I agree with Andrew's take on the new advertising paradigms, but I can't agree with his premise that display advertising on the Internet does not work. It works, and not only that, in some cases it works brilliantly. Not to say that it works for every audience (like HNers), or every product for that matter.
His point about low CTR is accurate but not entirely relevant. The user who asked in the comments "What is the CTR of the magazine ads?" hit the nail on the head. It's not always about CTR, but also brand impressions, reach and frequency.
Case in point: I did a campaign for a new brand in another country, which included display advertising. CTR was low, and initial conversions were low too. But over time, many would search for the brand after the visit, returning to the page and they converted! In so many other campaigns I would combine display with social media, email marketing and other stuff and get great results. Yes, I said email marketing. That still works too, and with some audiences, it is literally reeling them in. (No, I'm not talking about spam).
In short, Andrew is writing with an either/or mentality with advertising, when one needs to be thinking of and'ing: of all the tools available, which ones are going to work best together? Take a layered approach. Display advertising may be a hammer, but not every problem is a screw.
Psychology is as relevant to digital advertising as it ever was in analog advertising, and it'll be massively more important in social advertising. Understanding how the human mind works, why it chooses what it chooses, and how people are influenced and, in turn, influence others -- these things are still the bedrock of advertising. Media types may rise and fall, but the human brain is still the human brain. Group behavior is still group behavior. Psychology and sociology will be increasingly important tools in the marketer's arsenal as we move into the media of the future.
It's not an either/or proposition between psychological theory and real-time data analysis. Savvy marketers should combine the two. Both have their place. (As you've pointed out, the piece tends toward too many "either/or" implications that needn't be).
At the core of advertising is the "idea" - almost similar to a startup. Neither number crunching nor some psychological tricks are able to replace this. In fact their purpose is in my opinion just to evaluate or optimize towards better follow up investments.
Now this might be a different story when talking about (direct)sales where you can try to quantify action-reactions related to a specific product. And for most businesses the role of marketing ("all processes for creating, communicating, delivering, and exchanging value") is far more complex than just Tweets, Facebook and Foursquare.
I think the either/or mentality is entirely rooted in billing; you either pay CPC/CPA (Cost Per Click / Cost Per Action), or you pay CPM (cost per 1K impressions), but not both. The interesting question is, why not charge for both?
The truth is that integrated advertising on these new social web services is just catching up to what has long been standard in traditional media. For example, in TV and cinema, product placements by brands have been an effective alternative or supplement to standard commercials. In the same way, magazine and periodicals have long accepted "advertorials" by staff writers that passively mention/promote specific brands/views along with their traditional page layout ads.
While he's correct to think that these more integrated types of ads will be more affective on the web as they're more "consistent with the way their services natively work," it's something that traditional media advertisers have known for a long time.
This isn't a radical change or even the end of advertising, its just more efficient.
