Eric Schmidt, CEO of search giant Google, told an investors group this week that the market for targeted advertising is at a very early stage with lots of innovation still to come, according to Internet News.


Discussing the inefficiency of random ads in traditional media, Schmidt noted, "It's a constant barrage of ads that aren't relevant; pet food for people without pets, baby products for families with out kids. Even a small improvement [in relevancy] would have a very large impact."
The relevancy he's talking about is in the delivery of contextual advertising. But that's not the real issue. Content is the issue. And until both agencies and clients get a clue about online advertising, no changes in ad serving are going to matter.
In the age of micro-niche media, advertising has to be micro-focused as well. It's the content and the focus that has to change. It's not enough to put advertising in new media. "Traditional agencies see a trend and they fuck it up," George Parker told the PSFK trends conference in Manhattan the other day, "like Rupert Murdoch and MySpace. People just move on to the next thing."
The next big thing in advertising also won't come from consumers. All you have to do to prove that is look at the lackluster crap that passed for consumer generated advertising at this year's Super Bowl.
As Parker noted, consumer generated media is not a strategy. It's not true that simply handing the tools for advertising production will make people creative, or brands successful.
Consumers may not be creative, but they're not stupid. They know that advertising makes free content possible online and they're willing to accept, and even clickthru advertising that is interesting, engaging, and focused.
I believe the era of the big ad agency is over. And so is the time when a giant like Google or Yahoo! will dominate online advertising. The specialization, the real creativity, the new direction will come from niche agencies that specialize in particular aspects of online advertising. Those will soon be popping up like spring flowers.