7 ms·

Something doesn’t ad up about America’s advertising market

60 points by hardtke 9y ago

everdev 9y ago
Public link anyone?
- ikeboy 9y ago
  Subscribe Schumpeter Something doesn’t ad up about America’s advertising market Stockmarket investors are wrong to expect an enormous surge in advertising revenues Print edition | Business Jan 18th 2018 IMAGINE a world in which you are manipulated by intelligent advertisements from dusk until dawn. Your phone and TV screens flash constantly with commercials that know your desires before you imagine them. Driverless cars bombard you with personalised ads once their doors lock and if you try to escape by putting on a virtual-reality headset, all you see are synthetic billboards. Your digital assistant chirps away non-stop, systematically distorting the information it gives you in order to direct you towards products that advertisers have paid it to promote. Jaron Lanier, a Silicon Valley thinker who was an adviser on “Minority Report”, a bleak sci-fi film, worries that this could be the future. He calls it a world of ubiquitous “digital spying”. A few platform firms, he fears, will control what consumers see and hear and other companies will have to bid away their profits (by buying ads) to gain access to them. Advertising will be a tax that strangles the rest of the economy, like medieval levies on land. Latest updates A severe case of “truth decay” DEMOCRACY IN AMERICA Brexit presents new opportunities for organised crime BRITAIN Britain’s statisticians are at war like never before BRITAIN See all updates It may sound outlandish, but this dystopia is increasingly what stockmarket investors are banking on. The total market value of a basket of a dozen American firms that depend on ad revenue, or are devising their strategies around it, has risen by 126% to $2.1trn over the past five years. The part of America’s economy that is ad-centric has become systemically important, with a market value that is larger than the banking industry. The biggest firms are Facebook and Alphabet (Google’s parent), which rely on advertising for, respectively, 97% and 88% of their sales. But the chunky valuations of America’s giant TV broadcasters imply that their ad revenues will fall very slowly, or not at all. Startups that rely on advertising, such Snap, are floating their shares at prices that suggest huge growth. Large deals, too, are being justified by potential ad revenues. Microsoft’s $26bn acquisition of LinkedIn in 2016 was partly premised on “monetising” its user base through adverts. The main reason AT&T says it wants to buy Time Warner for $109bn is to create a digital ad platform linking AT&T’s data to Time Warner’s TV content. The immense sums being bet on advertising raise a question: how much of it can America take? A back-of-the-envelope calculation by Schumpeter suggests that stock prices currently imply that American advertising revenues will rise from 1% of GDP today, to as much as 1.8% of GDP by 2027—a massive jump. Since 1980 the average has been 1.3%, according to Jonathan Barnard of Zenith, a media agency, and in the past few years the advertising market relative to GDP has been shrinking. There are reasons why it might go on a tear, points out Rob Norman of GroupM, another media agency. In the old days adverts in Time magazine or on billboards in Times Square were big-ticket items that only giant firms could afford. But tech platforms have done a brilliant job of persuading smaller companies to spend money targeting customers. Facebook has 6m advertisers, equivalent to a fifth of all American small firms. Adverts could become even more effective at identifying customers and enticing them to spend money, using troves of data that have been gathered to anticipate their needs. As commerce shifts online, firms will cut back on conventional marketing (for example, the fees that consumer goods and food firms pay to Walmart to ensure products are displayed prominently on its shelves), freeing up budgets to spend more on digital ads. Yet there are two logical limits to the size of the advertising market. First, the irritation factor, or how much consumers can absorb without being put off. In the analogue era the rule of thumb was that ads could comprise no more than 33-50% of TV or radio programming, or of a magazine’s pages, says Rishad Tobaccowala, of Publicis, an advertising firm. The digital world is already showing signs of saturation. More people are using ad-blocking software. Tech brands that eschew bombarding customers with ads, such as Apple and Netflix, are wildly popular. The drive to lift user “engagement” on social-media platforms by showing sensational content, in turn boosting the number of ads that can be sold, has prompted a backlash. On January 11th Facebook said it would show users fewer posts from “businesses, brands and media”. Time spent online by the typical American is growing at about 10% a year, less than the 15-20% ad-sales growth that many digital firms expect. The second limit on the size of the advertising market is how much cash all other firms, in aggregate, have at their disposal to spend on ads. In theory they could spend more and more until their overall returns on capital drop below the cost of capital, compromising their financial viability. Remarkably, expectations for ad revenues are now so bullish that they imply that this boundary will indeed be tested. Commercial breaking-point Imagine if advertising spending really did rise to 1.8% of GDP in America by 2027. Most firms’ costs would have to rise, cutting total corporate profits (excluding those of ad platforms) from about 6.5% to 5.7% of GDP, the kind of drop normally associated with a recession. Alternatively, imagine if the firms in the S&P 500 index (excluding ad platforms) bore all the additional cost of the advertising boom. Their combined return on capital would drop from the present 10% to 8%, at or just below their cost of capital. America Inc would go from being the world’s greatest profit machine to flirting with Japanese-style financial-zombie status. That does not seem realistic. More probably, hopes for a new age of advertising nirvana are too optimistic. Perhaps the ad sales of conventional media firms (which are about half of the total, with TV dominating) will drop fast rather than merely stagnate. Or perhaps digital firms will struggle to increase ad sales at compound annual rates of 15-20% or a decade, as their valuations imply. Expectations for both groups are surely too high. In the advertising world, and on Wall Street, something does not ad up. This article appeared in the Business section of the print edition under the headline "Mad men" You’ve seen the news, now discover the story Get incisive analysis on the issues that matter. Whether you read each issue cover to cover, listen to the audio edition, or scan the headlines on your phone, time with The Economist is always well spent. Enjoy 12 weeks’ access for $12 Print edition | Business Jan 18th 2018 Reuse this content About The Economist Editors’ picks Banyan Asia is taking the lead in promoting free trade Asian voters know open markets have lifted billions of them out of poverty ASIA #OscarsSoRainbow The rise and fall of the award-winning white-saviour film PROSPERO From the single market to the black market Brexit presents new opportunities for organised crime BRITAIN The Economist explains Why the genome of wheat is so massive THE ECONOMIST EXPLAINS Subscribe: 12 weeks for $12 or sign up to enjoy 3 articles free Get full access to The Economist via print, online and our apps or sign up to enjoy 3 articles free. Subscribe: 12 weeks for $12 Sign up: 3 articles per week Tell us what you think of Economist.com Leave feedback Need assistance with your subscription? Contact us Subscribe Contact us Help Keep updated Sign up to get more from The Economist Get 3 free articles per week, daily newsletters and more. Email address Sign up About The Economist Advertise Reprints Careers Media Centre Terms of Use Privacy Cookies Accessibility Modern Slavery Statement Copyright © The Economist Newspaper Limited 2018. All rights reserved.
  - jamestimmins 9y ago
    "Copyright © The Economist Newspaper Limited 2018. All rights reserved."
- rm_-rf_slash 9y ago
  Just read it in private browsing.
- clusmore 9y ago
  https://outline.com/7R7kuH https://outline.com/7R7kuH
- labster 9y ago
  If you click reader mode really fast, the JS deleting the article doesn't run.
- lern_too_spel 9y ago
  Pay for it. It's the price of not having the article plastered with ads and clickbait.
  - BareNakedCoder 9y ago
    Yes, pay for it. It's well worth it. I've been a subscriber for many years and consider it on my Top 10 list of things I would miss most if I were ever stranded on a deserted island.
taneq 9y ago
> In the analogue era the rule of thumb was that ads could comprise no more than 33-50% of TV or radio programming, or of a magazine’s pages, says Rishad Tobaccowala, of Publicis, an advertising firm. My tolerance is way lower than that now. Commercial TV is basically unwatchable, as is commercial radio. The internet is pretty horrible without an ad blocker. Anything more than 10-20% advertising just gets turned off immediately.
- CapacitorSet 9y ago
  Indeed, 50% advertising seems outright ridiculous. Want to watch a 2-hours film? You'll watch two hours (!) of advertising. That's silly.
  - zipwitch 9y ago
    My memory is that ~20 years ago or so bottom-tier cable networks would get to that point during off-peak hours. I had to be tremendously bored before even contemplating watching them, but it happened a time or two - and I discovered that that much advertising did make pretty much anything unwatchable.
  - flukus 9y ago
    Or they'll just cut out part of the movie and give you 90 minutes of ads with 90 minutes of movie. Australian free to air networks have done this.
    - dvtv75 9y ago
      I saw that a few times in New Zealand, too. I think I've seen TV shows lose scenes and lines for more ads, as well. What really got me was back when the Battlestar Galactica pilot screened on TV. I was very keen to see it, and heard the pilot was three hours three minutes long. It was split up, on TV3 I think, into two 180 minute slots, which means there were almost as many minutes of ads as there were of the show. I had to turn it off after one scene was interrupted in the middle for an ad-break that was longer than the scene, then we came back for a single line (now out-of-context) and one camera change, then cut to another break. (For reference, it was a scene with the nuke hitting the Galactica, then six minutes of ads interrupted by about 25 seconds of show.) I turned off my TV, found an email address, and explained to them just why I was going to buy the DVD and not watch another second of their broadcast. TV advertising is so intrusive these days that I haven't watched broadcast TV in years.
harrywhelchel 9y ago
A lot of people have commented on native advertising being on the rise. Does the saturation of traditional ads mean we'll see more native advertising or will we adapt and better recognize native advertising too? Will we get more skeptical and untrustworthy of content in general?
- Feniks 9y ago
  Native advertising still has to be marked as advertising. In theory you could easily block them if you want with a cosmetic filter. Personally I don't mind advertorials if they have a subject I am interested in. Native advertising is better than a full page ad taking over the screen.
mindFilet 9y ago
IMAGINE a world in which you are manipulated by intelligent advertisements from dusk until dawn. It may sound outlandish, but this dystopia is increasingly what stockmarket investors are banking on. Except ads don't actually manipulate me. I know they don't because I don't even have the money to spend on the things advertisers show me. When I do have disposable money (a rare event) there are specific projects that I plan during the lean times. Those projects get well researched, and aren't impulsive, emotional events. Day-to-day spending also is not swayed by advertisements. There are real reasons behind the choices I make, and those ideas, opinions and motivations don't source their information from advertisers. I'm not charmed by entreaties that pander to my niche demographic. Advertising has one rare utility, in shedding light on things that are new. The cliche being that everything is "new and improved" if you believe what ads are trying to sell you. The people that try new things are the targets, and learning who will try something new, and who will spread positive word-of-mouth endorsements, is the holy grail of advertising, but realistically most people do research and find real evidence, before parting with their money. Ads can notify a person of presence, but in practice, people really do operate carefully before accepting invitations to buy, or R.S.V.P. with their wallets.
- Y7ZCQtNo39 9y ago
  They must be working for others. If businesses couldn't profit off of advertising, then they wouldn't do it.
  - itronitron 9y ago
    But consumers aren't buying the advertising, they are buying the product. Advertising is an expense for both the producer ($) and the consumer (time) so neither can profit from it.
    - turingbombe 9y ago
      No they are not buying the ad but from the producers perspective advertising is the way to get their product in the consideration set or possibly push someone further down the purchase path.
dba7dba 9y ago
When cable TV was starting out in US, one of the advertised pros was no commercials on cable TV.
- isostatic 9y ago
  In the UK, skytv stated free to air, with adverts, with movies being subscription but no adverts. Then they introduced subscriptions around 1994 to all channels, but kept adverts. I don't subscribe to sky, but I used to, until I saw that the revenue from advertising was tiny - by increasing subscription prices by 10% they could get rid of adverts and remain revenue neutral. If you don't offer an advert free product I won't buy it. When Netflix and amazon inevitably start adverts, I'll go back to DVDs. If they aren't available then torrents it is. Advertising is a scourge on civilisation, it costs trillions of dollars in lost time each year in the US alone.
  - dba7dba 9y ago
    When Netflix and amazon inevitably start adverts I am positive that day will come. Soon enough. Unfortunately.
    - isostatic 9y ago
      They know how much they get per customer from an advertiser. They could then simply offer a "no advert" plan at this premium (or more), like cbs all access do. If they don't they're idiots. Remember there's plenty of competiton for entertainment nowadays.
evrydayhustling 9y ago
These valuations aren't necessarily just a bet on advertising as we know or imagine it. At least for FB and Google, the assets that give them power to direct attention to ads can potentially be monetized in other ways if ads stop being the most lucrative. And conversely, if you don't own an asset that redirects a massive amount of attention, you can't launch any kind of product without getting help from someone who does (whether you call that help advertising or not).
- lsseckman 9y ago
  If Google's asset was so powerful you'd think their other products would be doing better. (google+, glass, Allo, etc)
  - gcb0 9y ago
    even they being failure, almost everyone heard of them.
    - lsseckman 9y ago
      right, but the point is that those products won't maintain the company valuation. lots of people have heard about AIM, but it didn't save AOL
ChuckMcM 9y ago
This isn't a particularly new insight :-). And the phenomenal rise in the use of ad blockers, dvrs that skip commercials, and direct to streaming services suggest that not only has "big advertising" poisoned the commons they are at risk to training an entire generation in the art of avoiding their product. It's my hope that they entire house of cards will collapse. There clearly are "good" advertising options. People will often read topic specific periodicals (magazines, newsletters, Etc.) both for the editorial content and the advertising of service providers surrounding the topic. And of course there are people who will be more excited about the advertisements on the Superbowl next weekend than the game. But advertising as envisioned by Google and Facebook feel like they are under siege and there is a race to the bottom in terms of what advertisers will pay, and so how much they 'care' about the end product. The growing battle will be advertisements "embedded" in content. People can already replace billboards in movies or on Youtube with ads for actual products. At some point these 'insertion points' will be programmed in as meta-data in the distribution of content so that they can be added in on site. Things from store fronts to the vehicles in the scene are up for dynamic replacement.
- lorenzhs 9y ago
  That last one is already happening, and has been for 5-10 years, albeit not dynamically. Reruns of old shows sometimes have the advertisements switched out or even inserted. Here's an article describing this phenomenon in 2011: http://www.ew.com/article/2011/07/07/how-i-met-your-mother-reruns-bad-teacher-zookeeper/ http://www.ew.com/article/2011/07/07/how-i-met-your-mother-r...
ramblenode 9y ago
I'm a Millenial and I have a hard time believing advertisers have gotten a positive return from what they've spent advertising to adult me. Clicking on an ad is always unintentional. Pop-ups are closed immediately and automatically, as are auto-playing videos. Other ads are scrolled past as quickly as possible to remove them from my field of view. And all this is when I don't have an ad blocker running. TV is almost unwatchable now because of ads. I can tolerate them for an hour or so, but past this I get anxiety and then frustration from seeing them if they aren't muted. At some point I begin to feel irrational hostility to the brands on TV. I struggle to remember the last time I saw an ad that triggered real curiosity or a desire to purchase something. Usually I'll hear about things I want from personal channels, by seeking them out myself, or from mailing lists I've explicitly signed up for. Of course, maybe I'm being influenced in ways I don't realize or understand. But I kind of doubt the effect is very large. I compare products on ingredients, price, utility, etc. and make a decision from there. There are a handful of brands which have intrinsic value to me, but it's because of good experiences and recommendations from people I trust, not ads. I don't think I'm atypical for my demographic, and there seem to be others who concur [0] [1]. Whether it's the majority, I'm not sure, but a sizable chunk seem to have become averse/resistant to traditional in-your-face, attention monopolizing ads. Influencers, sponsored content, and product placement may have better reach in the near future among these people. There's also IoT purchasing interfaces like Amazon Echo and Google Home which stand to be a powerful gatekeeper to products. It'll be interesting to see how this turns out and whether the marginal influence of an ad increases or decreases over time as AI, surveillance, and micro-targeting improve and as society and culture respond. [0] https://www.forbes.com/sites/danielnewman/2015/04/28/research-shows-millennials-dont-respond-to-ads/ https://www.forbes.com/sites/danielnewman/2015/04/28/researc... [1] http://www.sfgate.com/business/article/Millennials-really-hate-advertising-study-finds-7393642.php http://www.sfgate.com/business/article/Millennials-really-ha...
- jacobush 9y ago
  It may be that ads fail in the moment, the click-me-now-sense. But they may still work in the old-fashioned "strong signal way", i.e. you notice that a brand is strong (can pay for a lot advertising) and you remain aware of the brand. The "strong signal" message is diluted by ultra-targeted-ads, but you will still be aware of the product. Whether it still is a net gain in your (and similar targets) case, maybe no one knows.
debt 9y ago
Call me paranoid but y’all seem petty unfazed by the seriousness of what’s being presented here. Google and Facebook are going to stop growing in the next ten years which means unless cars start driving themselves soon, the gravy train is coming to a screeching halt. That’ll be a site to see.
- chatmasta 9y ago
  Google is (finally) diversifying with Cloud Platform. As recently as a few years ago, advertising was 98% of google revenue. I haven’t kept up with the numbers, but I bet that’s lower now due to cloud and gsuite.
chatmasta 9y ago
Advertisers, save for big brands, would not spend money on ads if they did not convert eyeballs to customers. The entire marketing industry is built around measuring traffic and conversions, and setting bid prices accordingly. So clearly advertising is “working” in some capacity. It generates value by providing a growth engine. A new company today can use advertising to reach an audience greater than ever in the past. My intuition is that this has to be adding real value, somehow.
apexalpha 9y ago
Many people scorn others for blocking ads. I'd be taking in content without paying back. But honestly I see it like this: If I walk down the street and someone hands me a flyer that says: new shop open at X! Come now for discount. I'd consider that fair advertising. But what happens on the internet nowadays is more like this: "Hello. Our cameras saw you stared into the windows at shop X, Y and Z. Our system also noticed you are walking slower than usual and your phone regularely turned on during the last 3 nights. Are you not sleeping well? Get a better bed! Come to this shop." That is basically how intrusive online ads are. And I have absolutely 0,00 regret about taking meassures to block this 24/7 subconscious priming from my life. If content creators don't like this they should find a different business model.
- bewo001 9y ago
  Good analogy. TV and many web sites feel like a road at very touristy place where you get constantly harassed by people trying to get you to visit their bar or sign time share condo contracts.
scarface74 9y ago
I find the best, most interesting ads to be podcast ads. I've bought or recommended a number of products based on them - Backblaze, Casper, Betterment, Hover, Squarespace, etc. Others I'm very interested in trying - Warby Parker, Away Travel, Linode and Fracture come to mind. I can't think of a single podcast ad that I think is total rubbish. On the same note, Marco Arment created his own podcast ad platform for his Overcast podcast player that is unobtrusive, informative and I actually consider it feature. Podcast ads and the direct response model must be working because the same companies are represented in most of the popular tech podcasts year after year. They have metrics to know exactly which podcasts generate traffic.

60 points by hardtke 9y ago

everdev 9y ago

Public link anyone?

ikeboy 9y ago
Subscribe Schumpeter Something doesn’t ad up about America’s advertising market Stockmarket investors are wrong to expect an enormous surge in advertising revenues Print edition | Business Jan 18th 2018 IMAGINE a world in which you are manipulated by intelligent advertisements from dusk until dawn. Your phone and TV screens flash constantly with commercials that know your desires before you imagine them. Driverless cars bombard you with personalised ads once their doors lock and if you try to escape by putting on a virtual-reality headset, all you see are synthetic billboards. Your digital assistant chirps away non-stop, systematically distorting the information it gives you in order to direct you towards products that advertisers have paid it to promote. Jaron Lanier, a Silicon Valley thinker who was an adviser on “Minority Report”, a bleak sci-fi film, worries that this could be the future. He calls it a world of ubiquitous “digital spying”. A few platform firms, he fears, will control what consumers see and hear and other companies will have to bid away their profits (by buying ads) to gain access to them. Advertising will be a tax that strangles the rest of the economy, like medieval levies on land. Latest updates A severe case of “truth decay” DEMOCRACY IN AMERICA Brexit presents new opportunities for organised crime BRITAIN Britain’s statisticians are at war like never before BRITAIN See all updates It may sound outlandish, but this dystopia is increasingly what stockmarket investors are banking on. The total market value of a basket of a dozen American firms that depend on ad revenue, or are devising their strategies around it, has risen by 126% to $2.1trn over the past five years. The part of America’s economy that is ad-centric has become systemically important, with a market value that is larger than the banking industry. The biggest firms are Facebook and Alphabet (Google’s parent), which rely on advertising for, respectively, 97% and 88% of their sales. But the chunky valuations of America’s giant TV broadcasters imply that their ad revenues will fall very slowly, or not at all. Startups that rely on advertising, such Snap, are floating their shares at prices that suggest huge growth. Large deals, too, are being justified by potential ad revenues. Microsoft’s $26bn acquisition of LinkedIn in 2016 was partly premised on “monetising” its user base through adverts. The main reason AT&T says it wants to buy Time Warner for $109bn is to create a digital ad platform linking AT&T’s data to Time Warner’s TV content. The immense sums being bet on advertising raise a question: how much of it can America take? A back-of-the-envelope calculation by Schumpeter suggests that stock prices currently imply that American advertising revenues will rise from 1% of GDP today, to as much as 1.8% of GDP by 2027—a massive jump. Since 1980 the average has been 1.3%, according to Jonathan Barnard of Zenith, a media agency, and in the past few years the advertising market relative to GDP has been shrinking. There are reasons why it might go on a tear, points out Rob Norman of GroupM, another media agency. In the old days adverts in Time magazine or on billboards in Times Square were big-ticket items that only giant firms could afford. But tech platforms have done a brilliant job of persuading smaller companies to spend money targeting customers. Facebook has 6m advertisers, equivalent to a fifth of all American small firms. Adverts could become even more effective at identifying customers and enticing them to spend money, using troves of data that have been gathered to anticipate their needs. As commerce shifts online, firms will cut back on conventional marketing (for example, the fees that consumer goods and food firms pay to Walmart to ensure products are displayed prominently on its shelves), freeing up budgets to spend more on digital ads. Yet there are two logical limits to the size of the advertising market. First, the irritation factor, or how much consumers can absorb without being put off. In the analogue era the rule of thumb was that ads could comprise no more than 33-50% of TV or radio programming, or of a magazine’s pages, says Rishad Tobaccowala, of Publicis, an advertising firm. The digital world is already showing signs of saturation. More people are using ad-blocking software. Tech brands that eschew bombarding customers with ads, such as Apple and Netflix, are wildly popular. The drive to lift user “engagement” on social-media platforms by showing sensational content, in turn boosting the number of ads that can be sold, has prompted a backlash. On January 11th Facebook said it would show users fewer posts from “businesses, brands and media”. Time spent online by the typical American is growing at about 10% a year, less than the 15-20% ad-sales growth that many digital firms expect. The second limit on the size of the advertising market is how much cash all other firms, in aggregate, have at their disposal to spend on ads. In theory they could spend more and more until their overall returns on capital drop below the cost of capital, compromising their financial viability. Remarkably, expectations for ad revenues are now so bullish that they imply that this boundary will indeed be tested. Commercial breaking-point Imagine if advertising spending really did rise to 1.8% of GDP in America by 2027. Most firms’ costs would have to rise, cutting total corporate profits (excluding those of ad platforms) from about 6.5% to 5.7% of GDP, the kind of drop normally associated with a recession. Alternatively, imagine if the firms in the S&P 500 index (excluding ad platforms) bore all the additional cost of the advertising boom. Their combined return on capital would drop from the present 10% to 8%, at or just below their cost of capital. America Inc would go from being the world’s greatest profit machine to flirting with Japanese-style financial-zombie status. That does not seem realistic. More probably, hopes for a new age of advertising nirvana are too optimistic. Perhaps the ad sales of conventional media firms (which are about half of the total, with TV dominating) will drop fast rather than merely stagnate. Or perhaps digital firms will struggle to increase ad sales at compound annual rates of 15-20% or a decade, as their valuations imply. Expectations for both groups are surely too high. In the advertising world, and on Wall Street, something does not ad up. This article appeared in the Business section of the print edition under the headline "Mad men" You’ve seen the news, now discover the story Get incisive analysis on the issues that matter. Whether you read each issue cover to cover, listen to the audio edition, or scan the headlines on your phone, time with The Economist is always well spent. Enjoy 12 weeks’ access for $12 Print edition | Business Jan 18th 2018 Reuse this content About The Economist Editors’ picks Banyan Asia is taking the lead in promoting free trade Asian voters know open markets have lifted billions of them out of poverty ASIA #OscarsSoRainbow The rise and fall of the award-winning white-saviour film PROSPERO From the single market to the black market Brexit presents new opportunities for organised crime BRITAIN The Economist explains Why the genome of wheat is so massive THE ECONOMIST EXPLAINS Subscribe: 12 weeks for $12 or sign up to enjoy 3 articles free Get full access to The Economist via print, online and our apps or sign up to enjoy 3 articles free. Subscribe: 12 weeks for $12 Sign up: 3 articles per week Tell us what you think of Economist.com Leave feedback Need assistance with your subscription? Contact us Subscribe Contact us Help Keep updated Sign up to get more from The Economist Get 3 free articles per week, daily newsletters and more. Email address Sign up About The Economist Advertise Reprints Careers Media Centre Terms of Use Privacy Cookies Accessibility Modern Slavery Statement Copyright © The Economist Newspaper Limited 2018. All rights reserved.
- jamestimmins 9y ago
  "Copyright © The Economist Newspaper Limited 2018. All rights reserved."
rm_-rf_slash 9y ago
Just read it in private browsing.
clusmore 9y ago
https://outline.com/7R7kuH https://outline.com/7R7kuH
labster 9y ago
If you click reader mode really fast, the JS deleting the article doesn't run.
lern_too_spel 9y ago
Pay for it. It's the price of not having the article plastered with ads and clickbait.
- BareNakedCoder 9y ago
  Yes, pay for it. It's well worth it. I've been a subscriber for many years and consider it on my Top 10 list of things I would miss most if I were ever stranded on a deserted island.

taneq 9y ago

> In the analogue era the rule of thumb was that ads could comprise no more than 33-50% of TV or radio programming, or of a magazine’s pages, says Rishad Tobaccowala, of Publicis, an advertising firm. My tolerance is way lower than that now. Commercial TV is basically unwatchable, as is commercial radio. The internet is pretty horrible without an ad blocker. Anything more than 10-20% advertising just gets turned off immediately.

CapacitorSet 9y ago
Indeed, 50% advertising seems outright ridiculous. Want to watch a 2-hours film? You'll watch two hours (!) of advertising. That's silly.
- zipwitch 9y ago
  My memory is that ~20 years ago or so bottom-tier cable networks would get to that point during off-peak hours. I had to be tremendously bored before even contemplating watching them, but it happened a time or two - and I discovered that that much advertising did make pretty much anything unwatchable.
- flukus 9y ago
  Or they'll just cut out part of the movie and give you 90 minutes of ads with 90 minutes of movie. Australian free to air networks have done this.
  - dvtv75 9y ago
    I saw that a few times in New Zealand, too. I think I've seen TV shows lose scenes and lines for more ads, as well. What really got me was back when the Battlestar Galactica pilot screened on TV. I was very keen to see it, and heard the pilot was three hours three minutes long. It was split up, on TV3 I think, into two 180 minute slots, which means there were almost as many minutes of ads as there were of the show. I had to turn it off after one scene was interrupted in the middle for an ad-break that was longer than the scene, then we came back for a single line (now out-of-context) and one camera change, then cut to another break. (For reference, it was a scene with the nuke hitting the Galactica, then six minutes of ads interrupted by about 25 seconds of show.) I turned off my TV, found an email address, and explained to them just why I was going to buy the DVD and not watch another second of their broadcast. TV advertising is so intrusive these days that I haven't watched broadcast TV in years.

harrywhelchel 9y ago

A lot of people have commented on native advertising being on the rise. Does the saturation of traditional ads mean we'll see more native advertising or will we adapt and better recognize native advertising too? Will we get more skeptical and untrustworthy of content in general?

Feniks 9y ago
Native advertising still has to be marked as advertising. In theory you could easily block them if you want with a cosmetic filter. Personally I don't mind advertorials if they have a subject I am interested in. Native advertising is better than a full page ad taking over the screen.

mindFilet 9y ago

IMAGINE a world in which you are manipulated by intelligent advertisements from dusk until dawn. It may sound outlandish, but this dystopia is increasingly what stockmarket investors are banking on. Except ads don't actually manipulate me. I know they don't because I don't even have the money to spend on the things advertisers show me. When I do have disposable money (a rare event) there are specific projects that I plan during the lean times. Those projects get well researched, and aren't impulsive, emotional events. Day-to-day spending also is not swayed by advertisements. There are real reasons behind the choices I make, and those ideas, opinions and motivations don't source their information from advertisers. I'm not charmed by entreaties that pander to my niche demographic. Advertising has one rare utility, in shedding light on things that are new. The cliche being that everything is "new and improved" if you believe what ads are trying to sell you. The people that try new things are the targets, and learning who will try something new, and who will spread positive word-of-mouth endorsements, is the holy grail of advertising, but realistically most people do research and find real evidence, before parting with their money. Ads can notify a person of presence, but in practice, people really do operate carefully before accepting invitations to buy, or R.S.V.P. with their wallets.

Y7ZCQtNo39 9y ago
They must be working for others. If businesses couldn't profit off of advertising, then they wouldn't do it.
- itronitron 9y ago
  But consumers aren't buying the advertising, they are buying the product. Advertising is an expense for both the producer ($) and the consumer (time) so neither can profit from it.
  - turingbombe 9y ago
    No they are not buying the ad but from the producers perspective advertising is the way to get their product in the consideration set or possibly push someone further down the purchase path.

dba7dba 9y ago

When cable TV was starting out in US, one of the advertised pros was no commercials on cable TV.

isostatic 9y ago
In the UK, skytv stated free to air, with adverts, with movies being subscription but no adverts. Then they introduced subscriptions around 1994 to all channels, but kept adverts. I don't subscribe to sky, but I used to, until I saw that the revenue from advertising was tiny - by increasing subscription prices by 10% they could get rid of adverts and remain revenue neutral. If you don't offer an advert free product I won't buy it. When Netflix and amazon inevitably start adverts, I'll go back to DVDs. If they aren't available then torrents it is. Advertising is a scourge on civilisation, it costs trillions of dollars in lost time each year in the US alone.
- dba7dba 9y ago
  When Netflix and amazon inevitably start adverts I am positive that day will come. Soon enough. Unfortunately.
  - isostatic 9y ago
    They know how much they get per customer from an advertiser. They could then simply offer a "no advert" plan at this premium (or more), like cbs all access do. If they don't they're idiots. Remember there's plenty of competiton for entertainment nowadays.

evrydayhustling 9y ago

These valuations aren't necessarily just a bet on advertising as we know or imagine it. At least for FB and Google, the assets that give them power to direct attention to ads can potentially be monetized in other ways if ads stop being the most lucrative. And conversely, if you don't own an asset that redirects a massive amount of attention, you can't launch any kind of product without getting help from someone who does (whether you call that help advertising or not).

lsseckman 9y ago
If Google's asset was so powerful you'd think their other products would be doing better. (google+, glass, Allo, etc)
- gcb0 9y ago
  even they being failure, almost everyone heard of them.
  - lsseckman 9y ago
    right, but the point is that those products won't maintain the company valuation. lots of people have heard about AIM, but it didn't save AOL

ChuckMcM 9y ago

This isn't a particularly new insight :-). And the phenomenal rise in the use of ad blockers, dvrs that skip commercials, and direct to streaming services suggest that not only has "big advertising" poisoned the commons they are at risk to training an entire generation in the art of avoiding their product. It's my hope that they entire house of cards will collapse. There clearly are "good" advertising options. People will often read topic specific periodicals (magazines, newsletters, Etc.) both for the editorial content and the advertising of service providers surrounding the topic. And of course there are people who will be more excited about the advertisements on the Superbowl next weekend than the game. But advertising as envisioned by Google and Facebook feel like they are under siege and there is a race to the bottom in terms of what advertisers will pay, and so how much they 'care' about the end product. The growing battle will be advertisements "embedded" in content. People can already replace billboards in movies or on Youtube with ads for actual products. At some point these 'insertion points' will be programmed in as meta-data in the distribution of content so that they can be added in on site. Things from store fronts to the vehicles in the scene are up for dynamic replacement.

lorenzhs 9y ago
That last one is already happening, and has been for 5-10 years, albeit not dynamically. Reruns of old shows sometimes have the advertisements switched out or even inserted. Here's an article describing this phenomenon in 2011: http://www.ew.com/article/2011/07/07/how-i-met-your-mother-reruns-bad-teacher-zookeeper/ http://www.ew.com/article/2011/07/07/how-i-met-your-mother-r...

ramblenode 9y ago

I'm a Millenial and I have a hard time believing advertisers have gotten a positive return from what they've spent advertising to adult me. Clicking on an ad is always unintentional. Pop-ups are closed immediately and automatically, as are auto-playing videos. Other ads are scrolled past as quickly as possible to remove them from my field of view. And all this is when I don't have an ad blocker running. TV is almost unwatchable now because of ads. I can tolerate them for an hour or so, but past this I get anxiety and then frustration from seeing them if they aren't muted. At some point I begin to feel irrational hostility to the brands on TV. I struggle to remember the last time I saw an ad that triggered real curiosity or a desire to purchase something. Usually I'll hear about things I want from personal channels, by seeking them out myself, or from mailing lists I've explicitly signed up for. Of course, maybe I'm being influenced in ways I don't realize or understand. But I kind of doubt the effect is very large. I compare products on ingredients, price, utility, etc. and make a decision from there. There are a handful of brands which have intrinsic value to me, but it's because of good experiences and recommendations from people I trust, not ads. I don't think I'm atypical for my demographic, and there seem to be others who concur [0] [1]. Whether it's the majority, I'm not sure, but a sizable chunk seem to have become averse/resistant to traditional in-your-face, attention monopolizing ads. Influencers, sponsored content, and product placement may have better reach in the near future among these people. There's also IoT purchasing interfaces like Amazon Echo and Google Home which stand to be a powerful gatekeeper to products. It'll be interesting to see how this turns out and whether the marginal influence of an ad increases or decreases over time as AI, surveillance, and micro-targeting improve and as society and culture respond. [0] https://www.forbes.com/sites/danielnewman/2015/04/28/research-shows-millennials-dont-respond-to-ads/ https://www.forbes.com/sites/danielnewman/2015/04/28/researc... [1] http://www.sfgate.com/business/article/Millennials-really-hate-advertising-study-finds-7393642.php http://www.sfgate.com/business/article/Millennials-really-ha...

jacobush 9y ago
It may be that ads fail in the moment, the click-me-now-sense. But they may still work in the old-fashioned "strong signal way", i.e. you notice that a brand is strong (can pay for a lot advertising) and you remain aware of the brand. The "strong signal" message is diluted by ultra-targeted-ads, but you will still be aware of the product. Whether it still is a net gain in your (and similar targets) case, maybe no one knows.

debt 9y ago

Call me paranoid but y’all seem petty unfazed by the seriousness of what’s being presented here. Google and Facebook are going to stop growing in the next ten years which means unless cars start driving themselves soon, the gravy train is coming to a screeching halt. That’ll be a site to see.

chatmasta 9y ago
Google is (finally) diversifying with Cloud Platform. As recently as a few years ago, advertising was 98% of google revenue. I haven’t kept up with the numbers, but I bet that’s lower now due to cloud and gsuite.

chatmasta 9y ago

Advertisers, save for big brands, would not spend money on ads if they did not convert eyeballs to customers. The entire marketing industry is built around measuring traffic and conversions, and setting bid prices accordingly. So clearly advertising is “working” in some capacity. It generates value by providing a growth engine. A new company today can use advertising to reach an audience greater than ever in the past. My intuition is that this has to be adding real value, somehow.

apexalpha 9y ago

Many people scorn others for blocking ads. I'd be taking in content without paying back. But honestly I see it like this: If I walk down the street and someone hands me a flyer that says: new shop open at X! Come now for discount. I'd consider that fair advertising. But what happens on the internet nowadays is more like this: "Hello. Our cameras saw you stared into the windows at shop X, Y and Z. Our system also noticed you are walking slower than usual and your phone regularely turned on during the last 3 nights. Are you not sleeping well? Get a better bed! Come to this shop." That is basically how intrusive online ads are. And I have absolutely 0,00 regret about taking meassures to block this 24/7 subconscious priming from my life. If content creators don't like this they should find a different business model.

bewo001 9y ago
Good analogy. TV and many web sites feel like a road at very touristy place where you get constantly harassed by people trying to get you to visit their bar or sign time share condo contracts.

scarface74 9y ago

I find the best, most interesting ads to be podcast ads. I've bought or recommended a number of products based on them - Backblaze, Casper, Betterment, Hover, Squarespace, etc. Others I'm very interested in trying - Warby Parker, Away Travel, Linode and Fracture come to mind. I can't think of a single podcast ad that I think is total rubbish. On the same note, Marco Arment created his own podcast ad platform for his Overcast podcast player that is unobtrusive, informative and I actually consider it feature. Podcast ads and the direct response model must be working because the same companies are represented in most of the popular tech podcasts year after year. They have metrics to know exactly which podcasts generate traffic.