How Digital Advertising Markets Really Work
prospect.org
prospect.org
The article has very pragmatic observatiosn but this is not one of them. This won't work, people won't pay with money for what they can easily pay with their targetting data. Private data is worthless in any other context than advertising, there is no opportunity cost.
I also think it didn't touch on advertisers themselves, who bear a big responsibility for this situation. Agencies like IAB have done less than nothing to fix this situation, they ve made things worse. We need more ethical ad platforms, but we also need more ethical advertisers.
I don't think that antitrust regulation solves this particular adverse selection problem. It's certainly difficult to compete against the established giants, for many reasons, but this theoretical opting out is definitely not some consumer benefit that we can expect.
The larger sites (Facebook, Twitter, etc.) are pretty close to saturation in North America and a lot of other English-speaking countries. There just aren't many people left here that don't know what Facebook is and might still be convinced they should start using it regularly. Almost all of the growth comes from other parts of the world, but the users from those locations are worth far less in terms of advertising revenue.
If you look at Facebook's Q2 2019 presentation [1], their average revenue per user from US & Canada is now $33.27, Europe $10.70, Asia-Pacific $3.04, and Rest of World $2.13. One US/Canada user is worth more to them than 15 from "Rest of World".
However, 74% of their Monthly Active Users are from Asia-Pacific/Rest-of-World now, and that only corresponds to 28% of their revenue.
I don't really have a particular point I'm trying to make, I just think it's interesting. These companies worry a lot about showing continued user growth (or at least not shrinking), but the growth sources now don't have anywhere near the same value as the old ones.
[1]: https://s21.q4cdn.com/399680738/files/doc_financials/2019/Q2...
> The richest people are the ones who advertisers really want to reach (in the article, the hypothetical beer ad sells at $2 CPM vs the hypothetical private jet ad at a $2000 CPM)
Rubbish. The 1000x $2 eyeballs is definitely worth money to the beer sellers, independently to the 1x "$2000" eyeball for the private jet advertiser (ignoring profit margin etc). Note, from the article: "The private jet ad might sell at a $200 CPM as opposed to the $2 CPM beer ad targeted to an anonymous user" not sure why you changed value to 2k.
Not only is an individual's private data nearly worthless, but they can protect it for free simply by using the Brave browser or other adblocking/tracking solutions.
People often claim that they would pay for web content if it were somehow easier or if micropayments worked better or something. I'm not sure that I believe them.
You don't have to take their word that people would pay. They already are paying. Millions[1] of people go out of their way[2] to pay creators monthly or per-work.
However, a lot of that "web content" needs to realize the actual value of their content might be ~$0. Advertising distorted the market; a lot of people were able to extract revenue greater than the actual "market value" of their content.
[1] https://graphtreon.com/patreon-stats
[2] While Patreon isn't very hard, having to take the extra step of vising (and maybe making an account) a 3rd party service is not a proper "micropayment" system. The goal of micropayments is to make trivial to immediately pay for something without any extra friction (perhaps a button/whatever in the browser to send a tip/donation, no need to worry about Paypal/Patreon/etc)
If people are spending time on your site, you are providing value to them (excluding scams, of course). It's never 0.
> Advertising distorted the market; a lot of people were abl
It did not. The percentage of GDP that companies spend in advertising is historically the same for more than 100 years. What happened with the internet is that Google and later FB progressively sucked up ALL the profits, leaving literally scraps to publishers. And over time they are eating more and more value from publishers because all their competitors have vanished (there is currently NO competitor to adsense). Publishers are seing their ad CPMs being lower , despite the fact that online audiences are growing fast, and the shift to online ads has accelerated explosively in the past few years.
Patreon and subscriptions have their place, but they are not scalable. Users will revolt if they have to pay 30 yearly subscriptions for reading 30 articles , and are forced to pass from an spanish inquisition to unsubscribe. Subscriptions can also be bad for the quality of content: If creators try to appeal to their patrons/subscribers instead of trying to reach as wide audiences as possible, they tend to become more partisan and biased ; you get what you incentivize.
micropayments would indeed be far better especially if they were anonymous, fire-and-forget payments. crypto payments would be ideal for that but its not gonna happen because they are untaxable
On the other hand, I'd like to support creators as well, so I've created a web site that allows readers to make payments easily. It's like scroll, quid, patreon, etc. but I've tried to reduce friction even further by only going with a HN-style sign up form (email/pass) and charging readers only once they've reached a minimum account balance:
My initial impression is that most people will just continue blocking ads everywhere, because it's the easiest and safest thing to do, and I'm not even sure I disagree with that approach.
Any feedback is appreciated.
Facebook then came along and followed the playbook with the social buttons.
Brilliant move, regardless of how we feel about that.
Go ahead and get rid of Google and Facebook and the rest overnight and all you'll do is find a new vector for advertising spring up virtually overnight.
Every ad tech company is responding to market incentives. Breaking companies up or killing them with regulation etc... won't make a dent in the long run.
Outlawing advertising as a business however will end the surveillance economy swiftly.
Earlier, the article explains pretty well how tracking increases the CPMs that publishers can achieve. In the author's example, cross-site tracking increases CPMs by 200%.
This seems like a benefit to the "health of the wider news ecosystem". If the author believes Google/Facebook increase the pie for publisher, why then say that they "extract from independent publishers"?
Meantime, the AI can update a private site with content that interest you.
An client side AI is the only way to make tracking useless.
Click the source link, and it’s an article about how companies are wasting money on data scientists when they only need data analysts, contradictory to the point made by primary article. This was an intriguing article, but I could not continue reading after noticing this.