At the heart of the classical model of advertising is a simple idea: Ads create purchase behavior. Advertise a lot, sell a lot. Classical advertising has little need for quality. At its cold heart lies the notion that advertising organizes demand, that you, the customer, are sort of an idiot: highly susceptible to flattery, comedy, sex, free stuff, and, most of all, repetition. You can be made to buy a product. No matter how sophisticated the icing you put on the cake (or how you improve the model), classical advertising rests on the simple foundation of recency, frequency, and money.

Ted Levitt, the late, great Harvard marketing theorist, turned this idea on its head. People don’t buy products, said Levitt. They buy solutions to problems; advertising is panacea to nothing. To sell, to succeed, companies must innovate—at very least, pursue incremental, non-disruptive innovation: e.g., the sixth blade on a new razor. Give customers more value than rival products, a better mousetrap, a better solution to their problems, and they’ll beat a line to your door. Advertising plays a role here too, but strategically speaking, it’s a different role, advancing the notion of customers as intelligent agents actively calculating and organizing their needs and values—albeit still as less-than-equal players in the determination of how demand is created and sustained.

Recently, I’ve been wondering about what Levitt would say if he had witnessed our revolution, the one wrought by the Internet. What happens when customers become the equal, or even the better, of advertising and marketers? What happens when advertising no longer plays the dominant, pursuers’ role in this relationship, and consumers hold the cards because their choice—e.g., their Google searches—is the leading edge of need and demand? Or to put this another way: When advertising becomes commoditized and consumer intent becomes self-organizing, how do companies organize self-organizing demand?

Post-advertising solutions

As AdSense and AdWords and PageRank show, it’s not as if you can count out the importance of advertising. Birds do it, bees do it, even Google does it, so it must be good: Advertising still serves a purpose in the atomized, anarchic world of search, even if that purpose is now merely to make algorithmically relevant matches between consumer need and products.

Even in this world of predictive matching, however, advertising, even advertising with well-written SEO, is losing its edge. This is particularly true of brand advertising’s expensive flattery (banners and brand campaigns). Not because brand ads don’t tell good stories or rivet brands to emotion (take a look at American Express’s My Life, My Card campaign), but rather because (as Chris Anderson says in his new book), customers basically orgasm when they get shit for free, and brands haven’t yet figured out how to compete in this environment. As long as price is a major consumer pain point—and that’s forever—you can bet your bottom dollar that advertising will continue to decline against Free. You can build the best mousetrap in the world, but if consumers find a mousetrap that delivers 90% of the value at zero percent of the cost—you’re sunk, dude.

Of course, most companies still haven’t accepted the idea that free products in free markets are good-enough consumer substitutes. They still think they are competing against advertised rivals instead of these reviled free purveyors/pirates. “The way to compete with Free,” says Anderson, “is to move past the abundance to find the adjacent scarcity.” I agree. But “adjacent scarcity”—e.g., the premium content consumers you supposedly going to offer for purchase to customers—isn’t easy to sell either. And it doesn’t leave you with much of a business model for the free stuff you’re giving away. So it’s back to square one: what’s advertised (and supposedly higher quality) versus what is free and frequently good-enough.

Another solution is to get consumers to do your advertising for you—what passes for much of what is called social media today. The theory goes that if advertising won’t work, influence will. You can zap a commercial, but you won’t zap your best friend’s blog or the tweets and (surreptitiously sponsored) Facebook status updates of someone you sortakinda trust. This kind of “social marketing” certainly seems to be gaining traction right now, at least among so-called social marketers. But saying you need social marketing strategy today is a little like saying you need dial tone strategy. The promotional stuff you load up on Facebook or Twitter isn’t social media, it’s social selling. Slathering “Follow us on Twitter” on your websites, emails, products is a kind of pure silliness that mistakes advertising for engagement. It falls absurdly short of the sophistication that self-organizing audiences require. And it reminds me of nothing less than the bubble pronouncements of Web 1.0, when every company trying to “get the web” slathered “Follow us at www.anycompany.com” on its products. It doesn’t work, except to create awareness that you’re advertising in a new medium. To which most consumer say: meh. (Counterexample: Coke.com. Its home page is nothing but a link to Facebook.)

Social media 2.0

So, if advertising is commoditized and “social marketing” is commoditized, what’s left? How do you organize self-organizing demand?

Well, first let’s look again at why purely promotionally focused marketing in nano-niches over Facebook, MySpace, Linkedin items doesn’t work. Why shouldn’t you advertise the latest feature by Author A in the new issue on a Facebook page; promote that new concert via a MySpace page; advertise a 10% discount off “allready [sic] low prices” via Tweets. After all, these do their part to a media buy.

But compared to the real gains these companies could create by creating service to their customer base through conversation and engagement—or conversely, concentrating promotional power at the touchpoints of specific use-cases—these promotions look like wasted spend chasing cheap dollars from customer segments. There’s no margin worth chasing here, and the instant someone else makes a better offer (or this consumer is convinced that Torrents aren’t the end of the moral universe), they’ll be gone. (See the recent Stephen Fry brouhaha on this very subject.) Of course, the counter argument is that the power of cheap promotion is all in the long-tail—it’s a volume game. But if you’re going to be in the shmatte business instead of branded fashion, you’d better be prepared for low margins, heavy debt to support inventory, and nasty, fast-paced churn as your customers run. I’m not saying it’s never worth it, only if you’re building a brand, it’s a distracton from finding that “adjacent scarcity.” A tough game to play

A more interesting game—more rewarding to brands and more lucrative, with less churn and higher margins—is the one that builds conversational and engagement gambits based on already existing social relationships, digging into what John Seely Brown and John Hagel called the social life of information: the information that lives, breathes, and functions in and through social relationships, online and off.

From this point of view, all media are social—the big question is how you unlock their social power. Just as we say that the only communities worth building online are those that already exist between people—that our job in building community should be to unearth and facilitate the communities that already exist—we can also say that the only media that can break free of commoditization are those that exist within an inherently social construct. The trick is finding the social tentacles  already at work in the DNA of the brand.

Of course that’s easier said than done. Where’s your brand DNA? Cue the consultants, right?

Well, here’s a different answer, one thankfully less indebted to bright shiny object syndrome but still somewhat novel: Don’t think of social media as a construct placed on top of your media, instructing or seducing consumers to accept the ventriloquistic subterfuge of influence., of advertising. Don’t even think of it as sharing or collaborating or creating a conversation. (Although that’s certainly better.) Think of social media as the social construct of every piece of data your organization already owns or can own. Not as an object in a database but rather as part of an exchange—between customer and company. That involves understanding every single utterance your company (and your customers) make as a scarce social bits that must be organized into context(s) and arrayed with that understanding.

Condensed to a single thought: social media can’t exist without content strategy—and vice versa.

Without social context, content strategy is arid taxonomical merchandizing contained by (and girding) user architecture. But social media without content strategy is typically promotion-by-another-name. Together, audience creation and social connection make beautiful music. Together, content strategy and social media perform superhuman feats of revenue creation. Together, they create real service to the customer, unlocking the riddle of “organizing self-0rganizing demand” over the lifetime value of the customer, and not in response to a cheap promo.

And what’s cool is that they don’t do it through Flashy multimedia SEO-immune trickery by the Silverlight of the moon. (And please don’t tell me the solution is custom publishing, unless you’re willing to put your custom published content into the market against paid content.) They do it through the remix and mashup of the content already in the storehouse, the treasure trove of digital assets most companies build or aggregate every day—whatever objects they generate through data creation, including documents, text objects (captions, pullquotes, etc.—) photos, music, video, Tweets… no matter whether they are made by your authors and contributors or your users.

As Andrew Savikas says, Content is a Service Business, but how, exactly? How do you go from “we have a lot of tweets about business that intersect our brand” to ExecTweets, a Tweet aggregator about business; from “we have stuffed suggestion boxes about how to improve our stores” to MyStarbucksIdea; from “we have a ton of blogs about small business” to OPENForum. From registered Democrats to the Obama campaign’s amazing social strategy? Or (to borrow from my own examples above) from promotional chitchat about the latest performance at that big Las Vegas hotel to an entertainment community that brings aggregated news of who’s playing with user comments from FB, MS, etc. Or travel listings that bring aggregated news and blogs about hot destinations with users’ tweets, geodata, and photos—and rankings of hotels, travel agents, and airlines.

The secret sauce

In fact, it’s not so secret—and if you’ve been prescient enough to have some kind of end-to-end XML-based CMS behind your operation, you probably already have a start. Because all it takes it the metadata you and, one hopes, your users, attached to those assets.

Why metadata?

Because that’s the system—on either the authors’ or users’ sides—through which you’ve made yourself searchable. Increasingly, tags are no longer second-order data—they’re the brass lamp in Aladdin’s cave, without which nothing can be illumined. Rub the lamp, and you can turn all those programming stacks into the most scalable, continuously profitable revenue generating data you own. Leave it as pure content or a promotional bolt-on from advertising, and you’re not only failing to create the layer of customer service that drives user loyalty, you’re failing to create the rich and inherently social content experience that users expect today. And as the metadata get better and richer, as the capabilities of OWL and RDF and SPARQL and the rest of the anagrammatic programs of the semantic web (sometimes called web 3.0) become more mainstream—and newsier: like these International Press Telecommumications Council “newscodes” (now being ripped off by AP)—we’ll get to evercooler and more useful mashups of news data, with greater revenue earning potential than ever.

So is anyone doing this now? (Apart from the OpenCalais project already initiated, albeit phlegmatically, in a handful of websites.) OK, here’s a trick question: What is the most successful media company in the world using metatag data to whip-up self-organizing demand?

OK, I give: It’s Apple.

As Kontra (a self-described “veteran design and management surgeon”) wrote in a post a few weeks ago on counternotions, Apple has created an entire universe of metatag strategy and dynamic metatag management via the App Store. Kontra points out that there’s always been a trove of metatag data in iTunes, more relevant to pre-packaged, static content than dynamically updated content. But thanks to changes in iPhone OS3, the App Store now allows for content to be upgraded recurringly and connected to other apps—you can even alert customers that new data is available via push-based numbered badges hovering over your app icon.

You don’t have to be a genius to see where this can go, but in case you can’t, Apple tells you about potential business opportunities push notification and metadata open up in black and white right  on its website: “Create a subscription magazine app where you ask for payment on a monthly, yearly or periodic basis of your choice. Sell extra levels to extend the experience of your game. Build a general-purpose city travel guide app and let your customers pick the city guides they want to purchase.” Obviously a lot more too.

So what’s this got to do with media? After all, publishing hasn’t been central to Apple’s business model until now. Bob Cringely, the brilliant tech (and now mortgage) writer I read as soon as he posts, recently said that Apple is moving slowly and steadily toward becoming primarily a content provider with Apple TV as Jobs’s Trojan Horse. Preposterous though it sounds, Cringely may be right: I’m a (hacked) ATV lover, and I can see where and how Apple might use the aggregated metadata knowledge it acquires from my purchases to create new programming. Genius playlists, in my experience, already do this so well, they’re a total substitute for dj playlists and mixtapes. Could ATV do the same thing for networks and channels? Scary thought if you’re NBC.

But now start to apply Apple’s brilliantly counterintuitive strategy—using broad distributed networks as the foundation for a moated ecosystem—to drive revenue in other media. To steal Jarvis’s WWGD idea: WWAD (What Would Apple Do?): How would you build a metadata strategy for more traditional media companies (magazine companies, newspapers, book publishers, online programmers) using Apple’s model? For book publishing? For a candy company? A digital camera manufacturer? For vertical search with travel, real estate, or auto listings?

This post is long enough as is—mea culpa—but let me finish by pointing to one of the biggest companies to have applied Apple’s lessons to its own business to date, creating a wave of disruptive innovation that may actually succeed where so many others have failed. I’m talking, obviously, about Amazon’s amazin’ Kindle. The correspondence isn’t one to one. You can’t compare the depth or pricing genius behind the App Store with the more conventionally priced Amazon Kindle bookstore. And—to return to the argument I made above about finding “adjacent scarcity” in competition with free models—I’m not so sure how much I’d bet on a DRM-based publishing model when there are so many amazing substitutes out in the wild.

On the other hand, Kindle—or maybe an Apple tablet, we’ll soon see—will I believe one day change the whole way we think of the media product. No longer will we buy a “book”—one day we will buy a relationship to a title. Home reno: we’ll buy a title and a continuing stream of articles and community relationships. (Or you can flip this into a freemium strategy—we’ll get involved in nano-niche communities, and buy their books and teeshirts when they finally appear.) Nothing, not even fiction, will be untouched by the Kindle model: Instead of buying fixed narrative, we will be purchasing a touchpoint in a story, one likely to have living prequel(s) and sequel(s). Whether we fix a badge to the content unit to let you know there’s new material waiting to be pushed or whether you just download it per Kindle, the key to organizing the self-organizing community will lie in unlocking the value of the socially affective (and effective) metatags that can power revenue-generating media. Call it social media, call it content strategy, call it whatever you want. I think it’s the future, but it’s already well under way today.

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Tagged: Advertising, apple, Business, Chris Anderson, content, content strategy, customer service, Facebook, freemium, Google, johnseelybrown, Marketing, metadata, MySpace, social media, Twitter