Monday, 4 July 2011

Europe's Consumer Service Worth much bigger than Ad-service revenue

An IABeurope-research paper states that user benefits from Web services are large—very significantly larger than the advertising revenues earned from providing those services, and very significantly larger, too, than any disturbance linked to advertising and privacy issues.

Scaling this finding to the existing broadband population of Europe countries as well as the US, the estimated consumer service surplus is about €100 billion for 2010, or more than three times current revenue from ad-based services.

In other words, the scale of online advertising revenue significantly underscores the massive value consumers derive from the online services they use.

Further, while the majority of users face advertising and privacy issues, the value they obtain from using Web services, separate from the value of access, is six times larger than the value they are willing to expend to avoid advertising disturbance and privacy risks in 2010.

In practical terms, for each euro an Internet user is willing to spend to limit privacy and advertising disturbance, the user gets a value of six Euros from using current ad-funded Web application services.

It’s interesting to see this development because it means that any web based company who tries to make money of the web should be aware of the mind-set of present-day Internet users. Which basically is, getting things for free. If user benefits by far surpass online ad revenues and the value uses receive is a six to one ratio, companies might want to reconsider their investments in online advertising.
In the end, it means a shift from ‘telling and selling’ to ‘listening and engaging’. Listening to users, know where they are, what they talk about, and engage in conversations with them. Provide the consumer service they expect.

The marketing mix of online and offline channels, requires a dual strategy where online channels have to be dealt with differently than the offline ones. To effectively use online channels, producers, companies etc. need to tap into this development. This certainly requires the necessary in-company mentality and organisation changes. An Internet strategy based solely on online advertising certainly won't do the trick. 
It should be combined with for instance: improved customer care, more attractive deals, client relations, Social Media, Virals or anything complementary to balance the 1 to 6 consumer service surplus.

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