Everything Looks Like a Nail

when you’re a hammer. When all you think about is information, everything looks like a problem the internet can solve.

Just read Brad Burnham’s post on the sale of Tacoda to AOL/TimeWarner. Before I go into my everything is made of digits spiel, I want to say congratulations to Brad and Fred at USV. I’ve known them both a long time (and co-invested with Brad when we were both much younger.) I’ve done business with a lot of venture capitalists and Brad and Fred are stand-outs, not just as businesspeople, but as people (and that, I should add, is just as important.) The sale of Tacoda shows their foresight, if anyone ever doubted it.

Brad makes the point that the internet fundamentally reshapes marketing. I agree. Here’s why.

The existence of marketing at all is a bit of an underaddressed topic in economics. Economists don’t like marketing because they like markets to be efficient and in an efficient market consumers find the best product for the best price. Marketing doesn’t make a product better and it certainly makes it more expensive. Marketing is a sign of an inefficient market, and an especially persistent one.

Plus, marketing is so declasse.

I like to tell my kids that anything they see advertised on TV is absolute junk and I refuse to buy it: the bulk of the purchase price goes to the marketing budget, not the product itself. This makes my life sooo much easier. But it drives them absolutely nuts, because the only products they know of are the ones advertised on TV.

In economics terms, marketing is a way to make finding a product more efficient. Companies advertise so consumers know about their products. In a world of mass media, this cost of search is borne by the seller: it has to be, it would be amazingly inefficient to try and have it be borne directly by the buyer.

What happens when the cost of search goes towards zero? The tables completely turn. Marketing moves (slowly) from being a shotgun fired by the seller to being a tweezer held by the buyer. Behavioral marketing is one of the first steps on that journey and Brad and Fred recognized that years ago. I’m sure they also realize that the really interesting stuff, the revolutionary stuff that makes marketing as we know it today completely obsolete, is what inevitably comes next.

One Comment

  1. You let your kids watch TV commercials? Softy! We fast-forward through them.

    My kids have gotten the whole training on “impulse buys” — why they’re placed where they are, how very much we do not need them, and lately, a bit about the nasty conditions in which it is likely that they were produced, not to mention the impact of the long-distance shipping to get them to the stores.

    It turns out I kind of enjoy the role of mean mom when it comes to cheap crap for sale.

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