Rita Gunther Mcgrath | Blog | The Discipline of Strategic Growth

Ads replacing $$$

I was recently asked about the emerging practice of replacing payment for services with watching ads. Here are some thoughts:

The practice of trading ad-watching for bill payments has been tried before, without very good results (remember e-machines in its first incarnation?).

Nonetheless, entrepreneurs continue to try. Some recent experiments are with the free phone lookup service that promises to replace the $1.50 fee charged by operators with a free lookup, provided that the caller is prepared to sit through an ad first. The advantage to a company is obvious: they can obtain a bigger footprint and more users by offering services that can be used without an out-of-pocket cost.

The big disadvantage of this approach is that the people you will tend to attract are those with more time than money, when the people advertisers tend to want to reach are the ones with more money than time. So you actually create a self-selected group of particularly undesirable users for many offerings if you offer this to the general public.

If you could conceive of a way to target the segments, however, you might have a winning formula. Say that your prime targets are people with a certain interest – say, women who enjoy needlepoint. If you could convince the needlepointers that the ads they will hear will be targeted to their specific interest, and the advertisers that they are targeting desirable customers only, then an operator might have a winner, because the service adds value to both parties. So yes, if there were enough of such targeted niches, it might work.

The big dilemma is that for many extremely desirable customers, sitting through ads, no matter how targeted, is considered a waste of time.

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