In Silicon Valley-Madison Avenue Standoff, the Valley Blinked

Silicon Valley has long looked down on the advertising business. Advertising is inefficient. Advertising is maddeningly hard to measure. Advertising prizes emotions over data.

That’s why the meeting of the two worlds – epitomized by the Web 2.0 era – was so messy. With the success of Google, it appeared inevitable that Madison Avenue as it existed would be left in the dustbin of history. Then-Google CEO Eric Schmidt crowed that marketing budgets were “the last bastion of unaccountable spending in corporate America.” Facebook took up this mantle, declaring its entry into the media business in late 2007 with CEO Mark Zuckerberg’s ballsy statement that “the next hundred years will be different for advertising, and it starts today.”

Anyone been to Facebook lately? I’m not sure retargeting ads are the revolution we were promised. The truth is Google, Facebook and Twitter have bowed to the realities of the ad world as it exists, which is different than what they want it to be or the way it might be at some point in the future.

Google now runs the type of ads it sneered at, even testing gigantic banner ads on its once-sacred search pages. (My first story about advertising was about Schmidt lecturing a roomful of advertisers in 2002 to “stop scaring users” with intrusive ads. Things change; Google sells plenty of these type of ads Schmidt hated back then.)

Facebook came under fire from Forrester Research this week for not revolutionizing marketing. Quite to the contrary, with its embrace of programmatic ad buying, Facebook has become pretty much like the rest of the ad world. And that’s not a bad thing.

Twitter has clearly learned the lessons from the giants that came before it. The company has made sure to tread carefully in media, presenting its ad options – native, of course – as complements to existing media like TV ads. Twitter doesn’t want to revolutionize the ad world, it wants to improve traditional TV spots. This message was even clearer this week when Twitter tweaked its design to, in effect, allow brands to run display ads. Twitter will call these placements “native,” but they’re really just banner ads by another name. It’s the same crazy contortion Facebook uses in calling its Facebook exchange Newsfeed retargeting ads “unpublished page posts.” Sure, whatever you want to call them, guys.

What all these giants have come to realize is that, despite their scale and hold on consumer attention, the ad industry wasn’t going to change overnight. Or even in a decade. Facebook admitted as much in its response to Forrester. I’ve been told the company was arrogant about advertising in the early days, but it recognized as a public company it needed to do what advertisers wanted to do.

Even Apple has found advertising hard to change. Steve Jobs promised to end the suckiness of mobile ads. And yet iAd has gone from a boutique, high-end product to a run-of-the-mill ad network. Pirates sometimes trade in their poofy shirts for dress whites.

Madison Avenue isn’t gloating over this. They are taking their tours of Silicon Valley and trying to adopt many of their processes for moving faster and “breaking things.” Much of it was predictable. Zuckerberg’s overearnest contention he was changing media, made at a glitzy launch event in Manhattan, was greeted at the cocktails afterwards with off-the-record chuckles by the ad execs. The consensus was: Good luck, kid.

Media is in the midst of an historic transition from the analog to the digital era. Power bases are shifting, without a doubt. And yet some truths remain. One is that the person writing the checks more often than not still calls the shots.

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