Buzzfeed’s Jonah Peretti: Display dollars aren’t coming back

Content providers are wringing their hands over how to get advertisers to pony up the big bucks they once spent on display ads. Maybe that money is just gone forever.

Jonah Peretti, a founder of the Huffington Post and viral content site Buzzfeed, says the sun is setting on display ads, and publishers should focus instead on ads tailored for social media.

“People are trying to get back to the way it was,” said Peretti in a recent interview. “With traditional display, people have figured out clever ways to get more clicks out of ads that don’t perform well.”

Peretti sees display ads as artifacts of an earlier internet era when people went to portals to find content. That era — and its skyscraper and banner ads — has long passed as readers instead turned to search and, more recently, to social networks to find stories.

Peretti is not the only one to remark on the portal-search-social evolution. But his observations on the ad industry’s response to the changes are intriguing.

He compares online advertising to the paradigm shifts Thomas Kuhn described in his seminal book, “The Structure of Scientific Revolutions.” In this model, progress doesn’t occur incrementally but in a series of jumps. Everyone works under the same (often wrong) assumption for a long time until a new and better idea emerges; when a tipping point finally arrives, everyone eventually gathers around a new plateau of knowledge.

This is what’s happening in advertising, according to Peretti.

“Social is a Copernican revolution but it’s still in its early stages,” he said, noting that the new paradigm — social-based ads — is based on the right idea but that the infrastructure to support it is still young and unsophisticated. Meanwhile, many in the industry continue to plug away at the old paradigm, using statisticians and advanced behavioral techniques to wring more dollars out of display ads.

So what will the online advertising industry look like when it catches up to the new paradigm? One possibility can be found in Buzzfeed’s own office where a creative team works with the site’s advertisers to help make their content as social as possible.

On the Buzzfeed site, ads are seeded in the stream of stories and are supposed to be appealing in the same ways as the site’s native content. This is consistent with Peretti’s mantra that a publisher should ensure the ad type is native to the platform (advertorials in print newspapers, for instance).

Another possibility is the New York Times’ clever new Ricochet product which allows brands to strap their ads onto a Times article. The ads then travel with the article as it bounces around the social sphere of Twitter and Facebook.

Peretti and other media leaders will be talking about these  issues and more at paidContent 2012, May 23 in New York City.