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Speculation On a Second Internet Economy Collapse
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."
He assumes that it costs $0 to put up an ad. That makes his entire argument (that ads aren't there because Google forces up the price beyond $0.01) bogus.
But considering what advertising in other media costs, with less targeting or chance of success, and you'll have some idea as to how much of a bargain online ads really are.
I am officially gone from
as opposed to allowing people to bid on every unclaimed typo and spam the system to hell....
equally the minimum bid system is common to all forms of auction.
yes Google are being a bit dodgy in how they manipulate the system but equally they (as the article says) don't want people to know exactly otherwise it makes it too easy for the system to be gamed at which point it looses all possible value. Google ads do well because they are generally clickable - in that you have a good chance of clicking on something relavent to what you searched for - that reputation is something that google understandably wants to protect.
As long as companies is willing to pay the price, google (and others) are willing to profit from it. Should advertisers become convinced that they pay more than what they see in return; then they might cease paying the price demanded. At which point ad-supported sites and services might see a drop in their budget. But until then, I do not think they will lower price just because they can.
The Long Now Foundation
Meh - if you shift 3 billion units/month, and still can't turn a profit, then you deserve to go out of business. Blaming Google for it is misleading at best; suggesting an imminent internet economy collapse because of ones own failure is projecting at its worst.
You assume that everyone hates advertising as much as you do and thus, in the future, the trend will extend to the extreme. You can't magically extrapolate trends like that, unfortunately.
If the people who really hate advertisements, and who would never (consciously) use them to make a purchasing decision, continue to block them -- then that would seem to increase the value of each successfully delivered advertisement?
People over time get sick of the "Trying to make me buy stuff".
Example: When I was a kid magazines like Amateur Photographer contained piles of ads which were basically directory listings. Item, price, condition. They were in fact useful data for buyers. What's the nearest supplier who has a second hand Leica M3 in excellent condition? Nowadays, the ads in photo magazines are demand-creators; reams of eye candy. More advertising, in color, is needed to pay for the content. What does it tell me? Five guys have half a page of trying to sell me the same digital camera I don't want. Do they have what I do want? Hard to say.
Google's problem is it wants to be a directory, but its advertisers want to distort its market by directing irrelevant traffic in the hope of selling something. Like bad coinage, bad ads drive out good ads. (Just like eBay with the crooks driving out legitimate sellers.) Ultimately the public gets turned off. (Do I ever click on a right hand link on a google page? No. Do I ever click on the top 3 links? Hardly ever. That's experience, not prejudice.)
So, my 2c worth is that this may be nothing to do with the recession and everything to do with the great public having had time to realise what a scam much internet advertising is. Someone will have to come up with a better paradigm. If people will still pay money for print magazines, how much will they pay for a verified Google for instance (I would personally pay a $10/month for a shit-free search engine where abusers were removed from search results, no messing.)
From scarped cliff or quarried stone she cries "A thousand types are gone, I care for nothing, no not one."
Less relevant is fine. But there will be a problem if the ads become effectively irrelevant because there is no longer an incentive for providers to continue supporting ad-funded services (e.g., gmail). I never click on embedded ads (the 3 or 4 times I did, it was on accident.) But I'm glad there are others out there who do hit them so all these free, web-based services continue to operate
"The first internet bubble popped largely because all business models failed except for ad selling." (from the article).
He's forgetting that there was also the speculative insanity that goes along with any bubble in any industry. There were many companies that made enough revenue to be possible if only the executive spending could have been reined in. I'm forgetting the name of it but there was a new media company that was doing something like $180 million in business but was spending $200 million. They produced content, text! It's not like that requires a huge capital investment. People are the biggest expense, get a cheap building somewhere, have your people work there, maybe rent a small bit of office space in a posh tower for impressing investors. But no, they put the whole organization in the posh tower, aeron chairs in every office, and shot their whole wad on overhead.
The internet has nothing to do with that kind of stupidity, it's endemic to human affairs. And the matter of crazy-stupid shit getting funded just because someone has a business plan? Again, common in any bubble, be it tech or tulips.
Kwisatz Haderach
Sell the spice to CHOAM
This Mahdi took Shaddam's Throne
How many times have you seen an ad for coke on TV, then immediately run out to the store to buy it? Can't say I ever have, but they keep on doing it.
Advertising exists for more then making instant purchase decisions.
-- "So they told me that using the download page to download something was not something they anticipated." - Bill Gates
Injecting a bit of html tags does not cost that much. But the value of Google is not merely tacking on bits of html. It is collecting all that data on the net and making it easily available. It costs money. That cost gets amortized over every bit of html it injects in.
I am sorry for your predicament, you want the service at a lower price. But so does every body for everything. As I said earlier, it is a free market. Google does not have a vendor lock or a platform lock on its user base. Any one can compete with Google. There is no switching cost to the user to go from Google to its competitor. If it is pricing the ads too high, it will go out of business. It is not like Microsoft with a defacto monopoly on OS or Office software.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
The problem is, the advertisers are making the ads more annoying. The people who don't hate ads now will start hating them when the advertisers make them jump around the screen playing bad music.
Really? I thought part of Googles success was the fact that the adwords it displays in search results are mostly unobtrusive, but usually relevant if you take the time to look at them.
Advertisements have become more annoying over my lifetime, but the problem with most forms of advertising is that you can't measure annoyance, you can only measure sales -- and these aren't always mutually exclusive factors to the individual.
Compare Google and Yahoo! - the latter was dominant at that time (April 1999), but the lack of clutter/animated gifs helped (along with relevant data) popularise the newcomer.
That's the beauty of adblockers and online advertising - you can now link annoyance to sales - and market forces seem to be pushing away from annoying your customer.
I think you hit on the real problem there. It's not that there *are* ads, it's that the ads are stupid and annoying. I'm seeing progress from IBM and some others in making the ads more fun and relevant, but there is still a long way to go. And internet advertisers will eventually have to realize that just because you *can* animate an ad, doesn't mean you *should* animate an ad. I've seen magazine ads for Carlton Draught that made me laugh my ass off as well as remember their name - no animation required.
Hell is other people's code.
Personally, I hope it does collapse.
Advertising is a ridiculous basis for an economy.
Oh, look, I built something wonderful that makes peoples lives better. Everyone wants to participate. How will I ever get the support I need to keep this thing that everyone wants to succeed functional?
I'll stuff it full of crap that they don't like, and the people who own the big factory peddling the crap can support me. That's a great model, right?
Wrong.
I don't know what the exact shape of the web will be when we find the right answer. But it sure as hell isn't this.
The modern web is like going to watch a show while two dozen ugly people with screeching voices walk the aisles constantly screaming at you to pay attention to them instead. It's shameful to see something with such potential perverted in such a fashion, and if we need another collapse before we get our heads out of our collective asses and fix things, well, it can't come soon enough for my liking...
-1 Uncomfortable Truth
As long as you have a monetary based economy and cash to spare, then why is advertising ridiculous? Lets say a completely new, innovative, or maybe simply entertaining product is created. As the seller, do you have to wait for "word of mouth" (which btw is a form of advertising) or do you deliver the product via channels to reach an audience? Ads are just a form of communication like standing on a stage with a tophat selling snake oil. Face it, you are a consumer and people are willing to pay a little to earn the chance to get your business. It's a FUNDAMENTAL force in driving an economy. Not ridiculous. Certainly it's more fun than trading a goat for some chickens.