Can a new generation of web companies finally bring emotion to online advertising?

There’s a common theme among the young founders of social web companies that haven’t yet made money when it comes to advertising: they want it to be beautiful. They want it to inspire people. And they don’t want it to feel like advertising. But is this even possible on the web?

Instagram, Pinterest and Tumblr are all hugely popular social companies that aren’t making much money right now (with the exception of Tumblr, and that might be debatable.) They’ve raised huge amounts of venture capital or have been acquired by companies for such large price tags that they’ll have to make money soon. But the core value proposition for these three services, one that’s certainly reflected in the attitudes of the founders, is that that they are beautiful, creative online spaces. So how do you put ads there without ruining the atmosphere you’ve created and that users have come to expect?

Mad Men advertising executives explore the brand new world of video ads in the 1960's.

Mad Men advertising executives explore the brand new world of video ads in the 1960’s.

Obviously, many forms of advertising have been around for hundreds of years, but only in the past 15 or so have we seen a change in how search and contexual ads have had an impact on the business. This search-driven model existed before Google, but from the time the company launched AdWords in 2000, the concept of text-driven and contextualized ads based on search really began to take off. This data-driven approach has affected much of online advertising since then, and Google has developed a billion dollar business around the practice.

And along with search, display ads have also been a signficant part of the puzzle. In the early years of online advertising, it seemed that banner ads and other forms of display would be able to mimic more old-school advertising methods, since they weren’t all that different from the then-profitable ads in print. But the format is no longer dominant — in fiscal year 2012, search ads brought in 46 percent of revenue from advertising, compared to the 21 percent of revenue coming from display ads, according to an IAB report.

Why advertising should get to know us

Most recently, the rise of social media and smartphones that track everything in our daily lives from location to spending habits to real-world friends have made keyword search or banner ads start to feel fairly impersonal. Now Facebook can serve you ads for cars if they think you’re likely to buy a car soon, or Twitter can show you promoted tweets based on the messages you post. These companies haven’t totally cracked personalized ad-targeting yet, but they’re working on it. As those companies know, advertising needs to feel useful and relevant if it’s going to work — all without seeming creepy or invading of a person’s privacy, and useful to a person on both desktop and mobile.

That’s a tough balance to hit, and it certainly doesn’t seem that those companies have totally succeeded yet. If the Mad Men era Madison Avenue experts figured out how to tap into a person’s core desires to re-create advertising in the 1950s and 1960s, we’re still waiting for someone to do the same with in the current digital era, by adding a layer of emotion and desire to the social media and consumer data that’s out there.

The idea of the moment, which we’ve written about extensively here at paidContent, is native advertising: creating “sponsored content” from brands that fits in with the look and feel of the site but is labeled as an ad and supports that particular brand. Tons of sites, from Buzzfeed to The Atlantic to the New York Times (to GigaOM itself) do sponsored stories. It’s how Tumblr’s ads are rolling out for companies like Denny’s. And in particular, for sites like Instagram, it seems like potentially the only way to preserve the aesthetics of the site while letting brands in the door.

Young founders look to their history books

When the Yahoo/Tumblr deal closed, Yahoo CEO Marissa Mayer talked about her intentions for ads on Tumblr and how CEO David Karp (who had previously decried advertising of any kind) imagined them on his site:

“David talks wistfully about the ads that he saw as a child, that would make him want to go see a movie or own a particular type of car,” Mayer said. “He says the current state of internet advertising doesn’t aspire to be as good as the content itself. We think that should change … we’re aligned in those ideals. When you hear us talk about native ads, where the ads are every bit as good as the content, and maybe even make the content better — that’s what we are aiming for. We want the ads themselves to create that aspirational feel that, for example, television ads or movie ads do.”

And speaking at the Commonwealth Club on Thursday in San Francisco, Instagram CEO Kevin Systrom was equally nostalgic about old-school advertising and how it might work for his own company:

“We made a promise that Instagram would be a self-sustaining business, and that promise still holds true today. The deal makes no sense if you think this thing will never make money. We’ve always had plans, and it’s just about when, and it’s just about how,” he said. “Think about the magazine Vogue, for instance, and how half that magazine is advertising, but that advertising is really compelling.”

Instagram co-founders Kevin Systrom and Mike Krieger talk with Google Ventures's Kevin Rose at the Castro Theater in San Francisco on May 30, 2013.

Instagram co-founders Kevin Systrom and Mike Krieger talk with Google Ventures’s Kevin Rose at the Castro Theater in San Francisco on May 30, 2013.

Finding the Don Draper approach to social

Systrom and Karp might be inspired by old Vogue ads, but it doesn’t seem that Tumblr users are as enamored by Denny’s gifs, and it’s fair to say that I’d be far less offended by a slightly off-target ad on a news website than one posted in my Instagram feed. The founders have accomplished a remarkable feat of creating companies where users feel personally and emotionally attached to the experiences they have there — just ask someone like Om who’s made a digital friend with someone he’s only “met” through Instagram.

But by raising the bar for what we expect on their services, the founders might have made navigating advertising that much harder for themselves. We’re in a whole new world of digital media, just as Don Draper and his executives faced with the rise of the television. But just as those executives saw the change as a new opportunity to reach consumers in their living rooms, so too could Pinterest and Instagram see this as an opportunity: to make digital advertising personal.