THE THREE TRENDS SHAPING ADVERTISINGBASED MONETIZATION: USER = ADVERTISER = USER When the user-advertiser boundaries disappear.

Sangeet Paul Choudary

ABOUT THE AUTHOR SANGEET PAUL CHOUDARY is the founder of Platformation Labs and the best-selling author of the books Platform Scale and Platform Revolution. He has been ranked as a leading global thinker for two consecutive years by Thinkers50, ranking among the top 30 emerging thinkers globally in 2016 (Thinkers50 Radar) and ranking among the top 50 thinkers of Indian origin in 2015 (Thinkers50 India). He is the co-chair of the MIT Platform Strategy Summit at the MIT Media Labs and an Entrepreneur-in-residence at INSEAD Business School. He is also an empaneled expert on the global advisory council for the World Economic Forum’s initiative on the Digital Transformation of Industries. His work has been featured as the Spotlight article on Harvard Business Review (April 2016 edition) and the themed Business Report of the MIT Technology Review (September 2015). As the founder of Platformation Labs, Sangeet is an advisor to leading executives globally. He is also an empaneled executive educator with Harvard Business School Publishing, and has advised the leadership of Fortune 500 firms, family-owned conglomerates, and key government bodies. He is frequently quoted and published in leading journals and media including the Harvard Business Review, MIT Technology Review, MIT Sloan Management Review.The Economist, The Wall Street Journal, WIRED Magazine, Forbes, Fortune, and others. Sangeet is a frequently sought after advisor to CXOs globally on the topic of digital transformation and also serves as a fellow at the Centre for Global Enterprise in New York. He is a frequent keynote speaker and has been invited to speak at leading global forums including the World Economic Forum’s Annual Meeting of the New Champions (Summer Davos), the WEF ASEAN Summit, and the G20 Summit 2014 events. Sangeet has a bachelors in computer science from IIT Kanpur and a masters in management from IIM Bangalore.

CONTRIBUTING AUTHORS

ABOUT PLATFORMATION LABS

Marshall Van Alstyne and Geoffrey Parker are contributing authors to the research published by Platformation Labs, including the books Platform Revolution (coauthors) and Platform Scale.

Platformation Labs is C-level executive advisory firm and think-tank, focused on the analysis and implementation of platform business models and network effects towards the digital transformation of industries. Platformation Labs has advised governments, Fortune 100 firms and high growth startups in 40+ countries across the Americas, Europe, Africa and Asia-Pacific. Our thought leadership and intellectual capital are commissioned and licensed by leading consulting firms globally and have been featured in leading global forums.

Once upon a time, we used to get dumb messages from the idiot box. Then the Internet happened! Traditionally, the user and the advertiser have been two distinct categories. Most advertising based businesses (print, radio, TV) had two distinct segments to address, the users and the advertisers. This structure was brought onto the web as well. However, in recent times, the lines separating these two groups have been blurring. What is more important is the rise of two roles rather than two distinct groups. The user and advertiser are today, often the same person, wearing different hats at different points on a platform.

The user is the new… advertiser The first steps towards this change were brought in by Google, which brought in two significant changes: TREND 1: Democratic access to ad-serving infrastructure AdWords and AdSense democratized advertising and made it accessible to anyone irrespective of a committed budget. Self-serve democratized advertising further as the primary bottleneck in ad-serving (the effectiveness of a salesforce) was removed. TREND 2: ‘Free’ tier to advertising Google was also the first ‘mass media’ advertising platform that allowed a ‘free tier’. SEO allowed anyone to gain users for free and to get their marketing message out (if they optimized their heading and content well) to users for free. AdWords simply turned the ‘paid tier’ on. The ‘paid tier’ is simply a premium version of the ‘free tier’ and allows the advertiser to gain non-democratic access to the audience by paying a fee. The rest of the message dissemination (Results shown in response to a query) remains the same.

These two changes have led to the rise of the user as the new advertiser. Advertisers and users are no longer distinct groups or segments but are distinct roles often played by the same entity.

Facebook, with its self-serve advertising, has taken a similar direction. Facebook has a ‘free’ tier of putting out a marketing message in the form of Fan Pages or even the ordinary status update. Fan Pages blur the lines between individuals and brands competing for the same piece of audience attention. However, the ‘paid tier’ allows both individuals and brands to grab attention in a non-democratic fashion by showing up as sponsored stories or advertisements on the sidebar. The user is the new advertiser because the user now has access to the same advertising infrastructure and can perform the same promotional actions that the advertiser did in the past.

The advertiser is the new… user In the past, the advertiser had a completely distinct set of tools from the user. The user would interact with content, and the advertiser would target such content with ads, often irrelevant. TREND 3: Advertising as Content The second phase in blurring the lines between users and advertisers has come up in recent times. The advertiser now participates in the platform as a regular user but can access a ‘paid tier’ which allows her to promote her message with an ‘unfair advantage.’ The advertiser is the new user because the advertiser now has access to the same functions that a user has and just augments it with greater paid exposure to an audience.

Content creation platforms: Tumblr is a platform where the advertiser and user use the same tools to create content. There is little difference in the content creation process; the difference kicks in with the ‘paid tier’ in the content promotion process as the featured content gets greater visibility. Content discovery platforms: StumbleUpon is a content discovery platform where users can share content (for free) while the advertiser works on a model similar to the user but with greater discoverability. Increasingly, the internet is driving the convergence of content and advertising. Advertising that distracts from the content doesn’t work anymore. Advertising that acts as the content is showing better results. Moreover, the internet has created user acquisition platforms that allow mass market access for free. This leads in to a model where advertising has added a Freemium model to content. Posting content is free, but promoting content is paid. The difference between advertising and content is no longer a difference of message; it’s a difference of the tools for promotion and the enhanced reach that the ‘paid tier’ has access to.

Implications This leads us to some interesting points to ponder upon while opening up advertising on any content platform: 1. Can you go the “Content + Paid Promotion = Advertising” route? Essentially, is there a ‘paid tier’ that you can add to the value proposition of your content platform? 2. Are the advertisers and users distinct segments? If not, do users, and brands have different motivations while advertising? How do you factor in these differences while serving them? 3. Can advertising be an afterthought to pre-created content? For that matter, can advertising tools be an extension of content creation tools?

4. Do you need a salesforce anymore? Or do you need focused analytics to figure out top content producers and make them go “premium”?

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