A Post-Advertising Business Model That is 6X More Valuable - Rita ...

by Rita McGrath??|?? 8:00 AM December 26, 2012

There is a lot to dislike about advertising supported business models. Ads are generally annoying. They are so scattershot that the overwhelming bulk of them fail to motivate anything like a sale. They cause those running web sites to flood them with frantically produced content, causing the quality of the experience to erode. Worst of all, the hunt for better ways to target ads is creating entire categories of companies with a vested interest in tracking everything we do online or on a mobile device, with the goal of aggregating this information and selling it. And that industry is only in its infancy ? I shudder to think of where it's heading. But the biggest problem with ads is that we are all increasingly sophisticated at tuning them out.

Now, imagine if instead of blasting out ads that are for the most part meaningless to those receiving them, an advertiser could instead pay to get access to a real, live, customer who was genuinely interested in and possibly in the market for whatever they were selling. Wouldn't it be worth something to know that those customers are actually keen to find out more about the product? And to be able to design your products and services with those specific customers in mind? Very valuable indeed.

Well, that model exists and some savvy entrepreneurs are beginning to take major advantage of it. It's called the affiliate model and in some ways it's back to the future. In the affiliate model, payments are made for referrals to the affiliate's site. In other words, if I'm in the market for the very best olive pitter on the planet, I might visit the web site of a cooking guru to see what that person would recommend. If they post their recommendation with a link, and I click on the link, the olive pitter producer pays the guru for the referral. Isn't that nice? People not in the olive pitter market don't have to endure ads for them and people who are can build a community around the expertise of the guru.

Some businesses are taking major advantage of this. Kevin Kelley, a founder of Wired Magazine and now its senior maverick, runs a referral site called Cool Tools. The New York Times quoted him as noting that his referral revenue exceeds his advertising revenue six to one. So here's a holiday wish from me. Advertisers: Stop bothering me with irrelevant and irritating ads for things I will never buy. Instead, figure out how to use trusted sources to make offers only to the people who will really want them, and leave the rest of us alone.

Source: http://blogs.hbr.org/cs/2012/12/the_post-advertising_business.html

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