6 ms·

Is the online advertising bubble finally starting to pop?

64 points by rinze 10y ago

Animats 10y ago
Did HN cover this article already?
- rinze 10y ago
  In the past, when I have tried to submit an article that had already been covered, I was redirected to the old discussion, but now I was able to post it, so I don't know. Perhaps it was covered and URLs differ slightly.
- nl 10y ago
  Yes. https://news.ycombinator.com/item?id=11626967 https://news.ycombinator.com/item?id=11626967 The general consensus was that the author of the report didn't really understand what they were talking about.
misiti3780 10y ago
We expect Alphabet’s share price to go down by 75%… Alphabet consists of a group of companies that are not necessarily affected by ad dollars - no ? edit - i guess it includes google also: https://en.wikipedia.org/wiki/Alphabet_Inc.#Structure https://en.wikipedia.org/wiki/Alphabet_Inc.#Structure
- cylinder 10y ago
  I'm not aware of a significant source of revenue for them other than ads
- coldtea 10y ago
  Last time I checked, most of Alphabet's revenue, like 90%+ came from ad dollars. The others (Fiber, Nest, etc) are mostly losing money.
fiatjaf 10y ago
This is not a bubble.
mevile 10y ago
> We are living through the latest stages of the online advertising bubble, as available high-quality ad space is shrinking, leading to a decline ad space quality, and a decline of ad efficiency. I don't understand how it's a bubble since the decline has been steady over the last few years. A bubble is spectacular, not gradual. A bubble expands and then suddenly and unexpectedly pops. A bubble ends in a steep and surprising decline. All of the trends here with fraud and growing use of ad-blocking software have been on the horizon for a very long time. It doesn't sound like a bubble, but talking about "bubbles" gets lots of clicks.
fchollet 10y ago
> I started calling online advertising a bubble in 2008. Then maybe it's time to quit punditry; that was 8 years ago and the online advertising market has grown 2.5x since. > I made “The Advertising Bubble” a chapter in The Intention Economy in 2012. The online advertising market has grown 30% since. Since no market can grow forever, at some point there will be a dip in the industry. Maybe in less than five years, maybe in ten years. And when it finally happens, this kind of pundit will be telling us "they had called it correctly, before anyone else".
- kiba 10y ago
  Pundits need to put a firm date on their prediction.
  - NotSammyHagar 10y ago
    5 years should be enough, if it takes 10 years that shows you must be wrong.
  - paulpauper 10y ago
    firms dates and accountability. At least Nate Silver fessed up to being wrong about Trump.
- coldtea 10y ago
  >Then maybe it's time to quit punditry; that was 8 years ago and the online advertising market has grown 2.5x since. Isn't the very nature of bubbles to get inflated? 2.5x or more? The main difference compared to a solid venture is not that they see growth (that's what they do best!), or for how many years they see growth, but that it's an inflated (hence "bubble") growth that can (and eventually will) disappear overnight. A non-bubble industry will also see growth, and will also see decline. But it will not see a huge sudden drop from hero to zero, unless something extraordinary happens (e.g. a war, alien invasion, etc).
  - fchollet 10y ago
    Stable year-on-year growth for 15 years is not the sign of a bubble, it's just what you see with a growing industry.
awesomerobot 10y ago
I just want online advertising to at least be better than trying to sell me a toaster after I literally just purchased a toaster. I only need one toaster.
- mevile 10y ago
  I bought a new expensive GPU on newegg and now every other week newegg sends me emails about new deals for graphics cards. In what market does that behavior make sense? Most pc gamers probably buy a graphics card once every two years at most unless they're filthy rich.
  - Bombthecat 10y ago
    It affects your next buy.you will think about that company and those cards next time.
    - jsymolon 10y ago
      GPUs are the worst examples. They change radically from year to year, so spamming right after you buy is a waste of money.
- JorgeGT 10y ago
  Exactly this. How is Amazon smart enough to know I have viewed item X yet not that I have just finally bought it? They should have some "oh, he bought it, let's switch" flag.
- mpeg 10y ago
  Careful what you ask for... being able to exclude you based on a conversion means better tracking. Tracking is not something that can be easily improved, either you use cookies which are acceptable, widespread, but sadly very limited in functionality or you get into the world of supercookies and fingerprinting which is not yet properly regulated and where a few players are disregarding industry self-regulation to get as much data as possible.
  - 10y ago
Alex3917 10y ago
A couple days ago Shane Smith said in an interview, "I don't think it's any secret that you're going to see a bloodbath in the next 12 months in digital or mobile or terrestrial because what's happening it's all brand money. This is why people are moving to subcription-based things. What brands are moving to are finding an audience." I have no idea what he's even trying to say, but it sounds ominous. http://digiday.com/publishers/shane-smith-vice-media-interview/ http://digiday.com/publishers/shane-smith-vice-media-intervi...
nl 10y ago
If someone keeps making the same prediction for 8 years, and it doesn't happen, and it still hasn't happened and the report the new post is based on is pretty much nonsense (just basic maths: trying to compare growth rates of ad spending vs increase in sales without noting the obvious thing that the increase in ad sales is sustainable so long as it brings in more money than it takes) then maybe it's time to update your priors.
cmac2992 10y ago
There is a ton of information that is objectively wrong. "A customer who has already made a purchase may be bombarded with redundant repeat ads wherever he roams: what we might call the phenomenon of “repetitive irrelevance." Its pretty easy to not do this on a lot of ad platforms. Facebook calls it "exclusion audiences".
subhobroto 10y ago
TLDR: I feel we, the people in the online advertising industry, have failed at our duties. We have failed to show relevant ads. People who would benefit from relevant ads don't see it, and those who have no interest get ads shoved to their faces. Online advertising currently feels more tuned to marketing and branding than actual advertising. (Ex: Seeing the same ad 20 times is crappy advertising but good marketing/branding) Online advertising is a powerful tool: no other medium of advertising offers more efficient tracking and analysis metrics. Unfortunately, it's also the most hard to do properly. The biggest issue is most clients do not understand online advertising: they assume it's just like TV, in that, you have a creative that you show online to people and then hope for the best. Online advertising is not a one way street: you can interact with the user, see how they respond and then tailor the advertising to their needs. No other medium offers this ability. Consultants like patio11 make a living off this knowledge (and give away this knowledge for free on their sites). This inefficiency is currently arbitraged by two parties: 1. People who understand that clients do not understand online advertising: they offer inexpensive CPMs to agencies so that they can meet their "numbers" (like one does in the TV realm). Then they "somehow" meet these numbers, often in ways that does not help the client at all. 2. Online deal sites who know a certain store/brand is offering a great deal and create pages with deal information so that people click on the links to the product leading to the site getting kickbacks from the store/brand. Some of these sites keep the whole kickback to themselves and some split it with the users, but this is money that the store/brand paid out unnecessarily because they otherwise had failed to convert a customer directly.
tlogan 10y ago
I think the cause of the ad bubble is free VC money pouring into startups whose customer acquisition channel is spending 100s of thousands dollars on advertisement. And when VC money dries out, startups will start tracking ROI and stop wasting money on branding. And that will cause domino effect. Of course, there might be no bubble and this is a new normal.
- hunvreus 10y ago
  I'm pretty sure the VC money is marginally impacting ad spend; there are real, established business in much greater scale and numbers that use online ads.
paulpauper 10y ago
I started calling online advertising a bubble in 2008. His credibility got killed in my eyes after reading that. Predicting the same thing over and over to no avail is called being a broken clock. What he's really predicting is that the derivative will go negative. It's kinda unbecoming that this is the 'logic' that passes for a blog published by school that is supposed to be really elite and prestigious.
cm2012 10y ago
Generally, vc backed start-ups nowadays only spend money on direct marketing online, and get a return on every ad dollar spent. The giant established brands buy clicks randomly, but they can afford it. Its pretty sustainable.
deleted 10y ago
[deleted]
Bombthecat 10y ago
I'm pretty sure ad spending will keep increasing. It's either that or you stop spending money and lose your market / niche to the big players.
RubyRuby 10y ago
Great read and insightful comments as well on the distinction between online display, search, and social media advertising. Each produce similar results. In my own digital marketing experience, we're still seeing a positive ROI on search only ads. We stopped running display ads awhile due to the impracticality of the approach with the rise of ad blocking software. We use ad blocking software. We developed built-in banner blindness for display ads when not using the software. Display ads annoy us. Why wouldn't they annoy our target audience? Instead of wasting money on failed advertising methods, we reallocated our time on creating value through our blog and promoting that valuable content (not sponsored content) through email, search advertising, social media, and other avenues.

64 points by rinze 10y ago

Animats 10y ago

Did HN cover this article already?

rinze 10y ago
In the past, when I have tried to submit an article that had already been covered, I was redirected to the old discussion, but now I was able to post it, so I don't know. Perhaps it was covered and URLs differ slightly.
nl 10y ago
Yes. https://news.ycombinator.com/item?id=11626967 https://news.ycombinator.com/item?id=11626967 The general consensus was that the author of the report didn't really understand what they were talking about.

misiti3780 10y ago

We expect Alphabet’s share price to go down by 75%… Alphabet consists of a group of companies that are not necessarily affected by ad dollars - no ? edit - i guess it includes google also: https://en.wikipedia.org/wiki/Alphabet_Inc.#Structure https://en.wikipedia.org/wiki/Alphabet_Inc.#Structure

cylinder 10y ago
I'm not aware of a significant source of revenue for them other than ads
coldtea 10y ago
Last time I checked, most of Alphabet's revenue, like 90%+ came from ad dollars. The others (Fiber, Nest, etc) are mostly losing money.

fiatjaf 10y ago

This is not a bubble.

mevile 10y ago

> We are living through the latest stages of the online advertising bubble, as available high-quality ad space is shrinking, leading to a decline ad space quality, and a decline of ad efficiency. I don't understand how it's a bubble since the decline has been steady over the last few years. A bubble is spectacular, not gradual. A bubble expands and then suddenly and unexpectedly pops. A bubble ends in a steep and surprising decline. All of the trends here with fraud and growing use of ad-blocking software have been on the horizon for a very long time. It doesn't sound like a bubble, but talking about "bubbles" gets lots of clicks.

fchollet 10y ago

> I started calling online advertising a bubble in 2008. Then maybe it's time to quit punditry; that was 8 years ago and the online advertising market has grown 2.5x since. > I made “The Advertising Bubble” a chapter in The Intention Economy in 2012. The online advertising market has grown 30% since. Since no market can grow forever, at some point there will be a dip in the industry. Maybe in less than five years, maybe in ten years. And when it finally happens, this kind of pundit will be telling us "they had called it correctly, before anyone else".

kiba 10y ago
Pundits need to put a firm date on their prediction.
- NotSammyHagar 10y ago
  5 years should be enough, if it takes 10 years that shows you must be wrong.
- paulpauper 10y ago
  firms dates and accountability. At least Nate Silver fessed up to being wrong about Trump.
coldtea 10y ago
>Then maybe it's time to quit punditry; that was 8 years ago and the online advertising market has grown 2.5x since. Isn't the very nature of bubbles to get inflated? 2.5x or more? The main difference compared to a solid venture is not that they see growth (that's what they do best!), or for how many years they see growth, but that it's an inflated (hence "bubble") growth that can (and eventually will) disappear overnight. A non-bubble industry will also see growth, and will also see decline. But it will not see a huge sudden drop from hero to zero, unless something extraordinary happens (e.g. a war, alien invasion, etc).
- fchollet 10y ago
  Stable year-on-year growth for 15 years is not the sign of a bubble, it's just what you see with a growing industry.

awesomerobot 10y ago

I just want online advertising to at least be better than trying to sell me a toaster after I literally just purchased a toaster. I only need one toaster.

mevile 10y ago
I bought a new expensive GPU on newegg and now every other week newegg sends me emails about new deals for graphics cards. In what market does that behavior make sense? Most pc gamers probably buy a graphics card once every two years at most unless they're filthy rich.
- Bombthecat 10y ago
  It affects your next buy.you will think about that company and those cards next time.
  - jsymolon 10y ago
    GPUs are the worst examples. They change radically from year to year, so spamming right after you buy is a waste of money.
JorgeGT 10y ago
Exactly this. How is Amazon smart enough to know I have viewed item X yet not that I have just finally bought it? They should have some "oh, he bought it, let's switch" flag.
mpeg 10y ago
Careful what you ask for... being able to exclude you based on a conversion means better tracking. Tracking is not something that can be easily improved, either you use cookies which are acceptable, widespread, but sadly very limited in functionality or you get into the world of supercookies and fingerprinting which is not yet properly regulated and where a few players are disregarding industry self-regulation to get as much data as possible.
- 10y ago

Alex3917 10y ago

A couple days ago Shane Smith said in an interview, "I don't think it's any secret that you're going to see a bloodbath in the next 12 months in digital or mobile or terrestrial because what's happening it's all brand money. This is why people are moving to subcription-based things. What brands are moving to are finding an audience." I have no idea what he's even trying to say, but it sounds ominous. http://digiday.com/publishers/shane-smith-vice-media-interview/ http://digiday.com/publishers/shane-smith-vice-media-intervi...

nl 10y ago

If someone keeps making the same prediction for 8 years, and it doesn't happen, and it still hasn't happened and the report the new post is based on is pretty much nonsense (just basic maths: trying to compare growth rates of ad spending vs increase in sales without noting the obvious thing that the increase in ad sales is sustainable so long as it brings in more money than it takes) then maybe it's time to update your priors.

cmac2992 10y ago

There is a ton of information that is objectively wrong. "A customer who has already made a purchase may be bombarded with redundant repeat ads wherever he roams: what we might call the phenomenon of “repetitive irrelevance." Its pretty easy to not do this on a lot of ad platforms. Facebook calls it "exclusion audiences".

subhobroto 10y ago

TLDR: I feel we, the people in the online advertising industry, have failed at our duties. We have failed to show relevant ads. People who would benefit from relevant ads don't see it, and those who have no interest get ads shoved to their faces. Online advertising currently feels more tuned to marketing and branding than actual advertising. (Ex: Seeing the same ad 20 times is crappy advertising but good marketing/branding) Online advertising is a powerful tool: no other medium of advertising offers more efficient tracking and analysis metrics. Unfortunately, it's also the most hard to do properly. The biggest issue is most clients do not understand online advertising: they assume it's just like TV, in that, you have a creative that you show online to people and then hope for the best. Online advertising is not a one way street: you can interact with the user, see how they respond and then tailor the advertising to their needs. No other medium offers this ability. Consultants like patio11 make a living off this knowledge (and give away this knowledge for free on their sites). This inefficiency is currently arbitraged by two parties: 1. People who understand that clients do not understand online advertising: they offer inexpensive CPMs to agencies so that they can meet their "numbers" (like one does in the TV realm). Then they "somehow" meet these numbers, often in ways that does not help the client at all. 2. Online deal sites who know a certain store/brand is offering a great deal and create pages with deal information so that people click on the links to the product leading to the site getting kickbacks from the store/brand. Some of these sites keep the whole kickback to themselves and some split it with the users, but this is money that the store/brand paid out unnecessarily because they otherwise had failed to convert a customer directly.

tlogan 10y ago

I think the cause of the ad bubble is free VC money pouring into startups whose customer acquisition channel is spending 100s of thousands dollars on advertisement. And when VC money dries out, startups will start tracking ROI and stop wasting money on branding. And that will cause domino effect. Of course, there might be no bubble and this is a new normal.

hunvreus 10y ago
I'm pretty sure the VC money is marginally impacting ad spend; there are real, established business in much greater scale and numbers that use online ads.

paulpauper 10y ago

I started calling online advertising a bubble in 2008. His credibility got killed in my eyes after reading that. Predicting the same thing over and over to no avail is called being a broken clock. What he's really predicting is that the derivative will go negative. It's kinda unbecoming that this is the 'logic' that passes for a blog published by school that is supposed to be really elite and prestigious.

cm2012 10y ago

Generally, vc backed start-ups nowadays only spend money on direct marketing online, and get a return on every ad dollar spent. The giant established brands buy clicks randomly, but they can afford it. Its pretty sustainable.

deleted 10y ago

[deleted]

Bombthecat 10y ago

I'm pretty sure ad spending will keep increasing. It's either that or you stop spending money and lose your market / niche to the big players.

RubyRuby 10y ago

Great read and insightful comments as well on the distinction between online display, search, and social media advertising. Each produce similar results. In my own digital marketing experience, we're still seeing a positive ROI on search only ads. We stopped running display ads awhile due to the impracticality of the approach with the rise of ad blocking software. We use ad blocking software. We developed built-in banner blindness for display ads when not using the software. Display ads annoy us. Why wouldn't they annoy our target audience? Instead of wasting money on failed advertising methods, we reallocated our time on creating value through our blog and promoting that valuable content (not sponsored content) through email, search advertising, social media, and other avenues.