Re: [projectvrm] Theory of peak advertising

[Marc Guldimann | Enliken < >]

"Death of X" stories are always fun, but unfortunately normally written by 
pundits that don't understand how markets are functioning in practice.  To 
wit, the 3 of the 4 points used support the hypothesis that "a broad 
transition the financial models supporting the web" is looming are incorrect 
and the fourth is questionable.

1 -  Older internet users are most impacted by advertising. 
This is going to take a bit longer to refute since the study seems to be well 
done, even if it is almost 7 years old. My thinking is that older users are 
probably more influenced (by their measure of purchase activity) by ALL types 
of advertising both because they have more disposable income and they develop 
the innate capacity to ignore ads more slowly.

2 - Ad blocking will be ubiquitous. 
False. Ad blocking is a technological blip, publishers will soon require that 
you don't block ads to see content. See DVRs and "the death of TV ads" or try 
using an ad blocker on Hulu to see why this is false. Even the #1 ad blocker 
is fast realizing this and has started blackmailing publishers to let ads 
through. 

3 - Click fraud is an endemic problem that will destroy online advertising.  
False. $53m in the first two quarters of 2013 is a rounding error. Online 
advertising did $20 BILLION dollars in revenue during the same period, and 
grew 20% year over year. That means click fraud amounts to not even 2% of the 
GROWTH of online advertising. 

4 - Too many ads will ruin the experience and people will "abandon the site". 
False. The same thing has happened in TV without the expected collapse - 
http://www.waynesthisandthat.com/commerciallength.htm . Additionally, the 
framing of this problem betrays the author's lack of understanding of digital 
advertising vs. traditional - attention to digital media is growing FASTER 
than online ad spend.

If I have more time later this week I'll do a more in-depth tear down on the 
whole paper.

Marc



On Oct 12, 2013, at 11:16 AM, Don Marti 
<
 >
 wrote:

> I don't know about those venture dollars, but ever
> since I read _Antifragile_ by Nassim Nicholas Taleb,
> I feel like a chump for not having figured out a
> way to bet against the ad bubble. (Especially since
> VCs don't understand advertising--they still think
> that it's something that data can make more efficient:
> http://venturebeat.com/2013/09/28/why-we-need-a-don-draper-mentality-to-redistribute-the-200b-tv-ad-industry-from-broadcast-to-the-web/
> ) Ideas?
> 
> Anyway, Peak Ads.  All good, as long as you're only
> considering what Doc calls direct marketing.  Peak Ads
> describes email spam perfectly.  Email spammers
> can send more spam than you can possibly read.
> You have an incentive to block it.  Email spam is
> an inexpensive, common, and almost totally ignored
> medium -- it's already peaked.
> 
> As web ads get to be more and more like email spam,
> they're peaking, too.  Right so far.
> 
> Magazine ads, though, don't peak.  Why?  Because they
> rely for effectiveness on the amount the advertiser
> spends, as perceived by the reader.  Signaling.
> 
> More ads make a magazine more valuable.  Instead of
> a death spiral like spam or web adtech, there's a
> value-building cycle.  A new magazine can rise if an
> ad there sends a strong signal.  (IMHO, good content
> has a multiplier effect on that reader-perceived
> ad spend.) More ads mean more money for content,
> more content means more readers, ad rates go up, and
> everyone's a winner.  Readers get better articles and
> photos for the same cover price, advertisers get a
> signaling "bonus" from the quality of the magazine,
> and the writers, photographers, and editors get paid.
> 
> Yes, the total attention that readers can pay is
> limited, but the tendency is to try to attract it with
> ever-stronger signaling, which means an incentive to
> give readers better and better ad-supported content.
> I'll take it.
> 
> The question is how to make web advertising work
> more like magazine ads, which have never peaked, and
> less like junk faxes, telemarketing, and email spam,
> which spiraled into near-worthlessness.
> 
> 
> 
> begin Katherine Warman Kern quotation of Sat, Oct 12, 2013 at 07:21:50AM 
> -0400:
>> 
>> Here's a idea for an additional chapter - "advertising isn't really 
>> financing the Internet"
>> 
>> I wonder if anyone has looked at some basis for an annual depreciation of 
>> cumulative venture dollars invested in Internet ad startups compared to 
>> the annual ad revenues.
>> 
>> 
>> Katherine Warman Kern
>> www.comradity.com
>> @comradity
>> 203-918-2617
>> 
>> On Oct 12, 2013, at 1:32 AM, Doc Searls 
>> <
 >
>>  wrote:
>> 
>>> <http://peakads.org/images/Peak_Ads.pdf>
>>> 
>>> ... is a "Working Paper by Tim Hwang and Adi Kamdar of the Nesson Center 
>>> for Internet Geophysics VERSION ONE - October 9, 2013." 
>>> 
>>> My only regret, reading the piece, is that Tim & Adi apparently had not 
>>> read The Intention Economy, in which one of the chapters is called The 
>>> Advertising Bubble, and makes essentially the same case.
>>> 
>>> For those not getting the tongue in cheek in the title, Tim is the father 
>>> of the Awesome Foundation, ROFLCON and much more — and a very smart, 
>>> funny and creative dude. Charlie Nesson is the alpha founder of the 
>>> Berkman Center and a Harvard Law Professor of high repute, both in spite 
>>> and because of his oddities (e.g. fondness for Internet gambling and 
>>> Jamaica permissiveness around drugs). Nobody is more out-there and 
>>> grounded than these two guys, who are also at least two generations 
>>> apart. Love 'em both.
>>> 
>>> Enjoy.
>>> 
>>> Doc
> 
> -- 
> Don Marti                      +1-510-332-1587 (mobile)
> http://zgp.org/~dmarti/        Alameda, California, USA
>