The Advertising Bubble
idlewords.com
idlewords.com
Advertising is not about selling individual products - It's about selling a lifestyle. Any media which encourages you to 'upgrade' your lifestyle should be considered advertising.
I myself have fallen victim to advertising. I used to live in a big-ish town where the cost of living was low. Advertising (in my case; the promise of a higher salary and access to a wider range of consumer goods and services) convinced me to move to a bigger city where the cost of living is ridiculously high.
So I am working harder and longer, I am able to save less money and I have a lower standard of living overall (in spite of a higher salary).
This lifestyle was advertised to me and I bought it. Much of the value I lost (in terms of quality of life) went into the pockets of advertisers (in the form of cash).
Believe me, I agree with the idea of shedding useless stuff before a move. Which we have. But you tend to accumulate needed stuff with a family in tow. Also, keep in mind that the amount of money involved isn't just for moving physical items.
There's distance as well. I've moved across the entirety of the United States twice, mostly for jobs. Although it was a bit of adventurous thinking because we liked the idea of such a huge change.
I regret nothing.
That does change things a bit.
Like I said, often there are some good reasons sometimes many good reasons. But as a stereotype, in the US people will have lots of material possessions, most of which are crap.
I know the comfort of having your own things that have been with you throughout the years, and everything is exactly how you're used to them. I do miss the feeling, and will eventually settle down somewhere, or at least settle down my "things" somewhere.
I still couldn't resist pointing out that being geographically mobile is a viable option, even if it does require some effort, planning and certain trade-offs.
And it isn't totally binary, it's a scale from "living out of one luggage-sized suitcase" six flags -style, through being able to pack up and leave on a week's notice, to having planned a lifestyle around moving every couple of years, to having deep roots etc..
And yes, it is very powerful. It can change the values of an entire society.
I doubt very much of the cost-of-living delta between a city and a suburb or the country has to do with advertising.
Walk me through the causal process here. Does it go something like...
Landlords want more money so they devise a massive marketing campaign, including a complete cultural narrative, TV series, movies, and even gasp whole companies created out of thin air.
They infiltrate media outlets to con dreamers into coming to their city, and expect to charge them 10x more than they used to pay in rent. They have to, after all, to cover the costs of the largest ad campaign ever created in the universe.
And it's a massive success! It just worked. Whoa.
Or... Maybe that's just not very realistic.
Maybe your rent is high because you live in a city with a flourishing job market for highly qualified and highly paid workers who came there to find new jobs, and whose real estate market has a chronically low supply of housing due to various cultural or regulatory reasons.
Not to mention, advertising often has been used to create markets out of thin air:
http://www.theatlantic.com/past/issues/82feb/8202diamond1.ht...
How advertising causes high rents in San Francisco?
Be my guest.
While consumer culture certainly includes sales, it's also about deeper things such as associating your identity and self esteem with consumption, the way those ideas intertwine with culture, the psychological structures through which those ideas are mediated, and the way it all congeals into a way of life.
There's just so much information available to us now through the internet/TV/radio that it has really become exhausting to conduct the necessary critical analysis to defend against malicious ads. Who is funding this advertisement and why - how does the value flow back into their pocket at the end of the day? If the ad industry keeps the firehose on, we get tired of asking these questions, and some ads will inevitably get through our mental defenses.
Sometimes biased/misleading ads are pretty easy to spot, such as in most Tech Crunch/VentureBeat articles where the product or service that is being "objectively reviewed" or covered on a seeming whim is clearly sponsored content. In some other cases its much harder...PG's 2005 essay "The Submarine" [1] is a great read and continues to gain relevance 10 years later. PR/ad agencies manufacture what is hot and trending, and it's usually incredibly hard to determine how or why.
So I've engaged two different strategies to help deal with malicious and/or deeply submerged ads:
(1) Disconnecting from many social media sites that serve as media/info aggregators. Facebook, snapchat, and instagram all had to go. I stay on HN because I find the community to be a bit more ad conscious and averse, but it always pays to remember that HN is both a great tool for discussion and a marketing tool for YC.
(2) Engaging friends and family heavily before making any sort of major "upgrade" decision. Perhaps your friends in said city would have had some interesting advice to share with you about your move had you asked for their frank and honest opinions beforehand.
One negative side effect of the constant barrage of ads/info is a certain critical, skeptical, and frankly negative mindset that has become SOP when digesting any new information. It's really a problem of trust at the end of the day, which is the fabric of any healthy and productive unit, whether that be a relationship, a family, or a society. It's not a new problem, but I feel like it's a hard and important one that has increased in difficulty with the rise of the internet.
Because that's what it's doing. Selling a particular lifestyle.
One kind is an appeal to the person in some general fashion. The usual forms apply. There isn't much of a value add, beyond the appeal. "Ours is 2x better", or "You will feel GREAT!", etc...
The other kind is a value add, in that something of value is given in return for a bit of mindshare or implied consideration. This is HN, and a lot of other content marketing type approaches. Some use forums for discussion, others blogs, still others white papers, and or maybe things like apps, or data one can make use of.
In my own personal thoughts, I refer to this as, "give 'em a cookie. Who doesn't like a free cookie?" And when they take the cookie, they will often give you that little bit of consideration, or a contact address, opinion, something.
Musicians do this by dropping free to play and sometimes free to download tracks. "Here's your cookie, I'm selling more in the store."
I'm generally OK with value added type advertising. I like my free cookie, same as most people. The non-value added ADS are often trading on shock value, or their ability to interrupt you, or some other inane thing. Noise.
Figured the crowd here would sort it easy enough.
For me personally, I tend to map things to simple concepts in that way. Makes a lot of stuff easier, and it often highlights the common where it might not be obvious too. Just FYI.
Preposterous.
I'm sceptical of that. I grew up pre internet and much information on stuff to buy came from TV ads, magazines financed by advertising and the like. Now I've basically stopped watching TV and reading those, read non commercial stuff like HN and when I want to buy toys check out the review sites to see which product is best, not which has the sexiest ads. Here's a graph showing ad spend tailing off http://www.digitaltonto.com/wp-content/uploads/2011/11/Ad-sp...
(from http://www.digitaltonto.com/2011/how-digital-leakage-is-rede...)
You wanted "access to a wider range of consumer goods and services" you got that access. Now that you want to save money instead means that you just changed your mind... again.
I've tried running context sensitive ads on my own site. I happen to believe that appropriate advertising is something users want - for example, I buy hot rod magazines specifically to get the ads for parts and other cool stuff for my car.
The context sensitive ads Google servers are just not interesting, and they happen to be one of a small handful of ads repeated over and over. There's no way I can tell Google "display ads in these categories".
I tried running context sensitive ads from Amazon. I wanted ads for programming books in various categories I'd select. What I'd get is ads for the latest Batman movie, over and over, I finally removed them. I don't know how Amazon decided that visitors to a programming site wanted to look at Batman ads.
There is a way to put an Amazon ad on the site for a specific product. But those get stale after a while. Again, I want to be able to list categories of the kinds of ads that would be appropriate for a particular page, but I can't. Ideally, I'd like to specify a list of categories for a context sensitive ad, like "programming books", and have Amazon scrape the page for keywords and then display programming books that are related to those keywords.
NaNaNaNaNaNaN Batman
More seriously: "20 to 40 year old male"
Programming -> Nerd -> Comics -> Batman
You can see plenty of this in, say, music recommendations where Youtube will follow a Foo Fighters song with Taylor Swift because they're both in the same "top 100 popular" category. It's easier than understanding content.
Actually, you can: http://www.google.com/settings/ads
Given the amount of tracking they do, I'm surprised this is still a problem.
> soon, on a website near you
Yeah, screw you advertisers. I honestly tried to browse with ads, but I couldn't any longer and finally reinstalled AdBlock a few months ago.
Amazing you held out that long. The difference between 'with ads' and 'without ads' is so large I can't understand how people in the tech scene (for who it is trivial to set this up, luckily for the advertising industry not all that trivial for others but getting easier all the time) still browse without some kind of blocking. Besides the security implications of running third party code on just about every website.
Ultimately it was YouTube ads that play before videos that were the last straw; I sometimes run YT as music source and I got too pissed off about having to listen to 30 seconds of unskippable advertising in order to get to 120 - 240-seconds long video. Mostly it's mood-breaking.
Targeting definitely works. A big entrepreneurial mistake is looking at things through your own eyes instead of those of users. Many brilliant coders can't get a handle on the business stuff because they just assume everyone else thinks and behaves like they do.
Ironically, the successful products I've created in my career I built to please myself. The ones I built to please others have all been failures. Apparently I'm not the unique snowflake others allege I am :-)
Theory A: He wasn't shopping for faucets at all, he's just a bot following links and who had recently visited a faucet portal page.
Theory B: He searched, found a faucet he liked and bought it.
Theory C: He searched, then installed Ghostery, and is still in the market for a faucet.
All are possible, but one of them sounds a lot more likely than the other two to my ears.
Advertising to someone who you have reason to believe is going to buy your product is much more effective than advertising to an unknown person.
Totally depends on the product and the person you are marketing to. Marketing hammers to carpenters makes sense: they use many different types, and presumably go through them quickly. Marketing faucets to regular folks is a dumb thing to do. A faucet is something you buy once in a blue moon.
Why do complicated things when something simple already works pretty well? Your thinking that just because something is possible it will be done is not very close to the practical reality in the trenches. Because something is possible it might be done if resources are there. If not, best effort, done.
All of this analysis is expensive, so don’t expect it all to be done.
People buy stuff for others. People buy stuff for professional reasons. And yes people do need more than one faucet when they are building or redecorating a home for instance.
Also, showing people stuff they have recently bought may provide an incentive to recommend it to others or write a positive review online.
Yes, your intuition derived from a single anomalous data point (yourself) is definitely more accurate than the companies which have seen demonstrable success from targeted advertising.
If you wanted to argue that brand advertising doesn't work, I might agree. Brand advertisers tend not to have high standards of data analysis.
Your publisher experience seems to actually be a case of wanting the former (targeted advertising) but getting the latter (brand advertisers), which can be a real problem because brand advertisers often overspend and undertarget.
As far as the success is concerned, the advertising company is hopping from one aggressive technology to another mostly because their techniques work but only for a while and then users tune out. So it may be that WB has a point that is rather stronger than you make it out to be.
If we're comparing anecdotes, I'll offer the 3 companies I've helped build online advertising campaigns for which had a positive ROI.
> hopping from one aggressive technology to another
I'd agree with that if the argument was that "this specific ad technology" is going to fail. I totally agree that ex. clickbait headlines are a temporary boom which will disappear soon.
But to argue that advertising as an industry is in a bubble, we'd need evidence that the industry is bigger than historically or what it can support. Which there just isn't evidence of (take a look at my other post).
Making an ad campaign that has a positive ROI is doable, but if you are that well embedded in the industry then you will quite likely agree with me that it has become quite a bit harder to achieve that today than it was in the past. The solution (performance based advertising) shifts the burden of the effectiveness of a campaign onto the wrong party (the owner of the inventory) which has resulted in a series of start-ups that optimize on behalf of inventory owner.
This is all like watching eb-and-flood erode a beach and just like real life erosion there are turning points at which the situation can go from steady state to dynamic quite rapidly and it is anybody's guess what the new steady configuration will be once all the potential for movement has been exhausted.
The ad industry is imo not exactly in a bubble as much as that they are more than a little bit worried about why the usual bag of tricks no longer works and how they plan on going back to when conversion rates were still something to be proud of. I don't doubt that this will initially be tackled with a wave of even more invasive advertising, or advertising masquerading as content.
The problem is that what was initially an absolute boon for the advertising industry, that you can 'measure' engagement ended up being the exact problem, you can measure engagement, including a steady drop in engagement over time. And so, by making advertising more and more aggressive the industry has made it impossible - or nearly so - to make a non-aggressive campaign because it has to compete with all the aggressive ones for attention (from the users perspective it is a zero sum game, they only have 24 hours in a day and usually something else to do besides watching and engaging with ads, and if they don't then they are not exactly prime material for some demographic to begin with).
So now there is a problem, which is that the ad industry can't suddenly stop reporting all these engagement metrics, nor can they pull more technological rabbits out of the hat that spawned all these new tricks because these too will work for a while and then run out.
It's not a simple problem.
The thing to remember about advertising is that at the end of the day it's really about finding ways to be different than it is about anything else. And so when everyone is doing TV ads, start doing online ads, when everyone is doing online ads, start making centent marketing, when everyone is doing content marketing use email and so on. It's an ever moving target. Thats why it's effective when it works.
There has yet to be a point at any time in the past decade where I said, this doesn't work, and shut all of the ad campaigns off. There definitely are issues that exist. There is a problem with mobile app ad quality. There definitely are bot traffic problems. The ad exchanges will be pretty brutal on inexperienced advertisers, but this was the case pre-exchange too. One "bubble" point is I suspect many of the adtech companies involved in exchange inventory may fine themselves on the line for the bot traffic. It will be enough to wipe out the investor equity. This follows based on class actions Google, Yahoo, and others have had to settle in the past and Google especially has always been aggressive about this stuff (although less so in the past two years.)
I read the original blog post and the writer doesn't seem to make a very good case outside of things that happen in normal capitalism. Lots of middle men, tools, and supply chains attempting to add value along with investors dumping in a ton of money in an attempt to gain some return -- possibly more than they will ever get back out. Sounds like a healthy marketplace to me. Some ideas are terrible, some are good, some are amazing but will never return their investment. That is ok.
The bigger problem is for small publishers and likely medium sized ones too. Ad inventory and the users online has ballooned many times over over the past decade. It also is a problem for traditional media companies like radio stations, newspapers, and television channels. I don't need to extrapolate on that one.
Advertisers need to be sophisticated. They had to in the past too but few had access to tools that told them they sucked. I'm not sure that is any more extraordinary than asking a commodity traders purchasing cocoa beans to know what they are looking at and know how to be sure that is really what shows up at port.
You're right that this is part of the normal cycle of capitalism, with all the creative destruction that entails. It's quite normal for a new, growing industry to support a whole forest of new businesses, and then as the industry matures some of those will die off. But I think there's one extraordinary thing here: the advertising industry is growing like a new market, the kind of market you see when the customer base is growing by 100% every year, like the early days of the Internet. But that growth simply isn't there; advertising is by most measures a mature market. So what's fueling all this expansion?
Is the question the expansion in adtech companies? If that is so, I think a huge part has been the Facebook traffic dumps to publishers like news sites. Basically the available display inventory something like doubled. That isn't sustainable, Facebook fully intends to recapture that external traffic back in to their platform. The drop is already visible to some publishers. Many companies certainly are turning a blind eye to fraud so as to hide the bad news from their clients and investors.
At some point the shift from offline to digital ends and the growth moves more in line with GDP. That will bring down valuations. Google and Facebook probably want to integrate the ad model with every human transaction. One could imagine getting in a Google car and saying "pizza" and be driven to the highest bidding pizza shop.
Certainly ad costs get baked in to some products in a big way: Coca-Cola, Geico, hotel rooms, for profit universities, and so on. Sometimes the costs are so much the profit center moves to another area, such as investing the float from insurance or maybe just straight up stealing money out of a person's bank account (pay day loan lead aggregators selling bank info to criminals, has happened many times, see FTC.)
As a whole, I don't know how this plays out. If the ad competition is brutal enough the costs will be driven up to the point where the parties not spending money on advertising are just far better deals. If it isn't the prices running up, the cost could be offloaded somewhere else like cutting maintenance at a hotel. Eventually the advertiser's reputation tanks.
These are marketplaces. On a micro level there are many perverse distortions because of some condition at a given time. Over time they should re-balance.
Some things like Coca-Cola, which has probably physically harmed and killed people on the scale of cigarettes, just last a really long time. Coca-Cola has a truly perverse combination of trademark law enforcement, addiction (caffeine+sugar), general scientific ignorance by consumers, and a long list of government subsidized cost advantages. All of these strengths save trademark law are being chipped away at right now. Which, at some point it flips and they have the McDonalds problem (toxic brand.)
Advertising was a mature market when Google started. Media was a mature market when Facebook started. (And, to make a slightly different point, people believed computers were a mature market when Apple started.)
Most of the time, I've been at the receiving end of advertising as a publisher (web/mobile). And I'm looking at the money stream from a different angle. What I hope (and fear the opposite of) is that for all the money I make with advertising (plus Google's share) there's actually more money earned (profit) by the advertisers. Because only then the system as a whole is sustainable as it is now.
My purchasing decisions tend to be pretty long and drawn out (it will take me months to decide that I want, for example, a camera and then to decide which one I want), but targeted ads have several times caused me to pick up the slack and continue my line of investigation into what to buy.
Their aggressiveness is an asset – and they also don’t really annoy me. Comical, sure, but they also remind me: Ah, I wanted to check out those cameras.
Obviously it’s a blunt instrument and not a scalpel (we know for to little about how human brains work to make that work – we need the blunt approach), but it’s a different blunt instrument compared to other advertising.
The problem is that although these stories exist, they're so rare. Drops in the ocean. All they say is that highly targeted advertising definitely works for a small part of one per cent of the advertisers.
(Which isn't to say that it doesn't work for more. Maybe it does, I wouldn't know.)
(a) On HN, it doesn't match the ideological overtones so it won't be voted up.
(b) In general, it's not interesting. Most business owners already know that advertising works and aren't terribly interested in hearing the obvious.
I'll trust his numbers. But is 20-100% enough to say "targeting works"?
And yes, targeting works. But non-animated banner ads also used to work, and they worked even better than quite a few targeted campaigns do today (hence the shift to performance based advertising rather than CPM and CPC campaigns, they are also much more resilient against fraud but much harder to properly set up).
There's an exception: Targeting geographical areas obviously works. If your market is the city of Toulouse, targeting by geoip gives you most of the intended audience and eliminates almost everyone else, at low cost.
The rest of the targeting techniques? Trying to pick male users, trying to pick users over 50 or between 20 and 30, trying to pick people who've visited faucet FAQs in the past? There's a long-term strategic cost in user revulsion and there's an immediate technical cost in implementing the tracking.
I won't try to put a number to the cost of creeping out users and making them install adblock, ghostery etc, but it does not seem safe to assume that the cost is smaller than the value of those 20-100% additional clicks.
"Single anomalous data point"? His description is exactly how targeted advertising works for pretty much everybody. He's not some weirdo outlier -- we're all show the same things we've bought and tangential things to our searches with the stupidest ad AI.
He might be wrong that "it doesn't work" (e.g. doesn't pay since it's crude), and probably he is, since so many businesses follow it, but he's totally right in that it's crude and far less effective than its potential effectiveness.
Now we can debate if it ought to work, if it's ethical etc., but let's get the facts straight, it does work.
The parent described how it's broken and works crudely and bad.
That it still works and gets some sales, he probably doesn't doubt.
FWIW, since we're doing anecdata, I just checked my Amazon front page. Many things are irrelevant, a few comical (I recently looked at a 80-book box-set of Penguin classics[1], now it's systematically recommending each individual member of that box-set to me :-/ ) -- and a few are quite relevant and I clicked on them to check it out.
1: http://www.amazon.co.uk/Little-Black-Classics-Box-Penguin/dp...
And that's in a nutshell both the solution and the problem because users have only so much to spend on product. So you end up with an arms race and that's exactly what we are seeing.
It's like the joke about two guys in a jungle, one with boots, the other with running shoes. The one with boots asks why are you wearing running shoes. The second one answers: In case we get chased by wild animals. "You won't be able to outrun a wild animal so don't bother, wear boots". To which the guy with the running shoes says: "I only have to outrun you".
The only places in which people are really competing directly with each other are in the labor market (which drives the price of labor down) and in professional sports or other one-on-one contests.
Almost everywhere else we co-operate before we compete.
So far this model is a bit like democracy, it may not be optimal but it seems to be the best we have. If you can improve on that model you'll go places but you're going to be ironically in competition with everybody else!
Also interesting note: from my experience, most tech companies aren't really competitive. The market is big enough that most successful companies either compete superficially or sometimes outright cooperate, even when working in the same market.
It doesn't matter if it's proven or not. We're (hopefully) not automata just doing what's proven to make us excel without consideration for the others.
I don't see the problem? It's probably much more expensive per impression than traditional advertising, but probably much less expensive per sale (which is the metric that matters). This arms race means that if I'm a plumbing supply company, I can now spend my money on displaying ads for specific plumbing goods to people searching for specific plumbing goods, even when that means I'm going to hit some people no longer in the market for these goods -- but even hitting people who are no longer in the market is vastly better then hitting people who were never in the market. This lowers the barrier to entry (less cash required to advertise your products) which means more and better competition which means prices go down.
They don't appear to be targeting people who are in the market for plumbing supplies and hitting a few who already have them, from what we can tell. They appear to not be targeting people who are in the market at all until after they're out of the market.
But a very low one. Conventional advertising is what, 0.1% effective?
I find my Amazon recommendations are often pretty good. And I'm willing to spend time curating them. If advertising on the rest of the web was as relevant as my Amazon recommendations then I'd probably stop blocking it.
I'll raise you mails that I get from Alibaba - after few months of receiving offers of aerospace-grade struts, I'm now getting mails advertising... stones.
(I do know how this happened though; the first is the result of me searching for aerospace-grade struts after CSR-7 launch failure, seeing if I can find the unnamed vendor by looking if someone is dumping cheap struts on Alibaba; the second is the result for me accidentally typing in "Pebble", meaning Pebble Watch).
So there's probably a significant number of people where targeted advertising is able to get the click that leads to the purchase. In reality, it's probably just taking organic traffic that would have purchased anyway and counting it as a targeted advertising win versus an organic purchase.
Or did the ad nudge you toward the conclusion that it is right for you, before you got over it and forgot?
Are you sure?
If this is an unassailable fact because data, where can I see that data?
The anomaly is not how targeting works, the anomaly is that it "doesn't work" on him. The fact is that most people do occasionally buy things because of advertising, particularly targeted advertising.
"Doesn't work" is in quotes because I suspect that he has in fact bought something based on a targeted ad in the past.
I'm not so sure. It's quite a big claim to say online advertising is effective on "most" people. It's also quite possible that it's not, and that online advertisers are all chasing an anomalous minority population that is not yet ad-blind.
What WB discusses is a common misconception. Just because it doesn't appear to work for yourself, doesn't mean that targeting is not worthwhile. It's not really designed for an improved user experience, but to provide an advantage to those running the ad campaigns.
The crucial thing that people forget, is that that targeting only has to be a little bit better than random to be worth doing (from the ad operations perspective). Given a large number of ads shown every day, with nominal cost, we've only got to push a fraction of those toward users with a slightly better propensity to interact to increase the interaction rate, and get paid more from the advertiser (presuming a model where the advertiser pays us based upon interactions that we generate).
One of the reasons that it is profitable is that the amount we might get paid for an interaction could 50p, £1 or even £10 depending upon the client and media. The cost of showing that ad is a few pence per thousand! So, we can get it wrong many many times, and still show a statistically significant improvement in interaction rates and make a huge dent in profitability for ourselves.
I discuss all of this in Chapter 5 of Algorithms of the Intelligent Web. 2nd Ed. https://www.manning.com/books/algorithms-of-the-intelligent-...
And here we descend into spammer-logic. It took a decade or more, but spam filters are good enough now that spam is almost a non-issue; the flip-side is that email, which was designed to be reliable above all else, is now flaky because some legitimate mail can't find its way through the maze of filters, many operating according to machine learning that defies introspection. Ad blockers will eventually be that good, will break web pages in equally unpredictable ways, and the "Open Web" will be a worse place for it.
But I guess you make some money from your book.
But after all, those ads leave an impression on me, that coca-cola is still there, in a red glassy bottle/can, and people seem happy drinking it. That is the reason I might choose it as my go-to soft drinks other than some unknown small brands. So that is advertising works, laziness.
"...advertising was positively linked to brand prices in manufactured food products. Prices of weakly advertised manufacturer brands, private labels and generic products were substantially lower than the prices of leading brands, especially highly advertised leading brands. Since the products selected for analysis were relatively homogenous, real quality and cost differences do not appear to account for the price differences across brands."
This may or may not be a result of the paradox of choice. That would be an interesting paper: "brand advertising increases prices when there are fewer than five choices of brands" would be a testable hypothesis, but I haven't been able to find that paper.
The following is a very interesting read: http://www.ft.com/cms/s/2/cd1722ba-8333-11e5-8e80-1574112844...
And yet, if I buy a coffee maker, the front page is covered in coffee makers for weeks. I've never bought anything based on what's on the front page and I'm not sure I've ever even clicked those suggestions. I'm sure targeted advertising can work in the long run, but at the moment the success rate seems so low that it's more often an annoyance than a convenience.
* buy an item from Amazon (coffee maker or otherwise)
* realize the build quality/size is rubbish (which from some of the less well known sellers, it really can be)
* return the item using Amazon's generous returns policies (never had one rejected, I've used it many times)
* buy a different item in the same category.
* repeat?
If this type of purchase happens a non-negligible number of times, could that be the reason we see so many 'buy more of X!' style ads?
Haven't you ever wish for a 'Punch Advertiser' button during commercials? This would be like hearing they built it themselves.
(To be clear, by having someone making $0.03/click sign their customer up for buyer's remorse thus destroying the profit from serving them because those return policies, the customer service time, etc, aren't free.)
But for 99.88% of people seeing those plumbing ads -- including many folks who have already bought their sinks -- such ads are stupid distractions. The net result: there's a big surge in the use of ad blockers, and the swamp is starting to drain.
Another case in point: I now follow Twitter trending reports for Yokohama, even though I live 5,000 miles away and can barely read a few characters of hiragana. It's my primitive hack to disable the trending "service." I'd rather have incomprehensible squiggles on a corner of my screen than a bunch of garbage content that's clamoring for attention, even though it's irrelevant to me.
Targeted advertising does in fact work. I know this because I work for an ad company, and it is very clear in both click- and conversion-rates.
The product specific level of targeting you are talking about, might be feasible for amazon... might be. But it isn't for our company since it is relatively difficult to maintain the segmentation and targeting rules required for it to work. The ROI is simply too low.
There are lots of other easier targeting options with a proven effect such as, frequency, geo, audience segmentation, site/product segmentation (such as the retargeting campaigns you have probably experienced), predictive behavioral targeting, and so on.
We typically see 1.2 to 2 times as many clicks on campaigns using a mix of the mentioned targeting options above, compared to campaigns with no targeting.
Which are, over time steadily dropping. Even simple non-aninmated banner ads used to have a high click-trough and conversion rate, higher than the best and most aggressive campaigns today.
But novelty can exist within a specific frame. The print ads of the 1950s stopped working, and a new approach to print ads was taken in the 1960s. The TV ads of the 1960s stopped working and a new approach was taken in the 1970s. Flashing banner ads that say "Click Here!" don't work the way they did in the 1990s, so a different approach is being taken. That approach will stop working and something new will be ginned up. But that doesn't necessarily entirely invalidate the technology being used or the basic form. Chances are the tech and form evolve, and the evolution will be driven by the dominant companies in the category. Revolutionary change is rare.
In addition to battle between adblocking and adblocker evasion, I think there are going to be a lot more sites with fusions between advertising and editorial (sponsored posts, product placement, and just good pr) making it more difficult to distinguish between the content and the advertising.
And even if such a button were present one could press it even though the product had not been bought.
(Unless you meant just clicking "I bought it" to get rid of retargeting ads in general, not that you actually bought the product)
Machine learning/recommendation systems?
I think Facebook enjoys the current Adblock situation, the native advertising is the future. Good luck blocking those ads in their app which everyone is using. Also paid tweets, paid Facebook shares - I don't think many people on HN realize they are being tried to sell something all the time, just the fact your Adblock doesn't block it, it doesn't mean it's not happening.
I can't see myself browsing the web without Adblock, but I think the future is really dark because more and more people feel that way.
I wonder why they don't do this? For example, offer $1 Play credit for filling out a short form of your preferences.
Before I upgraded to no advertising on Hulu, they would sometimes ask after showing an ad if you were interested in the target market for the ad.
> By 1998, Yahoo was the beneficiary of a de facto Ponzi scheme. Investors were excited about the Internet. One reason they were excited was Yahoo's revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in.
Maybe big G (er alphabet) is indeed cannabalizing it's own resources to juice adsense revenue. It's different than the late 90's though. For example pets.com, or moo.com. There are ideas that were tried that make money now. In the beginning it was just weird. all sorts of crazy stuff was tried.
And sure, that money would have flowed in but the track record of YC to date is one that I think would not have been duplicated without the unique elements that YC has managed to bring to the table. They literally hacked the start-up world and that's nothing to swipe under the table.
A ton of wanna-be competitors has come and gone (some are still there) but none of those have done nearly as well as YC. Whether or not it will continue for ever is unknowable but for now the results are quite amazing and not to be compared with what 'the industry' managed to achieve in the same timeframe. No other group has managed to create this number of start-ups, no other group has managed to change the dynamic between founders and funders this dramatically.
> Facebook has continued to perform in the market despite declining user engagement and pullback of brand advertising dollars -- largely due to mobile advertising performance - especially App Install advertisements. This is a huge red flag because it indicates that sustainable brand dollars have not yet moved to Facebook mobile platform and mobile revenue growth has been driven by technology companies (many of which are VC funded). VC dollars are being spent on user acquisition despite unknown LTV of users - a recipe for disaster. This props up Facebook share price and continues to justify VC investment in technology products based on abnormally large mkt cap companies (i.e. "If this company attracts just 5% of users that FB has, it will be HUGE" - fuels spend on user acquisition as user growth is tied to values). When the market for tech stocks cools, Facebook market cap will plummet, access to capital for unproven businesses will become inaccessible, and ad spend on user acquisition will rapidly decrease - compounding problems for Facebook and driving stock even lower.
(http://businessinsider.com/snapchat-ceo-on-tech-bubble-and-f...)
I can't help but think of Marc Andreessen's recent liquidation of 3/4 of his Facebook stock: http://businessinsider.com/marc-andreessen-selling-facebook-.... Despite a stellar revenue report it looks like all is not right in the Faceland.
Granted. There will be companies that will die in the ecosystem, but the logic is poor. It's like saying why do you need a CRM system, it's just a tool standing between the sales person and the customer.
Here's an attempt at some numerical estimates: http://www.bloomberg.com/bw/articles/2014-03-03/advertisings... Spoiler: ad spending in the US has grown roughly proportional with the growth of the economy, no bubble in sight.
Global advertising spend (est. 2015): $592B
Global digital ad spend (est. 2015): $170B
Global VC investment (est. 2014): >$48B
[1] http://www.emarketer.com/Article/Advertisers-Will-Spend-Near...
[2] http://www.pwc.com/us/en/press-releases/2015/annual-venture-...
Great. /s
There's a certain future-blindness that afflict us techies: in our fervent zeal, we think that the things we don't like (flash, ads, and flash ads) will be "killed soon": instead, they evolve into hardier, more insidious strains (HTML5/canvas ads, native ads).
Then (for me at least) there's the problem that almost all TV advertising is targeted at the more vulnerable groups in society: they invariably equate spending with a superficial emotional quality. I can't even remember the last time I've seen an ad that contained factual information.
And since consumer money can only be spent once, it's a zero sum game to me. I'd rather have people spending money on things they really need, instead of trying to fill an emotional hole created by advertising.
Overconsumption can be true on an individual level (person X did not need to buy Y). On an aggregate, consumption is "the economy" and advertising is the primary way of informing potential buyers about an offering.
i wonder how much of the world's economy is geared to providing consumers with things that they don't need? (this easily covers fashion + cars + travel + the latest gadgets + a lot of food)
i wonder how much of the world's economy is B2B style businesses geared towards assisting companies provide consumers with things they don't need? perhaps a fair bit?
i think one can argue that advertising makes "the economy" more efficient, perhaps.
one still has to answer the question of "is the economy a good thing?" -- i.e. efficiency in itself is not obviously a positive attribute - it isn't good to find increasingly efficient ways to carry out something that is a terrible idea.
it isn't obvious to me that the economy we find ourselves stuck inside is a particularly good thing (it doesn't seem particularly good at dealing with the problems that it causes).
I know that may very well be because of selection bias, in that the less egregious forms of advertising don't register with me (oh the ironing). For example, I actively search for reviews when buying new hardware. But the sad state of affairs is that it's very hard to find quality information between all the content-free fluff even though both are produced in the name of "advertising".
I disagree with your latter assertion though, that "consumption is the economy". To me, that's like saying "TV is society" or "the president is politics". The economy is much bigger than consumption, and I did not suggest that less advertising would lead to less consumption. At least that's what I meant with zero-sum game: it would just lead to different consumption.
I don't know, but I do consider your comment to be an excellent example of an advertisement masquerading as content. (see: https://news.ycombinator.com/item?id=10573590 )
Suppose for the sake of the argument that instead of drawing an arrow from the consumer to ad tech, I drew an arrow to... any other market.
Couldn't I make exactly the same argument?
People pay a "consumption tax" to fund every part of the products they buy.
That money flows into the pockets of myriad companies with intricate supplier/client links.
Investors pour money into that market and create new companies hoping to make money back on their investment.
That happens when their investment manages to get market share by "cannibalizing" competitors.
Some investors lose their shirt. Some companies go bust.
My question is: so what?
It seems like there's little more in the article, not to mention the complete absence of any numbers to back the claims that are made or give a sense of scale.
So my conclusion is that what the author really wants to talk about is how these bad companies own private data, yadda yadda. Nothing new here.
So I guess the author is just doing this to push his own ad-free product.
Inception.
Second, I'm not sure if you're being sarcastic, but your example seems poorly chosen. Uber and Lyft live off of venture capital. Even absent Uber/Lyft, the transportation market was/still is one of the most cartelised around.
Third, you could certainly find satisfactory counter-examples where the money "ends up" (money keeps flowing, btw, that's why simplistic diagrams aren't very interesting) in the hands of a larger pool of companies. But if the point of the article is to tell us that social networks is a highly concentrated industry, that's hardly an upvote-worthy revelation.
Judging by the language used in the article, it is apparent that the author has a beef with advertising.
I'm glad he can have a lifestyle business sustained by earned advertising he gets with mentions on Hacker News, but it seems a little disingenuous to pretend that can work for all businesses.
Yeah, only those other parts:
a) are not relevant to the topic discussed. If I discuss where ad money go, I don't have a reason to show where money for packaging go.
b) are essential to the production of the item (besides the fact that there are millions of products that are sold without ANY advertising at all -- e.g. all no-brand-name items) [edit: fixed "not essential"]
>Some investors lose their shirt. Some companies go bust. My question is: so what?
So, when it comes to online advertising, it's the basis for tons of tech-related activity (the reason d'etre of most typical web startups for example, most online media, etc.), and if it goes bust there will be a lot of blood.
The impact to HN's crowd and the web as we know it in general is not even comparable to what happens if some market like "PVC supplies" for products goes bust.
Anyway, the article doesn't discuss where ad money goes. It would need to use figures for that.
Instead, it tries to paint a market as some sort of a conspiracy that purposely creates complexity to steal money from consumers. It's essentially FUD.
You seem to suffer from the very common bias of "build it and they will come."
It's irrelevant whether a cost is "essential" to the production of the item. Distribution is a cost that's not part of production. Would you say that people pay a "consumption tax" on freight transport when they buy any physical product?
You say "most" web startups are based on advertising. That would require proof. I recall seeing someone breaking down the list of the current "unicorns" by revenue model. A minority is financed by advertising.
Oh, I see what you mean. I meant to write: "are essential to the production of the item" (scrap "not").
>Anyway, the article doesn't discuss where ad money goes. It would need to use figures for that.
It would only need figures to do that in detail, whereas the article wants to give an overview of where money goes, not go into numbers.
>It's irrelevant whether a cost is "essential" to the production of the item. Distribution is a cost that's not part of production.
Well, even if I got the wording wrong, I obviously consider "distribution" an essential cost too. It might not be part of production per se, but it's necessary for getting the item to the buyer. Advertisement, much less so.
There are tons of products that are sold without any advertising, but very few sold without distribution (e.g. some products you get directly from their makers' facilities), and it's totally inconvenient for larger items or items manufactured abroad.
>You seem to suffer from the very common bias of "build it and they will come."
Well, if we're to discuss my preferences on the matter, that (non advertising) is how most commerce worked for milenia, and how it's working even now for millions of non-advertised products.
Sure, for people to know and buy specifically an X brand, it takes advertisement.
But that's neither essential to society's functioning, nor beneficial (e.g. allows crappy products to advertise more than good ones, and be preferred over them, and also makes people over-buy with ads as constant reminders for consumption).
As a consumer why should I care whether brand X sells -- except if I'm its owner?
People can still buy whatever they want and need, without advertising. And in that world the best products can get word of mouth and organic growth unobscured by paid advertisement. As for further "discovery" there are always articles and posts about upcoming products, reviews, etc.
Is that so? How do you figure? How do you get an item to a buyer that will never be a buyer because he never heard of your product?
> As a consumer why should I care whether brand X sells -- except if I'm its owner?
Well, thank you for unearthing what I believe is the crux of the question so concisely.
Let me put a twist on your question: As an employee, why should you care if the company you work for sells?
Society is not made of people who are 100% consumers.
People need to sell stuff to make a living. Advertising is a way to sell stuff.
I don't like to pigeonhole people, but I've heard the arguments you're making a million times. Almost invariably, they came from people who'd never had to sell anything themselves to make a living.
Go ahead an try to sell people "crappy products" with advertising. See if they buy. What you'll discover is that people don't buy crappy products. They buy "good enough" products. Sorry people's standards aren't up to yours.
We can argue until the sun comes down about what is "essential" or "beneficial" to society, but that's entirely subjective.
I also don't understand the very common belief expressed around here that it would somehow be a good idea if humanity were reduced to its "essentials" or to stuff that they "really need". Art isn't essential. The internet isn't essential. Comfort isn't essential. Entertainment isn't essential.
That's a problem of the seller. Including the seller of bad goods (who has the opportunity to promote them over good stuff via a bigger advertising budget). Not a problem of the buyer or society at large.
Besides, as I said, billions of products are sold every day with zero advertising (all the generic brand items we buy).
>Society is not made of people who are 100% consumers. People need to sell stuff to make a living. Advertising is a way to sell stuff.
Selling stuff without advertising is also a way to sell stuff. We managed to do with 1/20 the advertising just few decades ago, and almost 0 targeted advertisement compared to today.
Besides buying stuff you don't really need just because you're conditioned by 24/7 advertising is not that good for consumers anyway. That's how people end up in debt.
>Go ahead an try to sell people "crappy products" with advertising. See if they buy.
You mean like the $100 billion "bottled water" industry?
http://money.cnn.com/2007/07/27/news/companies/pepsi_coke/ http://www.forbes.com/sites/nadiaarumugam/2012/10/19/nestle-...
Or selling "brandname clothes" to 10-20x markup all around the world similar to quality (and often made in the same factories by the same people) to much cheaper alternatives?
In fact you could take away "crappy products" and replace it with "equal quality products" and my argument would still hold: you can artificially promote the brand who spends more on advertising over the brand who is equally good, and might even be cheaper.
>We can argue until the sun comes down about what is "essential" or "beneficial" to society, but that's entirely subjective.
Something being "subjective" is not the same as "entirely arbitrary and "anything goes", unless we've lost all sense of purpose and reasoning.
Taste is subjective too, but a home cooked meal with fresh ingredients is better for you than McDonalds and Hot Pockets, and that's a scientifically verifiable fact.
>I also don't understand the very common belief expressed around here that it would somehow be a good idea if humanity were reduced to its "essentials" or to stuff that they "really need". Art isn't essential. The internet isn't essential. Comfort isn't essential. Entertainment isn't essential.
Only if by "essential" we only take into account the survival aspect. If we take into account our emotional well being, then arts and entertainment, and occasionally comfort, are essential too to one degree or another.
On the other hand, an always updated smartphone, the latest adidas, a sports car, etc, are not "essential" by any measure. And it's a good idea to reduce them, because their endless production is also environmentally harmful.
But how can advertising "consumption" increase in the same way? Either people buy more stuff (unlikely, because people already spend all of their money on stuff), or advertisers spend a bigger proportion of their revenue on advertising (which also seems unlikely, because their business models haven't changed). It seems more likely that most successful advertising companies are making their money by cannibalizing the rest of the industry. In which case, why is the industry growing?
How is which industry growing? If you mean how is ad tech growing, it's growing because digital advertising as a share of total advertising is growing. It's mainly eating up advertising budgets that used to go to newspapers.
You can check out this article linked somewhere else in the thread for more data: http://www.bloomberg.com/bw/articles/2014-03-03/advertisings...
But these startups are trying to take market from the incumbent Google, and increasingly Facbeook. These established businesses have paid back their investment and are now cash cows for their owners. The flows for Adsense for example will be in balance between cash in from advertisers, and cash out to publishers and Google shareholders. I've been in all three of those positions, often simultaneously, and been happy with the outcome.
When the VC tide goes out Adtech startups will be running up the beach trying to cover their white bits. But with less loss-making competition it could be very good for Adsense and Facebook.
As an aside, I see a future where digital advertising is equally split between Google for transactional (buy something today) adverts, and Facebook for brand awareness and engagement. I think Facebook today is in the same position that Google was when it was only selling ads against its search result pages. When Facebook launches adverts beyond its own property then the cash is really going to start flowing.
They already do this: https://www.facebook.com/business/news/audience-network
If this is true, all advertising companies will suffer; a drop in the price of advertising probably won't sink the big players, sure, but it will probably cause them to cut some of their fat.
I don't think that's the path the money takes. The path the money takes is that maybe some venture backed companies buy advertising to advertise their products. If that capital dries up then that particular segment will diminish but it will certainly not cause the industry to implode (though it definitely has challenges to deal with all its own).
If you take buyers out of the market the price for whatever it is they buy is going to come down. If the buyers who are taken out were the least price-sensitive buyers, (the theory being that people who aren't venture-backed generally have to spend what they earn) prices are going to come down a lot.
The trouble with the New Era of internet-enabled everything is simply that the bottom has fallen out of ad revenue. There is not enough money for this old relationship to continue. Advertisers on the web are parasitic, not symbiotic. They get plenty of eyeballs; the publishers get chump change.
This is an unsolved problem - analogous, say, to the streaming/Spotify problem. How many billions of people would have to lay out $10/mo on Spotify to keep the major labels in the junket-hopping, coke-hoovering manner to which they had long become accustomed? It's not going to happen. The reckoning, to my mind, starts not with the 1,876 marketing startups, but with the dying revenue models of mainstream publishing, broadcasting etc.
After that, well, you can be neither a symbiote nor a parasite without a healthy host, with a ready supply of tasty eyeballs.
So, this makes it pretty tough for small startups or 1 person projects to acquire users via ads, since they need to do it on the cheap, which isn't really possible. It's one of the few startup related expenses that has gotten more expensive over time, rather than less.
And why has it gotten more expensive? I believe it is because there is a bubble in this space, but not what the original article is claiming. The bubble is from the boat loads of investment capital in online startups. They take their 100m round and have no issue paying $5 per user, losing money with every one.
Companies that need to be revenue positive (or just don't want to waste money) can't compete with the high ad prices that this creates, which I think leads to a lot of hostility towards the whole space.
I believe another reason for the negativity is all the fraud related to online ads. It's hard to not be negative when there are so many accounts coming out about just how much of the paid advertising traffic isn't even real.
I understand that ads are a necessary evil for some businesses, but scroll to the bottom of a news article sometime. Is this really what we want our world to look like?
There's a lot of cool shit out there I may not find out about directly from friends or organically through social media (which is a horrible discovery engine anyway). This begs the question: If the ad is relevant to me, why is it "bad"? Now, I can absolutely get on board with an argument against poorly targeted ads or bulky designs that clog up space/speed or simply an overall surplus of them everywhere you go online. But that doesn't mean ads cannot be useful to society.
But anyways, all I was trying to explain was why I think there is a lot of negativity towards ads here- because HN'ers are sick of being outspent on ads, and they're being outspent in a (perceived) unfair way.
If you think that's expensive, try a field sales team.
But anyways, in both cases what matters is the LTV of the customer vs the acquisition cost. The scale of the number doesn't matter.
I doubt this same scenario is happening with field sales teams anyways. It's much harder to scale up your field sales team than it is to just raise your online ad spend.
Many SaaS products cannot hope to be ROI-positive off of initial revenue when their plans start at $10/mo, CPC's are $1+ (and that's being generous), and conversion rates are <1%. But if a customer sticks around long enough or generates enough LTV to be worth substantially more, and you have smart data on that, suddently your ROI calculation changes dramatically, and you can be more aggressive where less-savvy/more conservative competitors cannot.
Now, startups who spend all of this with high CAC and no business model other than "we'll monetize someday" are a different story, and inherently more risky. But that is certainly not everyone.
The post war television boom in America begat many new Madison Avenue ad agencies in the 50s who reached a high point in the 60s and the 70s, but then by the 80s and 90s were consolidated via mergers and acquisitions.
Even the great Ogilvy & Mather was swallowed by up WPP in 1989. In fact one of the David Ogilvy's greatest regrets was taking the company public which allowed the take over years later.
Although something to realize is that there are winners in that business. Most people don't think of Facebook as an ad company, but they really do get mobile advertising and from the looks of things they'll keep growing. And that's not just Facebook but other properties like Instagram which will snag more and more ad dollars.
Now we have a hundred TV channels, a massive amount of online content, all attempting to attract ads buyers. As a result the price has gone down. The oversupply also opens up the marked for targeted ads and companies that works as brokers. They need to get paid to, so they skim of a few percent, leaving even less to the sells of the ad space.
In the end I don't think that selling advertising space is sustainable for all but the very biggest content providers. The rest will have to have to start finding alternative sources of revenue, or simple charge for they content. I also believe this will leave us with better and more diverse content.
All increased supply does is drive down prices. At lower prices, there is sufficient demand to meet supply.
You're right that this is driving low-volume suppliers out of the business, but the world doesn't owe you a business model.
What you don't see are the spots that have disappeared because there wasn't enough demand to be profitable. The examples you've given are being used effectively because the price points have dropped to match demand for those specific service spots.
Advertising follows user attention, and as attention shifts mediums so does the advertising. That doesn't mean there is an oversupply in the advertising industry, it just means that it has liquidity (more so than physical goods like lumber).
For example, consider the TV show "Detroit Muscle". Ostensibly, it's about customizing and hot rodding your car. But it's actually a product placement show. I enjoy watching it, because various products are worked into the car project, and they show you what the products are good for and how to use them. For example, I'm likely to buy a welder that was featured on the show.
On what do you base that statement?
If so, had you considered the possibilities of hiring a welder for those seldom/rare occasions you need one? Or just paying someone to do the occasional bit of welding you might need done? (I am assuming, maybe incorrectly, that since you don't already own a welder, you are not someone who actually has high demand for welding at present. Perhaps you're planning some future activities that imply "lots of welding".)
If you were not actively Welder Shopping, then their advertising worked, didn't it?
(And possibly I'm straying offtopic for the thread. Begs forgiveness.) :)
Also, at no point during all this would an ad for a welder have made me decide to purchase that particular product because there is no way a broadcast ad could inform me about a product in as much detail and with as much knowledge as the above process could.
No, I don't need a welder. But the point of tinkering with a muscle car is to do the work yourself. Besides, it'd be a lot of time and hassle paying someone else to do the work, besides being far more expensive.
I've also learned from the show how freaking useful tools like angle grinders and sawzalls are. I've bought both, and they've made my work much easier than the older methods.
One area they go wrong is electrical work. They don't use proper technique in connecting wires - the work they do will degrade after a couple years and cause frustrating erratic behavior.
Cegłowski's argument was compelling because he had worked as both a professional programmer and a professional oil painter. That deep expertise in both fields made it possible for him to pick the holes in PG's arguments.
It seems that Cegłowski hasn't done much work in the AdTech industry. Pity, because his summary of the Scott and Scurvy[2] story is a wonderful piece of writing.
[1] http://www.idlewords.com/2005/04/dabblers_and_blowhards.htm
The path investor money takes if it ends up with the industry is that it is used to buy advertising for new products and services backed with investor money.
And so I also disagree with the conclusion. There will not be an implosion, but what there will be is a change of direction to maintain revenue. This has historically been true of advertising in general, ads today on TV for instance are totally different compared to ads on tv in the 90's, the 80', the 70's and so on.
I think your accusation is completely spurious, frankly.
The biggest budgets are all pretty tightly regulated. They have surprisingly good information on exactly what impact their ad buys are having, and that information informs their allocation.
The smaller budgets don't necessarily have that, but I assume they consistently churn as businesses open and close. Is this article suggesting the churn of new businesses is going to suddenly drop to zero?
How could advertising bubble with that level of transparency?
But imagine a secondary structure of ad buys: you buy mobile ads promoting your app, which monetizes itself through ads. If the ad market falls, you've effectively bought ads high and sold them low.
http://www.bloomberg.com/bw/articles/2014-03-03/advertisings...
What may exist (maybe that's over as well) is an advertising startup bubble.
I do think the (online) ad business is going to change radically over the next decade, but it's far from a bubble ready to burst. It'll be much slower.
PS: Maciej is such a great writer. I enjoy his writing immensely. Everyone should emulate his clear & concise style.
They probably roughly know where I live, roughly where I work, and when I move between A and B. They know my age, race, gender. They may know a sizable chunk of my social network. Maybe the porn I like. It seems possible, but unlikely, that they'd know my bank, ISP, or actual home address.
So they sell my info. What will the purchaser do with it? Send me more, better spam? So what - I'll block it and move on.
You stop going between A and B (home and work) for 6 months. You're now either unemployed or working from home; the latter can probably be inferred by any changes in shopping habits. Sell that information to recruiters and they'll know how hard to gouge you in your desperation for a new job.
The first bit of comfort is that the details you would want if you were to blackmail someone are not the details that advertisers want when trying to get you to click on an ad, so the people who end up with this private data might find it less useful for blackmail than we think. They probably don't have my embarrassingly bad poetry.
but... they probably do have all my alternate handles, and that's embarrassing enough.
I think one of the major saving graces here is the unreliability of the data; especially once it has been sold a few times, it's gonna have a lot of mistakes. Because for advertising? a few mistakes don't really matter. This is gonna make the "deny everything" defense a lot stronger.
Of course, the big thing about blackmail is that it mostly only makes sense when going after the big fish; there is a lot of hard to automate work in finding the victim's weak spot, and then actually extracting the money (or whatever)
Most of us probably don't have to worry about being blackmailed unless we get rich or someone rich wants something from us... but it's still pretty bad for us if a giant cache of data that can be used for blackmail ends up in desperate hands.
As a rule that is information advertising companies do not have or have access to.
Should we care how Google, Facebook and others make so much cash? Should it matter?
Honest question.
(The author suggests the firesales by these companies when things go south will involve internet users' personal information. I agree.)
Anyway, the parent comment made no sense. Maybe people expect privacy because they're US citizens. But the NSA doesn't specifically surveil people for that reason.
The political aspect is that whatever data there is about an individual can be used against them, selectively, for say political purposes. This is a gross violation of transparency and the principles of a democratic society.
The ethical aspect is that I am being spied upon because of what I am not -- because I am not a US citizen. The talk about whether US constitution protects US citizens from dragnet mass surveillance (and thus whether NSA spying is unconstitutional) outright disgusts me (although I do understand the relevance for US citizens, of course). Telling one to "not use US internet services" is like telling one to opt out from the Internet. It's a "tough cookies" argument with very limited practical applicability.
Collecting information about me to make money out of me by selling me stuff? Honestly, in comparison, that doesn't feel that bad at all. Luckily, browser add-ons like Ghostery and various adblockers mitigate this to an extent.
More generally, as companies die their assets will be sold off. These kinds of startups have virtually no tangible assets. Instead they have personal information. This will be sold, regardless of any previous policy. So if you were banking on the data privacy policies of an ad company to keep your data private, you might find that it is no longer in effect.
Of course, if there is an implosion then the price of this information will dwindle to almost nothing (given that there will be so much of it available). So it might not be so bad. Hard to say...
Still, hating to be the bear, but I really am expecting a correction in the start up field some time in the future. Personally, I wouldn't touch any SF real estate. But these kind of things are so difficult to predict ;-)
I would argue that two companies with identical products -- one who acquires customers organically and one who acquires customers through advertising -- should set the same price. The first will have higher net margins but the other will enjoy more total profit if they are smart.
Someone sells inventory, someone buys inventory, and there are middlemen to make this happen. Maybe too many companies are competing to be the middleman, but that's a problem that exist in every market (food delivery?). In the end some companies will die, so what?
I can't see where a gap is created other than this. Investors are betting on technology companies, that are supposed thrive when even more money is spent on programmatic than today (taking away budgets from TV, search...)
Maybe the author is not making a good enough distinction between publishers and technologies? The diagram of "advertising" the author refers to is almost entirely composed of technologies - very few agencies or publishers.
https://medium.com/@RickWebb/banner-fraud-doesn-t-matter-fc8...
I agree completely with Maciej points. There is one other factor that should be considered; the more ads served to us (normal consumers); the less our reception to them is thus the new ads need to be more powerful. Only giant companies can fund the creativity and subtlety needed for very effective ads on a large consumer scale; everything else is noise in the consumer mind except for tiny well-targeted niches. Those are the two groups (giant companies and very niche businesses) that will survive the consumer-ad bubble burst easiest.
"You'll notice that the incoming and outgoing arrows in this diagram aren't equal. There's more money being made from advertising than consumers are putting in"
All the figures I have seen seem to show the exact opposite, i.e that online advertising is growing and profitable, for example see:
http://venturebeat.com/2015/05/27/this-is-mary-meekers-eye-p...
I tend to believe that advertising actually adds value to the good or service, especially when it's exactly the same as a competing good. When you buy General Mills' Honey Nut Cheerios instead of Offbrand Honey Oats, the advertising on the sale has actually payed for itself and then some, increasing the profit margin above the good itself.
On a macroeconomic scale, the best example I can think of is the Soviet Union. Advertising was thought to be a drain on society under the Marxist thinking of the time, so the Soviet Union didn't allow it. But then they found without advertising, it led to under consumption. I think there were other problems too, but eventually the Soviets started advertising, despite their initial misgivings about it.
A quick google didn't reveal any good citations, so I'm certainly open to other ideas on this, but my main point is that this article over-simplifies the value that advertising generates for an industry.
Edit: Found an interesting article on the Communist world's relationship with advertising: http://www.acrwebsite.org/volumes/5816/volumes/v03/NA-03
I'd also like to suggest that the Soviet 'underconsumption' you speak of might be better characterized as 'proper consumption'. It's not a mandate that we buy a product just because someone's selling it.
I disagree with this completely.
Did you buy it because price wasn't important to you and it was on a more convenient shelf? General Mills paid for that shelf space out of their marketing budget, so the added value was convenience.
Did you buy it because your kid likes the cartoon bee and wouldn't eat any other cereal? Then the added value was entertainment. This is the same value you get when you buy a movie ticket.
What about when someone buys shoes from Gucci as opposed to loafers from Kmart? The consumer is paying for the marketing, without question. But they're getting something for their money - self esteem, status, etc.
Where a box is on the shelf - at least in every supermarket I've visited - has no effect on the convenience of the product. So that's a stretch.
I don't have kids but I am aware of the phenomenon of children making choices that an adult would not make. I won't assert that I would never buy my kid the cereal s/he wanted because it was marketed to them, but I will suggest that the value of entertainment gets canceled out by my feeling like a bad parent in that situation. Maybe I'm just bitter because my parents wouldn't buy me the fancy-box cereal.
Finally, I think Gucci is in the image business, which I agree is heavily dependent on advertising to sell the image. Without advertising it wouldn't surprise me if Gucci didn't exist. If your self-worth is tied up in what shoes you wear then I agree, advertising has added value here.
Startups will buy more of these (out of desperation to get growth from their remaining funding) before they buy none (because they will finally run out of cash). See AOL's 2001/2002 financials for a past example.
Oh, and by the way, we are at the beginning of a huge funding crunch (perhaps someone else can pitch in with some citations on funding activity etc), so this WILL happen.
Ignoring the way the article is presented, its point could be explained in a single sentence: startups are spending a lot on advertising, which is causing an investor-funded bubble in startups dependent on advertising.
Whether this is really true depends on the relative quantities of the money being spent on advertising by startups. A quick google says over $100 Billion is a reasonable estimate for online advertising annual spend, as a ballpark figure. Startups are raising say $20 billion [1] a year.
Even assuming a large percentage of funding is going to online advertising, we're only talking about say a percentage point increase in the size of the ad market. So I think this article is probably incorrect.
[1] https://www.cbinsights.com/blog/internet-startups-vc-2014/
2) There will be no reckoning. There will be "bubbles" like any other industry but, ultimately, they'll recover at the same pace of housing did after 2008. I'm sure people who post these articles will be convinced that was the "reckoning" but it is just the normal cycle of business in the capitalist system.
3) All this article does is really re-hash the history that has existed for decades and, ultimately, is "necessary" for mass market sales. The corner mom & pop doesn't need to advertise in this manner because its local and the locals advertise for them via word of mouth. Its also dead outside of the service industry because even with the cost of advertising its cheaper to advertise+mass produce. [i.e. restaurants, barbers]
You could also raise the price (CPM) of digital advertising.
Remember all these adtech companies deal in digital display. They take (for the most part) from traditional tv, print, classified, search (basically Google's monopoly), billboards etc. These decisions driven by ROI (cost benefit analysis based on price)
Sure, its competitive. And I agree that investors get excited about 'revenue traction' that isn't real traction. But in 2015 the winners have already separated from the losers in my opinion. There's maybe 5 to 10 companies on the Luma chart that are winners (outside of FB, Google etc). And to be a winner you need revenue growth, real profits and real cashflow (I'm talking net income, not adjusted EBITDA).
Does this actually work? Shills are pretty obvious on 4Chan due their usual lack of "culture fit" and tendency to call anyone praising a videogame a shill.
I manage digital media for a living and have for some time. I don't do astroturfing or anything like that. Primarily paid search/social/display.
Short answer is it works, and any advertiser with decent analytics should be able to see that plain as day.
Longer answer is that as more data becomes available around cross-channel attribution, the question of incremental effectiveness, and which channel/placement/ad gets what % of credit becomes the murkier, more difficult question to answer. For a glimpse of what I mean, do some googling on cross-channel attribution. Google Analytics has some great free tools they make available, but it is by far a perfect solution.
The further out from the purchase step a given touch point is (like a display ad that is driving awareness), the harder it is to attribute revenue to and determine the incremental lift of. Certain channels like display and social typically play a heavier role at the top of the funnel vs. search and email that are more prevalent at the middle and bottom of the funnel. Historically digital media focused on last-click attribution, but that view is fast changing since it discounts top of funnel efforts more than it should, and you need those to fill the lower parts of the funnel.
Happy to answer other questions you might have. Not all of us in the space are scammy/shady people looking to fleece everyone we can online.
Unfortunately, the article doesn't actually offer any evidence of there being a bubble in advertising. If anything, online advertising is actually being underbought at the moment.
For there to be a bubble, advertising spend would have to be growing at a rate which outpaces supply of advertising space. In fact, when it comes to online advertising the reverse is true.
Consider first that advertising in general is actually a remarkably boring business. The entire industry consistently consumes 1-2% of GDP, and we have not gone out of that historical band. [1] There's just not much evidence of there being a bubble in the overall advertising industry.
When it comes to internet advertising specifically, the argument for a bubble is even weaker. Ad spend on internet platforms (particularly mobile) continues to lag behind consumer attention. [2] Consumers are spending tons of time on mobile, but advertisers aren't spending nearly enough on mobile to match that supply. If anything, I think advertisers should be spending $10-20B more on internet advertising than they do.
Finally, consider that advertising prices are at rock bottom. That seems extraordinarily inconsistent with there being a bubble. The author ignores this fact by attempting to insinuate that the bubble is entirely investor-driven, but that doesn't match his hypothesis. Firstly, if investors are currently subsidizing the entire online advertising industry, then when investment pulls back we would fully expect advertising prices to rise—enabling the investors to be paid back (ie. not a bubble). Secondly, it doesn't match my experience: the late 2000s was a good time to be in adtech or social media, but these days most VCs aren't actually that interested in the sector.
Yes, advertising is annoying. Maybe it "doesn't work" on you. But that's not an argument against it being an effective industry, especially if you're arguing against targeted online advertising specifically. The biggest online ad budgets are very tightly run and you can be quite sure that the advertisers have studied and confirmed that they have a significant ROI.
Finally, one note about the insinuation that "it's going to get ugly" because adtech companies have our personal data. This ignores how incredibly noisy and inaccurate most adtech data is. It's "accurate" in aggregate, using statistical models, but it's just not very reliable when it comes to an individual. When the individual data is not accurate or trustable, the capacity for danger (or blackmail?) is extremely limited.
[1] http://www.bloomberg.com/bw/articles/2014-03-03/advertisings... [2] http://www.kpcb.com/internet-trends
My first ever online purchase was direct from an advert.
I needed 128mb more RAM, so I bought it from crucial. I knew of crucial because a gaming forum I visited had a single banner advert for crucial that never changed, so I always noticed it.
Advertising works, and even if you think it doesn't you're wrong. Every day you'll make purchasing decisions and often you'll tend toward products you recognise the name of. That process doesn't come from magic, it comes from advertising, the majority of which you'll not even notice.
The best-paying sells advertisers make is to their clients and their industry peers.
My purchasing decisions are based mainly on whatever is the cheapest. I do find brands useful, to the extent that if a product is brand-name, it's likely to be more expensive than the no-name variety one shelf below. Saves some mental effort of comparing prices more closely.
The muesli I purchase is store-brand. I have made the decision by comparing nutritional content of a number of varieties.
I have been advertised to to get me to look at the nutrition labels, I suppose.
Once those finding this current circus realize the above the bottom is about to fall out of the market real quick (and many "apps" / "sites" that rely purely on ad revenue wil go with it).
For example, listed under "infrastructure:"
- Google - Php - Stack overflow - jQuery
Need I go on?
> [Overheard]: Online advertising is getting bizarre; it’s almost like derivatives trading…
(original: https://twitter.com/AlanHogan/status/268458504673693696)
The way these recommendation systems worked is heavily flawed at a large scale.