We humans are greedy buggers.

Unfortunately, the Internet has only enabled us.

We now believe that pretty much everything — and especially everything information-oriented — should be available, on demand, in full, for free. And please bear in mind that I am at the front of the near-endless line of people clamoring for free stuff: definitions, research, how-tos, expert opinion, quality content.

I want it all. I want it all. And I want it now.

But, at the risk of degenerating into an incredibly tired cliche, there’s no such thing as a free lunch. It costs money to deliver all that free stuff. For some costs, such as the generation of content on Wikipedia, the price is spread over so many people that we’re all able to carry our share of the load without remuneration. For others — such as servers, bandwidth, and the professional services of writers, bloggers, and designers, to name a few — we need money, and it has to come from somewhere.

So from where does it come? For certain things, we’ve all agreed to an explicit price: the price of our Internet connection, for example. In other instances, the price is implicit, with the most common exchange being advertising. “We’ll give you this great content for free, and in exchange someone else will give us money to show you something else great that you might buy.”

It’s an uneasy truce, this exchange of advertising for content. Back in the day when all we had was a handful of TV channels, we didn’t know any better. But now, thanks to TiVo and On-Demand and user-in-control, we no longer accept advertising passively. The problem is that we as consumers haven’t really offered up anything better — and we still want the content.

Take Twitter, for example. Twitter has no business model, and its users definitely want it to keep going, but they don’t want the experience ‘ruined’ by advertising.

Excerpt from Technosailor.com:

Twitter… is a beautiful thing that allows for the free exchange of ideas and views. People converse and challenge each other. They unite behind causes, events and people. It?s great. However, recently, several ?indecent? examples have cropped up. Specifically, with monetization of Twitter. Monetization of Twitter, depending on how it?s done, is polluting the common area. It is an obscene money grab, and I?m tired of it.

Comment on What Matters Online:

Twitter could lose its character if we start being forced to consume messages from advertisers.

On TechCrunch, more than 46% of respondents said Twitter should be kept ad-free.

If you’re a regular reader of this blog, you know I’m a fan of Jamie Oliver, and one of the reason I’m a fan is because he looks at the whole system, not just the easiest blame target. When he talks about chickens, he points out that battery farms exist because the grocery stores demand it, and the grocery stores demand it because people demand cheaper chicken, and the people demanding cheaper chicken have no idea what has to happen in order for that chicken to be delivered for two pounds fifty.

In that same TechCrunch poll referenced above, a further 24% said they’d pay for an ad-free version. Shouldn’t this be our option? With advertising, we place a value on our attention as consumers by using it to pay for content. We are effectively admitting that we are receiving something of value and we have to provide something of value in return. Of course, we could always provide cash instead.

Who do we think we are, if we think we shouldn’t have to pay at all?

Last week, I summarized the current sorry state of the behavioral targeting industry. Adzilla in the chilla. NebuAd looking sad. Phorm facing scorn.

Okay, Eminem I’m not.

Nonetheless, I think there is a fundamental problem in the behavioral targeting industry, a problem that is being reflected across all of these companies and the problems they’re facing:

The cost to the consumer is greater than the value proposition for the consumer.

The FUNDAMENTAL premise of these companies is that they improve ad relevance. That’s fine and dandy — I’d rather see an ad for rock climbing gear than one for men’s hair dye.

On the other hand, it doesn’t really cost me anything to see the men’s hair dye ad. In fact, you could make the argument that I benefit more, because I don’t spend money on climbing gear that I want but don’t need. (This is of course in an alternate universe where it isn’t our patriotic duty to buy as much stuff as we can.)

OK, so there are arguments for relevant ads and arguments against them. Either way, it’s not a big pain point for individuals. Irrelevant search results? Big pain point. Irrelevant ads? Ho-hum.

Ad relevance is, however, a big pain point for the companies creating, paying for, and publishing those ads. Clearly, if the ads aren’t relevant, people don’t click on them. If people don’t click on them, none of the entities in that chain get paid. That’s a problem.

So behavioral targeting provides a solution that offers a powerful benefit to advertisers and publishers, but only a so-so benefit to consumers.

Unfortunately, in order to deliver their solution, the consumers have to pay almost as much as the advertisers and publishers, albeit in a different currency. Advertisers and publishers pay with dollars; consumers pay with data. In our attention economy, the data may even be worth more than the cash.

So advertisers and publishers have to pay cash for a powerful benefit they really want, while consumers have to pay data for a so-so benefit they aren’t exactly clamoring for.

In addition, under the model of these ‘traditional’ BT companies, it is impossible for them to provide advertisers a powerful-benefit-for-cash unless consumers go for the so-so-benefit-for-data.

This means that companies have come up with all sorts of creative ways to push the so-so benefit, or, at times, making an end run around the problem by not telling customers about the exchange. Phorm tried exactly this tactic in its initial trials, but has since capitulated to government pressure and now has an opt-in system.

So that’s the core of the problem: the moneymaking value proposition businesses’ll pay for relies on a non-moneymaking transaction with consumers who don’t want it.

What is the solution? It’s elementary, my dear: get back to basics and put the user first.

• What do web users care about?
• What are you offering them?
• Do they value what they’re getting as much as they value what you’re asking from them?
• What don’t they like about what you’re offering?
• What don’t they like about what you’re asking them to pay?
• How can you change what you’re offering, what you’re asking them to pay, or both, so that you’re creating value for the consumer?

Forget about maintaining surfing history, whether it’s anonymized or not. Forget about dangling the dubious carrot of ‘more relevant ads’.

Worry about what the consumer wants, and what the consumer doesn’t want — then worry about pleasing your advertisers.

What do you think about this idea?

Summary: In this post, I discuss the issue of trying to force independent word-of-mouth recommendations, an oxymoronic concept. I’ve come to the conclusion that there’s a simple two-step process to generate great word of mouth: 1) provide a great product or service, and 2) make it easy for people to spread the word.

One of the big lessons from Facebook’s trials over the past three weeks is this:

Artificially-induced word of mouth is not the same as the organic kind.

Not only is it not the same, but attempts to game it, like Beacon, carry the potential to bite the implementers in the nether regions.

This concept goes straight to the core of what makes word of mouth powerful: its inherent sincerity. And it pretty much goes without saying—or it should—that sincerity can’t be faked.

The reason we trust our friends is because we believe they have no ulterior motives, so it means a lot when they buy something or subscribe to a new service or read a good book, and are independently impressed enough to pass on a recommendation.

I believe that we all choose what we want to do all the time—nobody has to do anything. But in our society, the concept of having to versus wanting to is frequently linked with money. If you do something without receiving any money, you’re not doing it because you have to, you’re doing it because you want to. The most powerful recommendation possible comes from someone who is so awed by your product or service that they have to tell people even though they get no financial benefit.

And the payment question can be tricky. On the one hand, are paid endorsements still independent? On the other hand, if you’re going to co-opt my purchasing habits and use them to promote your products I should get a piece of the pie, don’t you think?

There is a reason this is the most powerful recommendation, and it has to do with motive. If you’re not getting financial benefit, why do it? Why do we tell each other about commercial offerings when we have no stake in the sale?

When we take away the financial incentive, it comes down to social standing. If I consistently recommend the best products, the coolest services, the newest up-and-coming websites, I increase my social rank. If I recommend lousy things, those recommendations color people’s impression of me personally.

We all know this, albeit subconsciously. I know that my friend wouldn’t recommend to me something lame because it would make her look lame. And that’s far more important to her than the $10 she might earn from a company trying to buy her endorsement.

You cannot fake this stuff. You definitely cannot fake this stuff sustainably.

Tapping into word of mouth is a simple two-step process:

1. Provide a great product or service
2. Provide the tools and mechanisms to enable customers to easily recommend your product or service

What has your experience been with social recommendations and endorsements? And I’ll give a dollar to anyone who can provide the original source of the quotation: “Sincerity is everything. If you can fake that, you’ve got it made.”

Boy was I wrong when I said that dynamic in-video ads hadn’t been done before!

From Cory Treffiletti at Online Spin:

Last week I made the statement that the majority of online video networks either serve video into existing ad units or are manually attaching video spots like 30-second commercials into existing video content. That set off a flurry of responses from such companies as Scanscout, Tremor Media, Eyeblaster, Broadband Enterprises and a new start-up called QMeCom. Each of these folks professes to be capable of dynamically ad-serving video spots into video content based on cookie profiles or behavioral data. I did take a peek at each of their newest products and they do appear to be delivering these services to advertisers within their existing networks of inventory, By using an ad tag from Doubleclick, Atlas or any of the major ad-servers, you can track these units in your digital dashboard for ad management and reporting. I can?t speak on the performance of any of these, as I have not tested them, but at least you know where to look.

Then Michael Arrington reinforced the point with his aptly titled post: Ok, Ok. All of You (even YouTube) Invented Video Overlay Ads “First”:

VideoEgg has certainly been doing this for a year or so…

Next up was Adbrite founder Philip Kaplan, who emailed me to say that Adbrite has had their own overlay product for nearly a year…

And finally, Brightcove CEO Jeremy Allaire sent me a long email saying they?ve been doing this as far back as October 2005…

So where did I read recently that dynamically generated ads were the holy grail for video content? Seriously. It was within the past month. I’ll send a Facebook gift to anyone who can help me figure it out.

Interestingly, Jeremy Allaire continued by saying that advertisers weren’t particularly interested in video overlays:

There are a lot of factors behind this limited uptake, including:

- the advertising community buying video have been very focused on leveraging existing creative and buying patterns in the online video space
- most content publishers and media owners have been focused on getting the ?basics? up and running, and also responding to the RFPs from marketers and advertisers, which are almost 100% focused on basic short-form video commercials
- for premium brands and content, the basic pre-roll and companion banners are yielding extremely attractive CPMs and there is little evidence that :15 ads have any negative impact on end-user viewership behavior ? in fact, our own metrics show that sites that run without any ads, and then introduce :15 pre-rolls and banners achieve identical usage and performance (e.g. no drop-off in users because of ads) on their content.

Brian Hayes pointed out after my last post that Google’s going to have a tough time recouping their $1.6 billion using this model.

So consumers don’t like it, advertisers aren’t interested, and Google can’t make money at it. Why are they doing it, then? And what do you recommend instead?