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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."
Bubble 2.0. The burst is coming. See it live on slashdot.tv.
Caesar si viveret, ad remum dareris.
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.
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 /.
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
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
Warren Buffett made all his money buying undervalued companies or (parts of companies via stocks) and then holding onto them as they reached their appropriate values. Note, he doesn't really sell most of the time. He holds onto things that are valuable, and whenever extra money comes from them he invests them either in what he already has to make them even more valuable, or acquires something else that would appreciate in value.
Note, I didn't say they would appreciate in price, though typically they would do that as well. But Buffett wouldn't buy something just because its price is going to go up if it was not reflective of its true value. Not that that's not a way that people can make money. It's just not a solid investment strategy.
Assuming Google is not overvalued, and in fact will continue to appreciate at a rate better than the market, Buffett would advise buying and holding onto it regardless of whether it gives dividends or its price falls. Dividends, to him, are only for when the company can't make better use of the money to increase its own value than the investors could if it were handed back to them.
Note, investing like this means that most of your wealth is not directly accessible as cash, as it's all tied up in investments, often investments that hold onto their money and reinvest. Not a recipe for a profligate lifestyle, but the surest means of building wealth.
Now as the parent mentions, the trick is in discerning value. Which is why Buffett avoids investing in industries he doesn't know well himself, and in particular avoids high tech. New technology's value is so unclear. Proven technology can be rock solid, but new tech's value is more often than not blown way out of proportion.
You can actually go back a lot further in your 'golden ages' than that to trace this.
Pretty much all of what we think of as "great" art/music was produced in a not dissimilar fashion, by being underwritten by King or Church in order to enhance their prestige. The modern version of King and Church is the incorporated company, and the modern version of prestige is, well, still prestige actually, but it's labelled "Goodwill" on balance sheets.
So the Sistine Chapel, for instance, was certainly commissioned as "pimping product" as you so delicately put it, that being the Catholic Church's product offering of salvation amongst the extremely competitive free market in religions, but most people see some intrinsic worth in it despite being a commercial message.