Internet advertising is on a roll; economic studies of innovation offer lessons on how to sustain the momentum.

Internet advertising is growing at double digit rates. The enthusiasm is back. The rest of the world, it appears, is finally beginning to get it.

It's good to be excited, to relish the sense of accomplishment after years of struggle. Yet it is important to secure these gains. Revolutions take time, and they don't always go according to plan.

Maximilien Robespierre, a great leader of the French Revolution, reputedly felt secure as he sat in his office in the Spring of 1793, savoring his success. His confidence had no doubt dissipated by the time he went to the guillotine in July of 1794.

Major innovations, like revolutions, are not always easy to control. Even so, successful managers can play to the forces at work both to promote an innovation's spread and to profit from it. Here are six lessons from the study of innovation that can help increase the chances for sustaining the growth and success of internet advertising.

Lesson 1:  Simply being better is not enough
Researchers conducted a simple experiment at Cornell University. Gathering together a group of students, they determined first that, when asked if they preferred to be given a chocolate bar or an equally valued coffee mug, about half the students preferred each. The researchers then randomly distributed a chocolate bar or coffee mug to each student, independent of a student's stated preference. The students were then told that they were free to trade. Given the random distribution, traditional economic theory would suggest that half would trade. Only about 10 percent did. 

This was an example of endowment effects, which suggest that people value something more simply because they own it. Multiple studies reinforce the findings, and the analysis of such behavior formed part of the contributions leading to Daniel Kahneman's award of a Nobel Prize in Economics.

Endowment effects reinforce a bias for the status quo. Innovations, even when demonstrably superior to what precedes them, are not necessarily preferred to what people currently have and hold.    

It's not enough for internet advertising to be marginally more effective. Status quo bias can only be overcome by being much better. The case has to be made stronger and stronger, and persistently, so that the status quo becomes more and more indefensible. 

Lesson 2: Evidence matters, but not as much as you think
It was in the midst of the Watergate controversy. Congressman Earl Langrebe of Indiana, a staunch supporter of President Nixon, was being confronted with yet more incriminating findings about the scandal. "Don't confuse me with the facts," he responded in frustration to a reporter. 

The Congressman was demonstrating a particularly profound case of bounded rationality. As explained by Herbert Simon (another recipient of the Nobel Prize in Economics) and others, human beings are not the purely rational thinkers of economic theory. Rather, we are constrained, bounded in our ability to process and analyze information. As a consequence we make decisions based on incomplete assessments of facts and conditions.

Human beings compensate for these constraints by relying on "heuristics," or rules of thumb. Intricate studies of the internet's effectiveness aren't nearly enough; they need to be tuned to readily accessible concepts and rules. There is typically a reluctance to suggest guidelines such as "X percent of the budget should go online." Such guidelines are imperfect and often arbitrary-- but maybe we should reconsider. Simple rules of thumb can be very powerful.

Lesson 3: Innovations are like diseases; infection spreads
Early economic models of the diffusion of innovation were built on models from epidemiology. They likened the spread of an innovation to the spread of an infectious disease. A few people are infected; they in turn spread the disease to others, with infection accelerating.

This process seems invariably to follow an S-curve. Depending on the innovation, the S-curve can be tightly compressed or elongated. Internet usage is moving quite quickly along its S-curve with 60 percent or so of households online. Internet advertising is moving more slowly; most advertisers are now online, but the share of ad dollars is still single digit.

 
The task for marketers is to seed the innovation well, "infecting" those most likely to be out and about, spreading the news about their experience. Once an inflection point is reached, the epidemic is set to build its momentum. 

Lesson 4: Massage the message
Everett Rogers, an early and prolific writer on innovation, liked to distinguish five categories of innovation adopters along the S-curve:

• The innovators (~ 2.5 percent of adopters)
• The early adopters (~13.5 percent)
• The early majority (~ 34 percent)
• The late majority (~ 34 percent)
• The laggards (~16 percent)

The motivations of each are very different. The innovators are the risk lovers, attracted by novelty. The early adopters tend to be the usual leaders in a field, technology savvy, and keen to understand and explore the applications.

The biggest challenge for any innovation lies at the inflection point. Geoffrey Moore describes the challenge here as "crossing the chasm" from the early adopters to the early majority. The early majority are a tough nut to crack, often fearful of fads, preferring to wait and watch.

Success requires differentiating marketing tactics across the different categories of adopters. Politicians are often accused of telling each audience what it wants to hear. We can learn from this example. Sellers need to move beyond their canned dog and pony shows to speak to each group's very differing needs and reasons for resistance. 

Lesson 5: Avoid head-on collisions; they kill
Galileo was condemned to prison for offering a theory of planetary motion that challenged Church orthodoxy. On a rather less momentous scale, many of us will recall the horror on the faces of our colleagues in agencies, media planning and brand management at the proposition that the internet offered a "a whole new way to connect with consumers." Why do we need a whole new way?

Revolutions are often the consequence of a crisis within the system. Despite pundits' occasional cries that the old marketing model is broken, and the occasional pep rally enthusiasm of internet conferences, there is little to suggest that the notion of crisis has deeply infiltrated the day to day thinking of marketers. Sure, there are problems, but I suggest that most see minor adjustment rather than upheaval as the way forward.

One solution is to pitch complementarity. Resistance is often due to a fear that an innovation is incompatible with existing processes and infrastructure. This can be accommodated by emphasizing the non-conflicting elements of the new, e.g., extending reach or taking TV ads and trailers online. It is not surprising that search has been a big winner. Just as important as the fact that it works, is the fact that it doesn't really challenge the old model. It's an easy add-on.

Lesson 6: Hold the fort; the cavalry is coming
Max Planck, the father of Quantum Physics (and yet another Nobel Laureate) wrote that, "A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it."

Planck's sentiment has been expressed, in various words, in many studies of innovation. The advocates of a new and better model will win in the end. Most of us would rather not rely on death as our winning card.

Still, the young will be the torch carriers. For marketers this has two implications. One is already well established-- targeting the young in sales and marketing. Their receptivity to innovation is always greater. A second implication can be just as important-- capturing young marketers with appropriate training. This is more difficult since the formal training institutions, including the universities, are still dominated by the old model.  Internet institutions, if they can build broad marketing credibility, may be able to help fill this gap.