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How the Social Tech Bubble Is Different
theodp writes "Tech bubbles happen, writes BW's Ashlee Vance, but we usually gain from the innovation left behind. But this one — driven by social networking — could leave us empty-handed. Math whiz Jeff Hammerbacher provides a good case study. One year out of Harvard, 23-year-old Hammerbacher arrived at Facebook, was given the lofty title of research scientist and put to work analyzing how people used the social networking service. Over the next two years, Hammerbacher assembled a team that built a new class of analytical technology, one which translated insights into people's relationships, tendencies, and desires into precision advertising and higher sales. But something gnawed at him. Hammerbacher looked around Silicon Valley at companies like his own, Google, and Twitter, and saw his peers wasting their talents. 'The best minds of my generation are thinking about how to make people click ads,' he says. 'That sucks.' Silicon Valley historian Christophe Lecuyer agrees: 'It's clear that the new industry that is building around Internet advertising and these other services doesn't create that many jobs. The loss of manufacturing and design know-how is truly worrisome.'"
"The best minds of my generation are thinking about how to make people click ads"
And yet, the best minds in Silicon Valley have NOTHING on what New York media minds have been doing for a long time, who are a lot smarter than Silicon Valley.
Why would an advertiser pay to place their ads next to some image of a college kids throw-up when they can place an ad next to an image of Karlie Kloss in Vogue magazine or with Ryan Seacrest on American Idol? And, they'll pay $150/CPM instead of the $1 CPM that google gets.
Marketing is not a tech problem. It is a creative problem. You can't solve marketing through technology. You need creative production to win ad dollars.
Google the largest Internet ad company, gets only $30 billion a year in revenue. The next largest company, Yahoo, gets about 6 billion.
Meanwhile, News Corp, just one of the many media companies, gets about $32 billion in revenue by themselves.
Silicon Valley should just GIVE UP on any form of business model that attempts to derive money from ad sales. Let the media professionals in New York handle that business.
Go back to making hardware.