Online advertising was supposed to
amortize start-up and operational costs and lead to
profitability even as it subsidized free access to costly
content.
A similar revenue model has been successfully propping up
print periodicals for at least two centuries. But, as opposed
to their online counterparts, print products have a few
streams of income, not least among them paid subscriptions.
Moreover, print media kept their costs down in good times and
bad. Dot.coms devoured their investors' money in a self-
destructive and avaricious bacchanalia.
But why did online advertising collapse in the first place?
Was it ineffective?
Advertising is a multi-faceted and psychologically complex
phenomenon. It imparts information to potential consumers,
users, suppliers, investors, the community, or other
stakeholders in the firm. It motivates each of these to do his
bit: consumers to consume, investors to invest and so on.
But this is not the main function of the advertising dollar.
Modern economic signal theory has cast advertising in a new
and surprising - though by no means counterintuitive - light.
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