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New marketing has been hailed as a miracle worker. So why do we see so many multi-million dollar flops? Because new marketing doesn't work when applied to old ways of doing business, says Seth Godin, author of the new book Meatball Sundae.

If the title sounds unappetizing, well, that's the point. For decades, says Godin, companies have prospered by selling "meatballs"—average stuff for average people, branded products of decent quality with little differentiation and marketed with TV ads in a model that hasn't changed much since the 1960s. New marketing appeals to niche communities using the "sundae toppings" like web sites, YouTube, permission marketing and viral techniques.

Young organizations naturally integrate these new techniques into the ethos of the business. They engage with customers, understand niche audiences and let marketing shape the product. But old school companies tend to spend lots of money on the flashy new media without changing the underlying organization or their "interruption" style of one way communication with the customer. Thus the yucky meatball sundae.

You say companies don't fail because new marketing doesn't work but because they don't change their underlying organization. Can you explain?

One after the other, we're seeing big organizations that have reputations for being great at marketing fail when they try to work in new media. The question is why? The problem is their organization is the wrong organization for the tactics. Like all industrial revolutions, this industrial revolution is changing not just the fancy stuff on top—the sundae, whipped cream, and marshmallows—but it's changing the stuff down below. An organization that isn't organized around the principles can't possibly leverage them.

Can you give me an example?

Here's an easy one—Bud TV. They've spent more than $40 million on it so far, yet if we look at their traffic numbers they do worse than a site on sheet rubber sales. What happened? Budweiser had a top down, we-speak-to-the-public mindset when it comes to commercials. They buy Super Bowl commercials for $2 million or $3 million each because they can. Bud TV was all about "let's send messages straight to consumers." Hold that up next to YouTube, which was built from the ground up around individuals sharing with each other, and Bud TV lost. Wouldn't it have been better if they had just embraced YouTube and used it for what it was good at, rather than trying to build their own channel and invent their own form of new media?

So how do you turn an old organization into the right kind of organization without giving up the structure and culture that made you successful in the first place?

I'm not certain you can. You're going to have to become a different kind of company if you want this medium to work.

Can you give an example of a company that's doing it right?

Take a look at Jones Soda, which is now worth hundreds of million of dollars and competes with Coca Cola. The whole company from top to bottom is built around allowing people to participate and have sense of humor about the product. They have flavors like mashed potatoes and gravy. They put pictures of their big fans on the labels. People own the Jones brand the way they have never owned Frutopia or Powerade. Compare that to Coke, which basically wants to stay in the Coke business by putting clever colors on new brands. Yeah, it works because they're Coke and they spend a lot of money on it. But it would work a lot better if they realized they could approach the market the way Jones does.