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Speculation On a Second Internet Economy Collapse

Posted by kdawson on from the put-down-that-pin dept.

David Barrett writes "If you sell three billion ads a month and can't break even, what do you do? Drop prices by 40% and switch business models, apparently. Is this an isolated incident, or does it contribute to the growing pile of evidence that ad inventory is overpriced industry-wide, with Google being the worst offender due to its policy of requiring minimum bids on keywords that would otherwise go for cheap? Check out this analysis on my blog and make up your own mind."

9 of 307 comments (clear)

  1. Google is overvalued by dreamchaser · · Score: 4, Informative

    I've been saying that since the IPO. Yes I bought shares, and yes I dumped them at a good price. The stock kept going up but I do not regret it at all. Ads are *way* overpriced, and when this next bubble bursts Google stock is going to tumble.

    I am not a stock analyst so I'm not going to predict where the price will settle, but $477 a share (as of this posting) is WAY WAY WAY overvalued.

    1. Re:Google is overvalued by SpiderClan · · Score: 2, Informative

      That's probably the most cynical way I've heard it described, but no, there is no other point. The general idea, though, is to buy it when it's undervalued so that you can sell at its proper price when the market corrects itself, rather than just buying at random and hope that somebody doing the same is willing to pay more than you did.

      The reason that so few people do well is because it takes knowledge and diligence to recognize the true value of stock and make sure that it's sufficiently undervalued when you buy it. Few people have that knowledge or are willing to put in the work, though many people think they have the knowledge and don't need to put in the work. Hence, they fail.

  2. Re:Ironic... by 4D6963 · · Score: 4, Informative

    "Check out this analysis on my blog and make up your own mind."

    Translation: Visit my website to increase my ad impressions so I can make more money.

    Translation: I didn't even bother to visit the site to make sure it even had ads before claiming so. Not like I would let reality get in the way of sarcasm anyways.

    Pwned? I think so.

    --
    You just got troll'd!
  3. It is not a burst by Yvanhoe · · Score: 3, Informative

    It is a single company that doesn't manage to make money in this market because it does it wrong. What Google has proved in the online-ads world is that what pays is to deliver the correct ad to the correct people. The first article clearly states that Lookery is not very picky about who to deliver their ads to and proceed to explain that its competitors manage to sell ads for 5 time Lookery's price because they craft their inventory more carefully.

    That's not a new bubble, that is a vestige of the first one : failing to understand that one online ad on a webpage do not have a fixed value but that many parameters are to be taken into account.

    --
    The Wise adapts himself to the world. The Fool adapts the world to himself. Therefore, all progress depends on the Fool.
  4. That's why you must at least visit the link.. by heteromonomer · · Score: 5, Informative

    at least once in a while. The author's page has *no* ads. That's right, no ads. If only you had bothered to visit the blog page, not even RTFA. And the fact that the parent post is now at +5 insightful tells a sad (oft-repeated) story about /.

  5. What plugins have you been using? by PC+and+Sony+Fanboy · · Score: 3, Informative

    I'm not sure what your idea of 'work' is, but it certainly wasn't more than 30 seconds of 'work' to install adblocker plus... and it updates itself auto-magically... and now I don't have to worry about those annoying laughing flash ads promoting 'custom smilies', and whatnot.

  6. Re:Inflation by zacronos · · Score: 4, Informative

    Meh - if you shift 3 billion units/month, and still can't turn a profit, then you deserve to go out of business.

    It's all about the spin -- I actually RTFA(s), and nowhere I saw except in some blogger's analysis did it say that company can't turn a profit. From the article:

    [Lookery] CEO Scott Rafer says the ad network is running at break even in terms of gross profits. But his plan is to use it to "bootstrap a data services business."

    The analysis makes the assumption that Lookery can't turn a profit and thus is changing their business model. Maybe this is true, but from that quote it seems equally plausible that this is all part of the plan -- run ads as cheap as you can to get as much market share as possible (hopefully undercutting your competitors, who are trying to turn a profit), then use your position to make money in a different way. I've heard many gas stations do the same thing -- they pretty much break even on selling gasoline (in order to attract customers), and then make their profit on the snacks, beer, ice, etc that people buy while they're stopped.

    This is not a new idea. Without further evidence, this does not mean the company is struggling -- even the fact that they've lowered their prices isn't evidence of this (what company wouldn't lower their costs if they thought they could get away with it?). It just means they're trying a different tack in a highly competitive market. No big deal.

  7. Re:Its all CLEAR... by Tubal-Cain · · Score: 2, Informative

    I can't think of a single time the cool hacker or badass spy hacked into the pentagon using a Dell,can you?

    The Atlantis expedition uses Dell XPSs.

  8. Re:Average Consumers? How about average internet.. by Raenex · · Score: 2, Informative

    It's effective on you. Advertising is about brand recognition, which you nicely demonstrated by mentioning Geico and Budweiser. It doesn't matter if you got the mascot screwed up.