How Segmentation Becomes Fragmentation: Online Advertising’s Incredible Blind Spot

In the late 1990’s, the tech industry hype machine went into over-drive telling us that the web would replace retail and become the biggest sales channel for every product on earth.

Of course, it didn’t happen. Today, brick & mortar retail dominates purchases – and does so while using the web as one of many communication options and as a small, but important, sales channel.

What’s the hype machine telling us about advertising? The same hype machine has re-emerged and is leaping at social media, viral campaigns, and online video as the magic that will rescue the web from a minority role in advertising. (This would, of course, bring all those juicy advertising dollars to the company’s and their VC’s who are behind the hype machine.)

Once again, these broad claims are bunk. And, with beautiful irony, the theory of web dominance in advertising breaks down because of what the hype machine also tells us is the web’s biggest strength: nearly infinite segmentation.

Web users sign on, search through a small number of search engines, then scatter around the web faster than particles pushed outward from a supernova.

Web advocates have rightly noted that this makes the web ideal for targeting – claiming that online promotions can have laser-like accuracy. (This accuracy requiring, of course, various forms of passive and invasive tracking of your every online action.)

Segmentation and fragmentation are two sides of the same coin.

If all we expect of the web is a highly targeted minority role in our marketing mix, then the web has segmentation. Or if you are selling a niche B2B product to a technical audience (like IT), then the web offers segmentation – and highly valuable segmentation.

But segmentation becomes fragmentation when we consider the idea of replacing advertising’s biggest gun: television. When compared with TV, web audiences are not merely fragmented but shattered into billions and billions of tiny shards. TV’s opportunity to move millions of consumers to action simply doesn’t exist on the web.

Consider it this way. If on it’s best days TV creates a power of 100, on its best days the web creates a power of 1 to 5. As a minority share of an integrated marketing plan, this “1” is important. But no matter how hard you try, the web’s 1 can never replace TV’s 100. (Or print’s 75; or direct mail’s 30 or radio’s 60 or outdoor’s 40 or…)

Sadly, if web advertising is all you’ve ever known, crawling around to gather enough shards to create micro-segments from nano-segments might make you think you are doing something big. (After all, it’s a lot of work and mere busy-ness can easily mask ineffectiveness.)

But if you have travelled the much wider world of traditional advertising, you’ll realize it’s impossible to use online shards in mass advertising to create anything more than a very nice minority role. (And here I should note that Apple is just one example of a savvy advertiser who knows this and relies heavily on TV while using internet advertising in a limited role.)

But heck, many web investors don’t want to hear this. And, just so, they’ll fire back. With what? Probably a Forrester research report showing an astronomical 20 year growth curve for the NEXT web invention – perhaps location based search engine optimization delivered via socially viral online video with a twitter core hosted on a cloud. Yup. That’s the ticket.

It’s time for the ad biz to grow up and confront the tech machine’s hype with advertising reality.

Copyright 2010 – Doug Garnett