Scott Karp at Publishing 2.0 poses some interesting economic questions about scale and efficiency.
As consumers spend more and more of their media time online, ad dollars have been pouring into online media — the assumption has been that the billions of dollars that large companies spend on mass media advertising and marketing (i.e. TV ads) will ultimately follow the small company dollars online. If this assumption is correct, websites with the greatest command of online consumer attention, e.g. MySpace, will be the beneficiaries of this 1-to-1 transfer of marketing and advertising dollars to digital media.
But what if there’s a fatal flaw in this assumption? What if the transfer of marketing and advertising dollars online is not 1-to-1? What if the Internet has fundamentally lowered the marketing and advertising costs for big companies as it has for small companies? What if large companies can achieve the same sales objectives for a fraction of the cost of traditional mass media advertising?
I hope companies can spend less on advertising in the future. Then they can spend more on R+D, their people, charitable giving and in some cases, production of other-than-advertising communications products like books, films, records, etc.