Uh-oh… “What If Media 2.0 Is Less Profitable Than Media 1.0?”

The Publishing 2.0 blog asks an interesting question, “What If Media 2.0 Is Less Profitable Than Media 1.0?“

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?

All marketers know intuitively that mass media advertising is wildly inefficient — there’s the obsessively repeated Wanamaker quote about knowing that half of all advertising is wasted but not knowing which half. But the Internet may be doing more than make advertising more efficient and measureable, i.e. reducing wasted dollars — it may be fundamentally lowering its unit costs.

Let’s take my favorite example — MySpace. There’s an article in the Times today about MySpace’s struggle to monetize it’s ever-ballooning asset. According to comScore Media Metrix, MySpace had 28 billion page views in March 2006. Annualized, that’s 366 billion page views. Yet Richard Greenfield of Pali Capital estimates that MySpace’s revenue this year will only be $200 million.

Do the math — that’s a CPM of $0.06!

… Later…

Now, I’m not suggesting that there’s no money to be made in 2.0 — I’m speculating that for media companies, it’s a whole lot less than what they enjoyed with 1.0.

I’m speculating that in a 2.0 future, total spending on marketing and advertising will shrink as marketing 2.0 proves to be far more cost efficient than marketing 1.0.