stores start to charge their suppliers for positioning on their most popular pages.

I wouldn't be surprised if it's already happening.

[Mystic Liquid]

Great article. Those are some great business models.

[Joshua Feinberg]

The Barnes & Noble example is interesting, partly because large publishers have been able to "buy" shelf-space for years in the brick and mortar space. The difference with an online site like this is that in theory the barriers to entry could be lowered enough to the point of critical-mass with even the tiniest of small businesses. Think about what online advertising "buys" were like in the late 1990's, before the PPC industry came along.

[scott]

Nice info. looking forward to have some more from you....

[scott]

Interesting article.Keep it up no matter what type of business you run .

[Jen, writer MembershipMilliona]

It's always important to look forward and anticipate any changes regarding technology, the web or anything that has anything to do with your craft. It's one way of being a few steps ahead of others and being able to prepare yourself for whatever may happen. Positive or negative. I've found that a lot of people don't really take the time to examine such matters, preferring instead to focus on what's happening now.