Building on our discussion of online advertising

This from Reuters yesterday:

YouTube will need at least two years to start making a meaningful contribution to parent Google Inc's revenue, despite a clutch of advertising initiatives this month aimed at cashing in on its online video dominance.

In the last eight days the popular video-sharing site has launched four new ad formats, signed its first full-length video pact and even taken its first dip into e-commerce.

Executives described most of the revenue-generating initiatives as experiments or beta tests, but analysts said the long-awaited moves will increase Google's revenue, though not in the near-term.

Google rakes in about $5 billion in quarterly revenue, mainly from Web search advertising. Though Google doesn't break out YouTube's revenue, analysts estimate it will make $200 million to $250 million -- a small percentage of the parent's revenue -- this year.

cooking ideas and reputation, is it enough?

In our hypothetical tribe, however, people give what they have into the pot with no guarantee that they’re getting a fair exchange, which smacks of altruism……. But on the Net, a cooking-pot market is far from altruistic…… Your effort is limited to creating one – the original – copy of your product…… but millions of unique goods made by others!

I guess the cooking pot markets make sense to me in that this is what I see on the Internet, especially through my everyday life. The model makes sense, but probably not enough for media companies who wish to make money, or cash in reputation. Each individual on the Internet might be producing their work for fun, only asking for ideas in exchange or gain some reputation, but media firms want to find a fast way to convert bits and bytes into real world currency. Subscription model does not work and online advertising is increasing, but uncertain where it is going.

Google creates new ways for ad methods, such as AdSense, with complicated equations, but what else? Cumulating reputation and then cash in the reputation is similar to your cash return credit card: before you reach a certain amount of credit (reputation), it cannot be cashed in (maybe a little with advertising). But if you cumulate enough reputation, one day you can cash in whatever you have at hand for millions or billions, if lucky enough.

So media companies buy Web sites that already have a good reputation and a good audience base, such as Google bought YouTube. In addition to this, after investing in a Web site and since nothing can be cashed in immediately, how can media companies survive if the cash flow keeps being negative? Media companies cannot just do it for fun, can they? (so far I guess only Google say they do?)

Web advertising 2.0

Google showing me advertisements that pertain to my mail is something I don’t think I’ll ever get over. Has it spooked any one else, or am I just paranoid? But apart from getting spooked, I don’t think I ever bothered to click on any advertisement. I guess it’s the same with everyone else because all we look for is the ‘skip’ button when advertisers try to get past passive advertising and fill up your screen with an advertisement. So this doesn’t really say much about online advertisements.

While it can be a bad thing when people look for the ‘skip ad’ button, I guess it is also a good way of marketing because you remember the advertiser for being annoying. Also, advertisers are making new models with online advertising. From the ‘per click’ model to spamming, marketing experts have figured out a way to the bank.

But for all its popularity, online advertising seems to be relatively fickle as compared to advertisements on traditional media because finding target markets is elusive. Google CEO, Eric Schmidt has spoken several times about online advertising, saying that Google is looking for the holy grail of online advertising – a model that will rake in the money.

Like an article in Publishing 2.0, said:
"Search advertising is probably the most scalable advertising platform in the history of advertising and marketing. But ten years into the promise of the web and new media to transform advertising into an ROI-driven marketing engine, the success of keyword-driven pay-per-click text ads is the exception, not the rule.

The problem is scalability."

With online advertisements picking up on tag words, showing the same ad might not work out. Advertisers need to make different advertisements for different tag words. So is it going to be an era where online advertisements will be all about text and no images?