The End Of The Rainbow.

In light of the plummeting internet stock prices on the back of the Yahoo advertising warning, I was very taken by JP's reference to Peter Drucker's observation that on the internet maybe companies have to buy customers rather than sell products. I think it applies offline as well as online.

Despite declaring advertising to be a dying industry, some commentators have been willing to exempt new internet businesses from the slump that Yahoo is facing and I think they're entirely wrong. Sure, Google adwords are different from moribund brand advertising, but in an economic turndown minds will be focussed on issues such as the overbidding for adwords (which I think is rife because advertisers don't bother to run an ROI analysis) and the incestuous walled ecosystem of Web 2.0 companies providing advertising revenue for other Web 2.0 businesses.

At the end of the day, businesses need customers or they die. The auto industry is suffering from overproduction but I just wonder how many online businesses that have grown up in this last upturn of the economic cycle may also be found to have been "selling" products rather than acquiring genuine, profitable customers?