Why Advertising is (NOT) Failing on the 'Net

Really interesting and controversial Techcrunch-guest-piece by Eric Clemons, Professor of Operations and Information Management at The Wharton School of the University of Pennsylvania. He makes the basic argument that users will ignore and/or disintermediate advertising online and therefore advertising will ultimatly fail. 

The internet is about freedom, and I suspect that a truly free population will not be held captive and forced to watch ads.

I think he's wrong. Here's why: 

1. Performance vs Brand: He totally ignores brand advertising. Online, performance based ads are high-profile, and has dominated over brand advertising. This is due to the medium - the Internet is data rich and user-interactive (unlike TV that is passively consumed)
2. Brand advertising isn't about conversions exclusively, it's about moving people through the purchase decision process and increasingly brand familiarity/ favorability with the goal of increasing the probability that someone will buy your product vs a competitor's. The point: an ad on a screen doesn't need to be clicked on to be impactful (from the point of view of a brand advertiser). Eg. If the Watchmen movie is launching this weekend, the studio would prefer that you click on the banner ad and explore the content THEN go watch the movie, but if you just decide to watch the movie (because the ad made the movie top of mind), they're also happy. 
3. Everything he said about the Internet is true about meatspace TV advertising: people do not trust, want, or need advertising. He then argues that synchronicity of TV makes those ads more impactful, but has he never made a bag of popcorn during commercial breaks on TV?
4. He narrowly defines "advertising" as the banner ad: corporate/ product sites are a form of advertising, and research shows that though this isn't the most trustworthy source, it's a primary source used by consumers to help make a purchase decision. 

Advertising on the internet suffers for a couple reasons: 

1. Supply: Unlike TV where the advertising is "hardcoded" into the content, and there's a limited # of impressions possible, the Internet's has billions-billions-trillions of impressions everyday. At AdTech, interactive folks complained that the price of a broadcast impression is higher than an online impression. My arguement back: increase the quality of your content to have parity with TV and reduce the number of available of impressions/ user to the same as TV (say 5/ hour), and you have an arguement. 
2. Relevance/ Trust: Relevance is really just a response to the supply problem. Mobile advertising,behavioral targeting capabilities, really rich niche content, social advertising really just allow advertisers to increase the probability of conversion (or a high-quality impression) and efficiency of spend. They're willing to pay more for inventory that "works" better.

In other words, I sense online people have high expectations for both the performance of ads and how they expect people will interact with ads. In general, people do not want to interact with ads, but they don't mind high-quality content sponsored by high-quality, relevant advertisers.

The problem from the publisher perspective - it's a race to the bottom, the market is too efficient:

• Any high-quality content they make, is competing with "good enough" or "more relevant" content from another publisher. Eg I don't read CNN's political coverage, I go to huffingtonpost - I don't read their tech news, I go to Techcrunch. 
  
• The Internet evens the playing field to attract ad dollars (not quite, but it's moving this way). Programmatic ad buying/ placement/ measurement means a big brand can just as easily advertise on a niche site as on a large publisher's site and if it performs, there's no reason to buy elsewhere. 

Both of these factors result in an ever-reducing ad rates: good for advertisers because it provides the opportunity for huge reach, bad for publishers because they have to actually provide good content.