10 ms·

A downtick is coming for online advertising

93 points by prostoalex 5y ago

willhinsa 5y ago
https://archive.ph/CHBTo https://archive.ph/CHBTo
BarryMilo 5y ago
Thank God! Unbelievable that google can grow their advertisment revenue 23% YOY though.
- mgh2 5y ago
  Google seems unaffected right now because they are partners with Apple. However, their values are growingly contradicting the user experience, interesting to see what the future holds.
- ocdtrekkie 5y ago
  Considering every first world country is about to drop the hammer on Google's core business practices, and pretty much outlaw them entirely, expect this to end very, very abruptly. If the US passes either or both of their laws with strong bipartisan support, or the EU gets the DMA into effect, a lot of Google's core businesses will be open for real competition for the first time in a decade.
  - victor106 5y ago
    > If the US passes either or both of their laws with strong bipartisan support, Which specific laws are you referring to?
    - ocdtrekkie 5y ago
      The American Innovation and Choice Online Act and the Open Markets Act.
01100011 5y ago
I suspect we're about to see a prolonged weakness in tech. Ad revenue will drop due to a weak economy. Higher interest rates will expose many business models(Uber, Doordash, etc) as unsustainable. Netflix crashing likely popped the bubble in streaming services and Hulu. People are realizing Netflix is the next TiVo and streaming services with monthly subscriptions are a 'race to the bottom' and content(which is currently not cheap to produce) is king. Even with content, users can sign up, binge, and quit after a single month. All of these services crashing will slow sales of enterprise HW and AI accelerators. Now is probably a good time to shift your investments to things people need, not things they want. If you're in tech, I hope you've diversified your assets.
- samspenc 5y ago
  I feel like FB / meta stock crashing after last quarter's earnings miss was the first warning, and today Netflix stock cratered after a miss as well. I'm not sure if we will see a crash or recession however I do believe all the factors you mentioned will set off a drop in valuations and hence the stock market.
  - robbedpeter 5y ago
    Facebook just sucks all on its own, I don't think it's failing because of any larger market trend. Meta has only itself and overweening arrogance to blame for its failure. They've got enough money to make dying a long and tedious process.
- _huayra_ 5y ago
  This is especially true to people who get paid in RSUs or do ESPP through their employer. Even FAANG employees should not really sit on these to get the maturation of these stocks to cap gains, as they'll likely go down by a larger margin in a year. This is gonna be a wild few years ahead of us one way or another.
  - ChuckMcM 5y ago
    My take on it is that every new generation has to learn this lesson the "hard way" if only because they are pumped by people saying "Yeah, this time it is different."
rr808 5y ago
I've started clicking ads regularly throughout the day. I used to think the best way to avoid ads was to ignore them, but clicking ads now makes me happier. I know some dumb VC funded tech company/Stupid Corporation/Click Bait generator/FB advertiser is paying every time I click on something gives me much pleasure.
- summerlight 5y ago
  Sorry to interrupt your delights, but the majority of the digital ad industry already has moved to cost per conversion model. So you're just decreasing conversion rates for those ads, thus advertisers will bid less, pay less per click and spend a roughly same level of amortized cost...
  - redhedgehog12 5y ago
    Which large majority now operate this way? Google only offers this payment model for display campaigns which (most of the time) convert rarely when meaningful conversion actions are tracked. Facebook only offers this for a small set of actions like mobile installs etc. Bing doesn't offer this at all. These three platforms make up a majority of the ad industry without a doubt so I'm not sure where your statement comes from? If you've got info or sources though I'd be very keen. A lot of people get confused about targeting a cost per conversion which is extremely common now, and actually paying per conversion. Targeting cost/conv is not the same thing and is purely when the ad platform will adjust who and when it shows your ads too based on an amount you give it, normally the most you'd be willing to pay for a sale or lead.
    - summerlight 5y ago
      I explicitly mentioned "pay less per click" so I expected most people to take it as tCPA/tROAS and similar kinds of bidding families? Yeah, technically you're gonna pay less per click even in fCPA, but usually people won't say anything about clicks in fCPA products. It's my bad if it was not clear enough. Anyway this doesn't really change the issue; these kinds of bidding strategies are not really CPA cost type but the result is nearly identical for most campaigns/ad groups. OP's behavior doesn't really affect the amount of advertiser side cost.
bitxbitxbitcoin 5y ago
In the cannabis industry it’s been that way for months already. 10-20% lower CPMs from the networks.
depot 5y ago
Maybe I'm just a dumb hermit, but still, I frequently think: Is there real proof the marketing is worth the extra effort? Adblock is very popular. Most people seem to want the same things their friends get. Seems like the best place to get control is the influencers. But yes, I'm out of touch. I don't understand SEO much, but the result of that seems much more valuable. I think there was an article like this recently.
- coder-3 5y ago
  It's case-by-case. You can calculate whether ads are worth it for what you're selling by using cost per click, conversion rate and customer lifetime value. My general sense is that paid ads is still valuable for niche markets as the ad will be cheaper and ad platforms allow quite specific targeting (they do gather huge amounts of data after all). It's probs too expensive for big competitive markets. As an aside, it's quite risky to rely too much of paid ads as your business becomes subordinate to the whims of Google, Facebook etc.
- vnorilo 5y ago
  I've seen a handful of cases where a small software house with very limited name recognition that provides some genuine value to customers gets a big bump from advertising targeted to "lookalike audiences" on facebook. Some of these shops run either 0 or 1 ad campaigns at any time, so the correlation is actually visible and quite irrefutable. However, that is also the exact type of adtech that is extremely dodgy in terms of privacy, because it thirsts for data. I'd love the whole thing to end in favor of some genuine user recommendation system. But as always, any ranking system that drives revenue will be gamed to no end.
- shostack 5y ago
  Savvy advertisers measure incrementality. The short answer is yes, it can work. The longer answer is that it is hard to do right, and getting good signal to feed into incrementality models is increasingly hard for advertisers for obvious reasons.
- somenameforme 5y ago
  - The following is based on traditional (television/film/etc) advertising; I am assuming it holds true for internet based advertising. There's some [literal] marketing 101 stuff most people aren't aware of. For large companies the value in marketing isn't really about directly selling you products, but about instilling a positive subconscious perception of a product in your mind. Coke is the classic example. Dominant marketshare, defacto monopoly in many regions, and a loyal customer base. Yet they advertise endlessly and at great cost. The reason is so when you look at a bottle of Coke you don't think 'sugar, heart disease, obese people drink this' but instead 'crisp, cool, refreshing, athletic people drink this'. And it's all subconscious because of course we all consciously know its the former rather than the latter, but advertising can effectively make people do and think things that they might not otherwise. And there is significant research and practice to confirm all of this. Companies aren't just spending out of inertia. This [1] is considered one of the most effective and powerful ads of all-time. It's Apple's 1984 Ad about the first Mac. A 60 second clip with zero information on the product/capabilities, zero information on pricing, etc. And Apple spent big on the ad (which was, for instance, directed by Ridley Scott) and tried to get it out everywhere, including in theaters. It seems like a completely absurd ad, until you understand how advertising works. [1] - https://www.youtube.com/watch?v=VtvjbmoDx-I https://www.youtube.com/watch?v=VtvjbmoDx-I
chupchap 5y ago
Eh no. Companies still want to advertise and there are still people who will gladly accept the ad money. The advertisers might get less data back but the ad spends are not going to reduce. What else do you think marketing teams in most companies will do with that money?
- weatherlite 5y ago
  Good point. Overall the industry will do fine since there are no alternatives. However Facebook might be hit a bit harder, arguably. What advantage do they offer over Tiktok for instance? I don't believe they dont offer a premium but some companies might take their money elsewhere.
  - chupchap 5y ago
    Yes, the money might go to different platforms; wherever the eye balls are.
- Nextgrid 5y ago
  The ROI on ads will go down meaning less money will be spent on them. Buying ads doesn't magically give your prospective customers money to buy your product either. If people struggle to make ends meet, no amount of ads will change that.
  - chupchap 5y ago
    Even if ROI on ads go down, it just means when one company's budget is exhausted, other companies will display their ads now for a keyword since there is a bidding system for ads. On the slowdown front, some companies work in industries with inelastic demand. They advertise to stay in forefront and these ads won't go away. Then there are companies in the want-based sector and they rely heavily on ads. I don't see this changing even with a reducing consumer appetite. They can't afford to be out-marketed as long as there is demand of any kind. The only place where I see some reduction would be in the VC-funded consumer space in developing markets that rely heavily on cash backs and incentives as a way to get customers onboarded. I feel there will be a major push back on them.

93 points by prostoalex 5y ago

willhinsa 5y ago

https://archive.ph/CHBTo https://archive.ph/CHBTo

BarryMilo 5y ago

Thank God! Unbelievable that google can grow their advertisment revenue 23% YOY though.

mgh2 5y ago
Google seems unaffected right now because they are partners with Apple. However, their values are growingly contradicting the user experience, interesting to see what the future holds.
ocdtrekkie 5y ago
Considering every first world country is about to drop the hammer on Google's core business practices, and pretty much outlaw them entirely, expect this to end very, very abruptly. If the US passes either or both of their laws with strong bipartisan support, or the EU gets the DMA into effect, a lot of Google's core businesses will be open for real competition for the first time in a decade.
- victor106 5y ago
  > If the US passes either or both of their laws with strong bipartisan support, Which specific laws are you referring to?
  - ocdtrekkie 5y ago
    The American Innovation and Choice Online Act and the Open Markets Act.

01100011 5y ago

I suspect we're about to see a prolonged weakness in tech. Ad revenue will drop due to a weak economy. Higher interest rates will expose many business models(Uber, Doordash, etc) as unsustainable. Netflix crashing likely popped the bubble in streaming services and Hulu. People are realizing Netflix is the next TiVo and streaming services with monthly subscriptions are a 'race to the bottom' and content(which is currently not cheap to produce) is king. Even with content, users can sign up, binge, and quit after a single month. All of these services crashing will slow sales of enterprise HW and AI accelerators. Now is probably a good time to shift your investments to things people need, not things they want. If you're in tech, I hope you've diversified your assets.

samspenc 5y ago
I feel like FB / meta stock crashing after last quarter's earnings miss was the first warning, and today Netflix stock cratered after a miss as well. I'm not sure if we will see a crash or recession however I do believe all the factors you mentioned will set off a drop in valuations and hence the stock market.
- robbedpeter 5y ago
  Facebook just sucks all on its own, I don't think it's failing because of any larger market trend. Meta has only itself and overweening arrogance to blame for its failure. They've got enough money to make dying a long and tedious process.
_huayra_ 5y ago
This is especially true to people who get paid in RSUs or do ESPP through their employer. Even FAANG employees should not really sit on these to get the maturation of these stocks to cap gains, as they'll likely go down by a larger margin in a year. This is gonna be a wild few years ahead of us one way or another.
- ChuckMcM 5y ago
  My take on it is that every new generation has to learn this lesson the "hard way" if only because they are pumped by people saying "Yeah, this time it is different."

rr808 5y ago

I've started clicking ads regularly throughout the day. I used to think the best way to avoid ads was to ignore them, but clicking ads now makes me happier. I know some dumb VC funded tech company/Stupid Corporation/Click Bait generator/FB advertiser is paying every time I click on something gives me much pleasure.

summerlight 5y ago
Sorry to interrupt your delights, but the majority of the digital ad industry already has moved to cost per conversion model. So you're just decreasing conversion rates for those ads, thus advertisers will bid less, pay less per click and spend a roughly same level of amortized cost...
- redhedgehog12 5y ago
  Which large majority now operate this way? Google only offers this payment model for display campaigns which (most of the time) convert rarely when meaningful conversion actions are tracked. Facebook only offers this for a small set of actions like mobile installs etc. Bing doesn't offer this at all. These three platforms make up a majority of the ad industry without a doubt so I'm not sure where your statement comes from? If you've got info or sources though I'd be very keen. A lot of people get confused about targeting a cost per conversion which is extremely common now, and actually paying per conversion. Targeting cost/conv is not the same thing and is purely when the ad platform will adjust who and when it shows your ads too based on an amount you give it, normally the most you'd be willing to pay for a sale or lead.
  - summerlight 5y ago
    I explicitly mentioned "pay less per click" so I expected most people to take it as tCPA/tROAS and similar kinds of bidding families? Yeah, technically you're gonna pay less per click even in fCPA, but usually people won't say anything about clicks in fCPA products. It's my bad if it was not clear enough. Anyway this doesn't really change the issue; these kinds of bidding strategies are not really CPA cost type but the result is nearly identical for most campaigns/ad groups. OP's behavior doesn't really affect the amount of advertiser side cost.

bitxbitxbitcoin 5y ago

In the cannabis industry it’s been that way for months already. 10-20% lower CPMs from the networks.

depot 5y ago

Maybe I'm just a dumb hermit, but still, I frequently think: Is there real proof the marketing is worth the extra effort? Adblock is very popular. Most people seem to want the same things their friends get. Seems like the best place to get control is the influencers. But yes, I'm out of touch. I don't understand SEO much, but the result of that seems much more valuable. I think there was an article like this recently.

coder-3 5y ago
It's case-by-case. You can calculate whether ads are worth it for what you're selling by using cost per click, conversion rate and customer lifetime value. My general sense is that paid ads is still valuable for niche markets as the ad will be cheaper and ad platforms allow quite specific targeting (they do gather huge amounts of data after all). It's probs too expensive for big competitive markets. As an aside, it's quite risky to rely too much of paid ads as your business becomes subordinate to the whims of Google, Facebook etc.
vnorilo 5y ago
I've seen a handful of cases where a small software house with very limited name recognition that provides some genuine value to customers gets a big bump from advertising targeted to "lookalike audiences" on facebook. Some of these shops run either 0 or 1 ad campaigns at any time, so the correlation is actually visible and quite irrefutable. However, that is also the exact type of adtech that is extremely dodgy in terms of privacy, because it thirsts for data. I'd love the whole thing to end in favor of some genuine user recommendation system. But as always, any ranking system that drives revenue will be gamed to no end.
shostack 5y ago
Savvy advertisers measure incrementality. The short answer is yes, it can work. The longer answer is that it is hard to do right, and getting good signal to feed into incrementality models is increasingly hard for advertisers for obvious reasons.
somenameforme 5y ago
- The following is based on traditional (television/film/etc) advertising; I am assuming it holds true for internet based advertising. There's some [literal] marketing 101 stuff most people aren't aware of. For large companies the value in marketing isn't really about directly selling you products, but about instilling a positive subconscious perception of a product in your mind. Coke is the classic example. Dominant marketshare, defacto monopoly in many regions, and a loyal customer base. Yet they advertise endlessly and at great cost. The reason is so when you look at a bottle of Coke you don't think 'sugar, heart disease, obese people drink this' but instead 'crisp, cool, refreshing, athletic people drink this'. And it's all subconscious because of course we all consciously know its the former rather than the latter, but advertising can effectively make people do and think things that they might not otherwise. And there is significant research and practice to confirm all of this. Companies aren't just spending out of inertia. This [1] is considered one of the most effective and powerful ads of all-time. It's Apple's 1984 Ad about the first Mac. A 60 second clip with zero information on the product/capabilities, zero information on pricing, etc. And Apple spent big on the ad (which was, for instance, directed by Ridley Scott) and tried to get it out everywhere, including in theaters. It seems like a completely absurd ad, until you understand how advertising works. [1] - https://www.youtube.com/watch?v=VtvjbmoDx-I https://www.youtube.com/watch?v=VtvjbmoDx-I

chupchap 5y ago

Eh no. Companies still want to advertise and there are still people who will gladly accept the ad money. The advertisers might get less data back but the ad spends are not going to reduce. What else do you think marketing teams in most companies will do with that money?

weatherlite 5y ago
Good point. Overall the industry will do fine since there are no alternatives. However Facebook might be hit a bit harder, arguably. What advantage do they offer over Tiktok for instance? I don't believe they dont offer a premium but some companies might take their money elsewhere.
- chupchap 5y ago
  Yes, the money might go to different platforms; wherever the eye balls are.
Nextgrid 5y ago
The ROI on ads will go down meaning less money will be spent on them. Buying ads doesn't magically give your prospective customers money to buy your product either. If people struggle to make ends meet, no amount of ads will change that.
- chupchap 5y ago
  Even if ROI on ads go down, it just means when one company's budget is exhausted, other companies will display their ads now for a keyword since there is a bidding system for ads. On the slowdown front, some companies work in industries with inelastic demand. They advertise to stay in forefront and these ads won't go away. Then there are companies in the want-based sector and they rely heavily on ads. I don't see this changing even with a reducing consumer appetite. They can't afford to be out-marketed as long as there is demand of any kind. The only place where I see some reduction would be in the VC-funded consumer space in developing markets that rely heavily on cash backs and incentives as a way to get customers onboarded. I feel there will be a major push back on them.