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The July 8th issue of The Economist featured an article entitled The Ultimate Marketing Machine about how online advertising eliminates wasted advertising dollars by showing users relevant ads. Before the web, statistics, rankings and ratings were used to maximize conversion but as accurate as these methods are, they’re mere guesswork compared to the precision with which users’ behavior can be tracked online.

The article included a brief history of how modern advertising was fathered by John Wanamaker who said, “Half the money I spend on advertising is wasted. The trouble is, I don’t know which half.”

The article also called out Google, labeling it “the world’s most valuable online advertising agency disguised as a search engine.” You gotta love The Economist for telling it like it is. Sometimes people forget what’s paying for all the free email and services Google provides.

Also discussed was the variety of payment models being used in this new ad-space: pay-per-click, pay-per-print (coupons), pay-per-view (CPM), pay-per-call and the most-effective-but-yet-to-be-realized cost-per-action (cost-per-sale).

As more humans turn to the Internet for media consumption, advertising revenue will continue to increase (see chart). More ads online will irk some, but the silver lining is that they will (hopefully) be just the ads you’ve been wanting to see.