The Theory of Peak Advertising and The Future of the Web (2013) [pdf] | Hacker News Reader

The Theory of Peak Advertising and The Future of the Web (2013) [pdf]

peakads.org

46 pointssinak23 comments

I've always been a little bemused by the single-minded focus on clickthrough and direct engagement in online advertising.

In television and radio advertising, you don't have direct engagement metrics like clickthrough -- just reach. X number of eyeballs saw your ad, and that's that. Television ad campaigns tend to have a far more abstract strategy than anything that could be captured by something like clickthrough. They're about building brand image and planting a well-designed perception in the mind of the viewer. It's a long-term strategy. And despite a lack of any measurement or expectation of direct engagement, companies don't even blink at paying hugely more for television advertising than an equivalent reach of internet advertising.

Why are they willing to believe in longer-term, more nebulous ideas like brand image and mindshare with television ads, yet Internet ads are expected to result in direct, immediate conversion for pennies on the dollar? It's as though you measured a TV ad's success by the number of people who dropped whatever they were doing, went out to the store, and bought whatever was on the ad immediately.

It just seems like an absurd double standard, and I don't understand where it comes from (other than the general arbitrariness of marketing in general).

Alternatively, advertisers (and publishers) could insist on more and more intrusive or unavoidable advertising. Even now, you could pretty reliably detect ad blocking; many sites don't but some do (eg fark). You could simply block users that don't view ads. Or use interstitials exclusively. And if some users complain, well, who cares? It's not like people who skip ads earn you any money, so in a very real sense, they don't matter at all.

I think this will lead to a web experience that I like less and less. I'm willing to pay money to not have to endure advertising but I'm very much in the minority. As blue_beetle said: "If you are not paying for it, you’re not the customer; you’re the product being sold."

Nope. It will go the other direction. I think we'll see an insurgence of astroturfers and their ilk.

Advertisers will realize that no one clicks in-your-face banner ads, but that people can be manipulated to purchase their items through the subtle use of forums and social media. Then we see more research into the field of planting trained individuals into sites like Reddit and HN, and the effectiveness there, then come the sales.

I really hope you're wrong...

Do you see any way around it?

or both. either way, a web experience I like less and less...

I'm pretty sure advertisers are doing it already, definitely on reddit. It would surprise me if HN didn't have a few stealth shills.

Do you have any examples?

http://www.reddit.com/r/HailCorporate/top/ is the subreddit focused on highlighting posts they consider to be onbehalf of corporations.

Advertiser here. This is correct. Social + context is going to be king moving forward. Advertising is going nowhere, it's just taking the form of content as opposed to banner ads.

But there's a bright/flip side to this, in that particularly big brands who approach the problem correctly could create some really good community. I'm thinking of the "maker" space in particular, where tool vendors could sponsor forums, events, etc that would be actually useful to their customers. (Mid-size b2b software vendors actually do a pretty good job here, with their webinars and such.)

Basically, it's the generalization of the sporting event sponsor: you sponsor that skate-boarding competition to inspire more kids to do skate boarding.

The problem of course is that it's hard to imagine the communities that would form around "canned tuna" or "sham wows". But then, I've never really understood those kinds of products, or why they'd even bother advertising. Is there really a difference between Crest and Colgate? Why would either of them bother advertising anywhere, let alone on the web?

> As blue_beetle said: "If you are not paying for it, you’re not the customer; you’re the product being sold."

Also if you are paying for it. See cable TV, magazines, cell phones, etc.

The way I'm formulating it these days is: if you can be measured, you can be exploited. Observe, explain, predict, and control---the goals of the scientific method---all work on people too. You might say that people aren't linear systems, which is true---unless they act like them.

yup; a specific individual is hard to predict but large groups of people behave in probablistically predictable ways, and that's useful information

"It's not like people who skip ads earn you any money, so in a very real sense, they don't matter at all."

Publishers aren't apt to turn away traffic they get because the value they receive by you consuming their content is generally more than the cost of serving you that content even if they can't monetize you directly. If they turn you away they lose out on any monetizable traffic you might have referred.

More importantly, publishers aren't willing to risk the massive backlash that might come by banning those who block ads. That said, adblock really is hurting online publishers. I'm excited to see alternative solutions like Patreon fill in the gap.

How much of the content on the web is garbage?

That is what I have asked over 100 people in the past two years. Only two have ever answered less than 80%.

> Advertising is the critical financial engine of the Internet.

Well this explains why we have so much garbage. The web is the result of the perverse incentives advertising creates.

> The fate of the Internet is therefore inextricably tied up in the fate of advertising.

We are not doomed to this fate. TV has gotten better because we have decided its worth paying HBO and the others.

We have to stop the lie that the ad supported web is free: https://news.ycombinator.com/item?id=7485773

> We are not doomed to this fate. TV has gotten better because we have decided its worth paying HBO and the others.

Do keep in mind, though, that it used to be that way in the past. It's a cycle that led to steady price increases since the advent of TV.

Once upon a time, people paid for cable TV to spare themselves of ads.

Fast forward a few years, and cable TV operators noted that they could get away with having people pay for their content and show ads, all while publicly funded TV channels were steadily starved of cash.

Fast forward yet another few years, and the same cable TVs are charging for these cable channels and for premium channels such as HBO.

Meinks in a few years, cash starved cable TV channels will be so crappy that viewers will begin to tolerate ads on premium channels. This will open the gate down the road for yet another round of price increases -- possibly something like paid shows with two prices, one with ads and one without.

At the same time, the coming generation will quit TV altogether (if they have ever used it to begin with) and tolerate ads while watching movies on their smart phones and tablets.

The only real question is what type of ads these will be. The paper hints at what probably lies ahead: sponsored content and product placement.

Patreon is starting to replace ads for some people. Including me. I won't be sad to see them go.

Interesting, but pretty thinly supported by facts. The demographics, in particular, could be explained as a function of relative disposable income as much as immunity.

Would be far more persuasive if backed up with a cohort analysis over time of a young and and old demographic.

For too long, and on too many websites, you couldn't be sure that the ad wasn't just going to trigger a thousand pop-ups and/or download malware. Or, the ad was for something you just purchased on-line, leading to confusion. People no longer click ads because they've learned to avoid them (and almost every ad I've seen looks super spammy anyway).

It's called training. People can be trained to do/not to do anything. In this case they've been trained to avoid advertising nonsense; look at the annual increase in ad-blocker usage and how younger generations avoid ads the most as cited in this paper.

Interesting theory. I can think of two additional counterarguments:

1) the decline in price of advertising belies the growth in users and the steady increase in advertising spend Y/Y (+14% in 2014 according to Mary Meeker's latest report).

2) the paper focuses only on advertising targeted toward the bottom of the purchase funnel. A considerable amount of display ad revenue comes from upper-funnel ads, where the objectives are not behavioral but rather perceptual. That said, I don't know what proportion of total display ad revenue falls into this category.

> The fate of the Internet is therefore inextricably tied up in the fate of advertising.

Are we going to revert to a web of sharing and free contributions by passionate people ? How sad ! Is the web close to an end ? No we're fine, thank you advertising and ecommerce people.

How are we going to do without all those big servers and clouds and things ? Peer to peer.

A few observations:

• There are other revenue models online. Notably, Amazon, Apple, Google, eBay, and Etsy are all employing direct sales. This cuts out the role of advertising and focuses instead on intent. It's also directly monetizeable. I'm watching to see who can apply this to main street, offering a hybrid online/offline shopping system (I'd like to be able to research and order online, but pay and/or arrange for delivery offline). I'm struck by how small online sales are having consistently undershot growth forecasts in recent years. Federated retail is one such approach. http://redd.it/22om3p http://redd.it/243in1

• Advertising is a hugely negative experience in many, many ways: http://redd.it/24107v

• The medium is the message. Both technolgies for information and entertainment, and the business models supporting them, have had tremendous levels of influence on what forms of media are available and provided. A quick off-the-top-of-my-head listing: http://redd.it/278e2o

• Advertising has severe perverse incentives on media. Much of the present weaponized clickbait, viral media, and other misfeatures are a direct result of ad-optimized content. The faster it dies the better: http://redd.it/23twec

• Mass-marketing advertising itself is largely a creature of a number of accidents of history. Consumer culture (dating to Wedgewood China and mid-19th century England, see James Burke, The Day The Universe Changed: 6 "Credit Where It's Due"), broadcast media in which content was widely distributed (now rapidly fragmenting into microchannels, though costs remain low), a proliferation of consumer goods for which demand had to be engineered (possibly ending, and while the 3D printing / micromanufacture model may be overhyped, it's one possible avenue out), and a growth-oriented economy (as well as a financial system which absolutely relies on it).

• For content, at least, there are several ways out. I'd be particularly interested in seeing a broadband tax or content syndication scheme (the first is a proposal of Phil Hunt's, of the UK Pirate Party, the latter my own) tried. To a first approximation the dollars work out. http://redd.it/1vknhc http://redd.it/1uotb3

There's also Don Marti's observation that a key function of indiscriminate advertising is a brand-strength signalling message which is lost in microtargeted advertising. The waste is the useful part: http://zgp.org/~dmarti/business/targeting-better-is-worse/

In a sense, advertising becomes a Veblen good, signalling status: http://en.wikipedia.org/wiki/Veblen_good

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