Advertising is becoming not just about messaging but providing value to customers. Functionality has often not been the role of advertising.

- Trevor Kaufman, CEO of Schematic, an interactive advertising agency (link)

Essentially:

• Build a brand by building a product.
• “Market” by delivering valuable services to people that help their lives.
• Focus on delivering value exchanges rather than merely influencing value exchange decisions.

Simple idea, but hard to execute.

Luckily the web makes it easier to blur the lines between messaging and functionality, between influencing and delivering value exchanges.

Traditional web advertising, whether it is text, image, contextual, keyword-based, etc., is still based on the fundamental model of displaying advertising next to content, a notion simply transferred from traditional offline media into the online world. Web pages are just inventory.

But this notion is becoming increasingly outdated as marketers realize that they can create content and use their websites to drive engagement by delivering valuable services. Nike Plus is the oft-cited example, but another example is Johnson & Johnson’s BabyCenter, a website that provides deep content around, surprisingly, babies, but also a highly relevant community of users that use the site to engage with each other. The concept of “earned media” in PR can be adapted to “earned engagement”. Web pages are not inventory, but interactive services for people.

As entrepreneurs, re-think the potential revenue models for startups: interstitial, interruptive advertising is not the only way. In fact, basing a business on advertising revenue will soon be poor business strategy.

As I posted earlier today on my photography site:

In the near future, advertising will no longer be the default revenue model for web startups. To start:

• We will have realized that interruption-based “messaging” (e.g. corporate spam) is something nobody wants in our social networks, in our communication services, in our products and services, in our information sharing, in our transactions of value. We’ll be sharing too much value, too easily, too widely, too targeted: the transaction costs of advertising will simply be too high compared to other ways of extracting revenue from value creation.
• The interest will be in conscious consumption instead of conspicuous consumption. Attempting to convince consumers to “buy, use and discard more” simply won’t be good business strategy. Conscious consumption requires a different approach to influencing people’s decisions; existing traditional advertising is a square peg for that hole.

So what else is there? Chime in with your comments, and help start the conversation by voting for this SXSW panel idea, “Avoiding Advertising in Business Model Design”.