Silicon Alley Insider in Wednesday’s post "How Google Can Make Money With Google Wave" is bringing up a point about online advertisement very much like the kind I have been making for at least the last 6 months. Here the key excerpt (my BOLD highlights):

Semantic advertising. [...] Since conversations on [Google Wave] waves have to go through the server each time, a semantic engine could parse them on the fly and serve up relevant text ads. With enough data and training, a semantic engine could decipher intent, i.e. whether you’re talking about your trip [...] last summer, in which case ads would be useless, or whether you’re setting up a wave to plan a trip [...] with your friends, in which case ads for cheap flights and hotels are relevant.

Intent is the reason why nobody clicks on ads in social networks but they do in search engines. A semantic engine would know that 99% of the times you’re waving an ad would be irrelevant at best. So 99% of the time people wouldn’t see ads at all. Wave, Inc. might set this up on their own servers and allow others to set it up on theirs under a rev[enue]-share agreement.

Over the long term, Wave, Inc might also open an ad network [...]. This would be good for consumers since they would get few ads, and only relevant ones, good for advertisers since they’d get high clickthrough, and good for Wave, Inc, since they’d have a high quality, expensive inventory. This might be the thing that makes online ads something other than punishment for using stuff for free, but actually something useful and exciting.

Problem: semantic technology is still inchoate and execution would have to be flawless for people not to find it annoying and/or creepy.

Read that 2nd to last sentence in bold again. Therein lies the crux of the failure of online advertisement in most areas other than search ads.

For more proof of how badly current ad models are failing, witness the stats that MediaPost Publications just posted in ComScore: Most Clicks Come From ‘Natural Born Clickers’ 10/02/2009:

Indeed, the number of people who click on display ads in a month has fallen, from 32% of Web users in July 2007 to only 16% in March 2009. Worse still, an even smaller core of consumers — representing just 8% of the Internet user base — accounts for the vast majority, or 85%, of all clicks.

Now while the strong "few users generate most clicks" imbalance is predicted by the 80/20 Principle, the reduction BY HALF in less than two years is indeed stunning, and cannot likely  be explained away with the recessionary economic background alone.

It is far more likely that users have systematically trained themselves to mistrust and hence to simply ignore online ads altogether (other than MAYBE search ads).

The situation of internet users ignoring internet ads is apparently becoming so dire, that comScore et al. are beginning to sound like TV advertising execs in their pitch to ignore the bad news (from the same post):

"Marketers who attempt to optimize their advertising campaigns solely around the click are assigning no value to the 84 percent of Internet users who don’t click on an ad," said Linda Anderson, comScore VP of marketing solutions and author of the "Natural Born Clickers" study. "That’s precisely the wrong thing to do."

Rather, as comScore research has shown, marketers need to embrace the fact that non-clicked ads can also have a significant impact on consumers.

Basically, the argument goes: Ignore the fact that no one is clicking your ads anymore, those ads are still somehow reaching consumers on a subconscious level, and will (magically) continue to build your brand (and ultimately sell your stuff) that way.

When the Internet guys are telling you to forget "measurable" and instead extol the virtues of Madison Avenue-style image advertising, you know something is afoot.

Now it is fair to point out that people do in fact retain contents that they saw even if the "seeing" never reached the level of top level consciousness. As such, in a recession, one might argue that there could be value in a company advertising simply to "ping" the consumer in a "we’re still here" sense? (Especially if the collapsing ad rates make it cheaper than ever to do so…)

But now remember the phrase from the first quote: "…the thing that makes online ads something other than punishment for using stuff for free". Then think about how sure anyone could be that their mere ad presence actually engenders much love from anyone at this point.

Rather than ask themselves the hard question on how to finally make online ads work, online ad stake-holders give you evasive platitudes. That’s simply not enough.