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A lot of people blame Meta's VR attempt, but I don't think that's the problem. The problem in my opinion is that we have reached peak advertising. Advertising

A lot of people blame Meta's VR attempt, but I don't think that's the problem. The problem in my opinion is that we have reached peak advertising. Advertising is ultimately a doomed business model as it works against your users' interests, yet requires those users to willingly use the product and engage with the ads. Over time, users learn to ignore it (see "banner blindness") so a short-term response is just to include more ads to compensate, but there's only so much space before the entire product becomes saturated with ads and users leave completely because the inconvenience of advertising became greater than the value the product provides. Regulators are also wisening up to it with stronger privacy protections (that threaten non-consensual ad-targeting) all around the world. Advertising is a time bomb and an unsustainable business model. It provides short-term revenue (and a lot of it if you play your cards right, as Meta's stock price until now reflects) but will never be sustainable in the long run. Advertising is a parasite and its host will always try to get rid of it - a pretty terrible business model when you can instead align the incentives by charging your users money and provide them a valuable service in exchange. Is there value in Facebook's products (whether current, or future VR-based ones)? Yes. Is there enough value to justify a overinflated stock price that only got there due to a combination of monopoly position as well as temporary gap in regulation against spyware? Doubt it, and so does the market.

datadata 4y ago
The game theory of firms choosing to advertise seems to be prisoner's dilemma like. The only equilibrium is for both firms to advertise at a loss. If either firm stops advertising, the other firm's ads become more effective and it will steal market share. As a consequence of this, I think advertising will always persist irrationally unless the system if changed to prevent this irrational behavior. A really high tax on any ad spend would probably work.
- whimsicalism 4y ago
  That's not what "at a loss" means and is also not irrational. High tax on ad spend would be a throwback to our Christian moralist days where we decide that some spending is good spending that we like and other is bad spending. Most attempts to ban payment for boosting speech have failed, see citizens united.
  - datadata 4y ago
    I'm sorry, but have we ever left "those days"? There are dozens of examples of sin taxes on things like Cigarettes, Gambling, Alcohol, Carbon Emissions, etc.
    - whimsicalism 4y ago
      Carbon has clear negative externality. Most of those other taxes were first instituted during periods of much greater Christian beliefs in the US than now.
      - datadata 4y ago
        So are you OK with a sin tax if it is on something with a negative externality? Do you think advertising does not have any negative externalities?
        whimsicalism 4y ago
        Carbon is not a sin and that is not the historical reason it is taxed, unlike say alcohol and cigarettes. Many of these other things may have externalities, both positive and negative, but not so clear cut as carbon.
        jlund-molfese 4y ago
        The reason you're getting downvoted is because you compared a tax on ad spend to "Christian moralist" taxation in the United States, otherwise known as sin taxes. But you changed your definition of a sin tax halfway through the thread. These days, sin taxes like those on soda are often not motivated by religious concerns, at least in the US. They're taxes on goods or services that are harmful to individuals or society.
      - qwytw 4y ago
        And Cigarettes, Gambling & Alcohol don't?
- potamic 4y ago
  Tax on advertising is a very interesting idea. Everyone understands that is a necessary evil and most parties would rather not do it given the chance. But how do you classify what advertising is? Buying adspace on a website or billboard might be obvious? What about other forms like content creation, influencer marketing etc. If you create some websites or videos related to your services, is that considered advertising?
  - whimsicalism 4y ago
    Exactly. It wouldn't survive a court challenge.
  - datadata 4y ago
    I think you only need to track financial transactions, advertising companies would have to report and be taxed on income. The government has shown moderate competence at being able to implement things like this (maybe there are some areas where there is a lot of tax fraud, but generally it works). It is an interesting question you raise about second order effects-- would there be ways to work around this to get advertising for free?. For example maybe spam would become more common and intrusive and be used by more reputable companies. Note that ideas such as "hashcash" were solutions to effectively put a fee on email spam. The root of what is troubling about this all is that free speech isn't a sufficient framework in the modern world where attention and time are constrained.
    - r00fus 4y ago
      How do you separate advertisement companies and, say, entertainment companies that happen to just do product placement? I'm in favor of taxing ads, but it'd need to be comprehensive definition unless you want some unintended consequences.
      - vlovich123 4y ago
        Product placement is advertising. You only need to tax the transaction for the advertisement not “advertising companies”. It does get more complicated about how you define that it’s an advertisement vs not. And there’s lots of “paid placement” stories even in “respectable” newspapers that masquerade as news but would be hard to pierce the veil on as advertisement instead of just “free speech”
- dredmorbius 4y ago
  Among the sea-changes in the publishing industry was the abolition of exceptionally high taxation rates on advertising in the UK in the early 19th century (circa 1830 or so). I've only read peripherally about this and don't have any good sources handy, but it's a historical fact which strikes me as quite interesting.
whimsicalism 4y ago
Seems premature to crow the death of advertising when not a single social media company has been successful with this alternative scheme you are imagining. The market is contracting because when rates are high and capital is expensive, ad spending is one of the first you cut.
- Nextgrid 4y ago
  Not a single company succeeded because up until now, advertising both produced greater returns and neither people nor regulators were interested in its privacy implications. Now people (and most importantly regulators) are starting to pay closer attention, so the tide might be turning, up until the point where advertising becomes such a minefield that its costs will make alternative monetization models more profitable.
  - bostik 4y ago
    [Caution: contains strong language.] I can't believe I'm the only one who considers advertising as an active negative signal. That is, if you're pushing ads, you are loudly telegraphing that your offering is not good enough to be discovered organically, and is therefore shit. Paying for so-called influencers is even worse: if you do that, you are - and there's no kind way of putting this - paying for others to whore their opinions on your behalf. If you want to make your wares visible in my sphere, find ways to make these appearances interesting, original, inventive and sufficiently unobtrusive. If you can't, tough. Take your toxic waste where it belongs.
    - whimsicalism 4y ago
      You're not the only one - I generally also considering advertising a slight negative signal (although not for the reasons you describe.) I just assume there is some other lower cost competitor that spends less money on advertising and returns the margin to me.
    - davidivadavid 4y ago
      So basically all products are shit. Gotcha. Seems like a sound model. "If you want to make your wares visible in my sphere, find ways to make these appearances interesting, original, inventive and sufficiently unobtrusive" Yeah, that's also called advertising. Sorry.
thehappypm 4y ago
I don’t think so. I think ad spending is in a temporary slowdown due to economic concerns, and Meta is losing users to TikTok so it’s got less eyeballs to monetize as well. Google for example grew ad revenue this quarter YoY.
mc32 4y ago
Tangential but I'd be happy to see them become a second-rate company like Yahoo! I understand Advertising and Marketing have positive social functions, but I also think we are getting oversaturated with it and need to pull back to a "saner" level. Humanity doesn't need the latest crap to survive as a species.
jstx1 4y ago
I don't know if you have an actual reason to attribute Meta's performance to their business model (apart from not liking advertising). They could reasonably run a steadily profitable business based on advertising without expecting to grow forever.
- Nextgrid 4y ago
  People learn to ignore ads over time (if not deploying technical countermeasures such as ad-blockers), so even maintaining stability is IMO impossible as the effectiveness of the advertising (and thus the revenue from advertisers who pay for it) will diminish.
  - dtauzell 4y ago
    I ignore ads, but do occasionally buy stuff from Facebook ads. For example, I ordered some guitar picks. I like that if I am interested I can look at the comments and get some immediate reviews and discussion about the product.
wussboy 4y ago
I want to hear more about how advertising is a doomed business model. We've had advertising for centuries... But I'd love to know it was going away...
- titzer 4y ago
  I must have missed the viagra ads in "A Tale of Two Cities."
  - AlanYx 4y ago
    You jest, but "A Tale of Two Cities" was published in just under three-dozen weekly instalments in a periodical that did have advertising.
- harpiaharpyja 4y ago
  I think there's some confusion here. By "advertising" GP is referring to the business model where you offer a product to users, but your revenue comes from advertisers targeting those users. IIUC they are not claiming that basic practice of advertising goods and services you provide is doomed.
- dredmorbius 4y ago
  Mass-market advertising in the modern sense dates to about 1860, or about 160 years. That's over a century, but not "centuries". As a significant social and economic dynamic, it's younger yet. As I've recently posted to this thread, Hamilton Holt's 1909 account is an excellent introduction to the beginning of this period: <https://archive.org/details/commercialismjou00holtuoft https://archive.org/details/commercialismjou00holtuoft> Google's Ngram Viewer suggest that the terms "advertising agency" and "advertising copywriter" only came into vogue during the 1920s, which would be only just at the century mark: <https://books.google.com/ngrams/graph?content=advertising+agency%2C%28advertising+copywriter+%2A+20%29&year_start=1800&year_end=2000&corpus=15&smoothing=3&direct_url=t1%3B%2Cadvertising%20agency%3B%2Cc0%3B.t1%3B%2C%28advertising%20copywriter%20%2A%2020%29%3B%2Cc0 https://books.google.com/ngrams/graph?content=advertising+ag...> I don't have a ready reference for ad spend evolution over the entire 20th century, but based on the 1980--2000 data, it seems likely highly skewed to more recent times: <https://www.visualcapitalist.com/evolution-global-advertising-spend-1980-2020/ https://www.visualcapitalist.com/evolution-global-advertisin...> There's probably a pretty good historical basis for the series Mad Men to have been set in the years 1960--1970. <https://en.wikipedia.org/wiki/Mad_Men https://en.wikipedia.org/wiki/Mad_Men>
outside1234 4y ago
It is even more simple than that. Apple has kneecapped Meta's advertising business with their privacy controls.
rapind 4y ago
I’m not so sure the advertising parasite hasn’t killed the host. At the very least, I’d say it’s winning, and that it evolves much faster.
m3kw9 4y ago
As long as you can attract attention, ads will work. Fb can still attract plenty also there is still no better way to attract attention than a mobile phone
togs 4y ago
Traditional ads might become less effective. But all social interaction is mediated by ads now.
williamcotton 4y ago
> Is there value in Facebook's products (whether current, or future VR-based ones)? Yes. Is there enough value to justify a overinflated stock price that only got there due to a combination of monopoly position as well as temporary gap in regulation against spyware? Doubt it, and so does the market. The market also doubts the future VR-based ones. If you think there is value in those future VR-based products then I would say take a chance and buy the dip! Institutional investors are not as deeply involved with computing as we are on this forum.
- jhickok 4y ago
  There is value in VR in that there is at least some demand that Meta is meeting. 1bn+ in quarterly revenue is not nothing. But assuming their VR business could become profitable, the valuation justified by a billion in revenue is still much much much lower, so the dip would be a ways down still.
dustingetz 4y ago
advertising at its essence is dissemination of information to the people who seek it. it’s a win/win done right and essential to an information society
cloutchaser 4y ago
This is a very broad statement. Google's search ads revenue are growing just fine... Youtube is down though. WPP is seeing increased ad spend as well. Conclusion? Probably that apple has fucked facebook to such an extent that it's threatening their entire business. This isn't much to do with advertising in general.
berkes 4y ago
If that were true, we'd see other companies that rely on advertising to drop similar, or at least drop as well. Google, ClearChannel, IPG, and even Amazon. But those aren't collapsing. What you say is probably one reason, though. But the actual crash is more likely because Meta didn't innovate and move away from-, or diversify their advertising-model over time. So rather than a steady change through continued innovation, A&M etc, they are now forced to bet on a giant pivot. For one, this makes investors nervous. Meta has performed several M&As though, some of which proven extremely profitable and successful. But while e.g. Instagrams' userbase is different from FB, their income is based on almost the exact same model of targeted advertising. FB failed to move into ecommerce, video, streaming, etc. and diversify their income significant. Something that Amazon or Google do much better.
- allie1 4y ago
  FB/Instagram became boring for a very long time. Their recent pivot to "discovery" is a move in the right direction, but they are still ways off from staging a return. And all this is overshadowed by the Metaverse. They've invested so much reputation wise (changing their name even) that it's very hard for them to back down, maybe impossible considering who makes that call.
  - berkes 4y ago
    > Their recent pivot to "discovery" is a move in the right direction, I'm not following META closely. But isn't this another pivot to diversify their userbase, rather than diversify their revenue-stream? Or is there some plan to monetize this "discovery" outside of their common "targeted advertising"?
- whimsicalism 4y ago
  Google is dropping. Amazon doesn't rely on advertising. The advertising market is definitely slowing with the high rates.
  - berkes 4y ago
    Amazon doesn't rely on a single revenue stream. But Advertising certainly is an important income stream. It gets its own chapter in the earning calls. ~$9 billion in 2021, which is more than subscriptions (Prime etc), at ~$8 billion[1] [1] https://www.insiderintelligence.com/insights/amazon-revenue/ https://www.insiderintelligence.com/insights/amazon-revenue/ , https://s2.q4cdn.com/299287126/files/doc_financials/2022/q2/Q2-2022-Amazon-Earnings-Release.pdf https://s2.q4cdn.com/299287126/files/doc_financials/2022/q2/...
allie1 4y ago
FB advertising works extremely well, little less so after Apple's changes, but still it's a beast. If you look into FB financials, revenue per user has more room to grow, outside US if nothing else, but I think US as well. So "advertising model broken" isn't really true. It is irritable and despicable/deplorable in some ways for sure. But it works.
xhkkffbf 4y ago
I've got to disagree. I've been involved in many projects and companies where we needed to reach out to potential partners and customers around the world. Advertising was essential. I'm sure there are better ways to do it but as long was we need to get someone else's attention, it will be there.
mbesto 4y ago
> Advertising is ultimately a doomed business model as it works against your users' interests, yet requires those users to willingly use the product and engage with the ads. Sort of, but not quite. We had already kind of reached peak advertising, this isn't recent. More specifically the following trends: - Advertising has been and is expected to continue to grow at a measly 5% per year on average[0] (compare that to say like 10% on Software) - Digital advertising's cannibalization (e.g. the pie shifts) of traditional media is slowing down and hitting diminishing returns - We're hitting peak media use at 12 hours 9 minutes per day[1]. There's just physically not enough hours in the day to consume more media. - There are more players trying to capture that consumption. Facebook's properties's use are diminishing compared to competitors (e.g. basically TikTok). TL;DR - Pie only grows 5% per year, digital is getting close to eating a majority of the pie, and people that aren't Facebook are eating that pie and Facebook can't compete. [0] https://www.imarcgroup.com/global-advertising-market https://www.imarcgroup.com/global-advertising-market [1] https://review42.com/resources/how-much-time-do-people-spend-on-social-media/ https://review42.com/resources/how-much-time-do-people-spend...
- dredmorbius 4y ago
  It's interesting to note that mass advertising has gone through several stages, and a number of previously highly-active platforms are now pale shadows of their previous selves. Some of this is a matter of shifting technology and related advances, but there also seems to be a pattern of burning through audiences through frustration. Arguably, advertising initiated in bulk print (newspapers and magazines), see Benjamin Day's The Sun (1833). I've mentioned Hamilton Holt's Commercialism and Journalism (1909) many times, it's an excellent summary of early advertising-based publishing, and its many problems: <https://archive.org/details/commercialismjou00holtuoft https://archive.org/details/commercialismjou00holtuoft>. Radio stole the thunder from print as a more passive and accessible medium, television from radio. Targeted cable offerings sniped over-the-air broadcast. And now online advertising is dominating both print and broadcast. I'd argue that billboard advertising has shown similar patterns as well, expanding rapidly with highway construction, seeing a strong backlash (beginning in the 1960s, notably by Lady Bird Johnson: <https://www.sandiegoreader.com/news/2001/jun/21/what-happened-ladybird-johnsons-anti-billboard-law/ https://www.sandiegoreader.com/news/2001/jun/21/what-happene...>), and over the past several decades, trending strongly to very low-value advertisers ("gentlemen's clubs", lottery and casino ads, the classic anti-goods of alcohol and tobacco, as well as the increasingly ubiquitous "your message here" placeholders, being strong indicators of this, particularly outside high-wealth metro regions). I don't recall who made the observation, but in the content industry, it's interesting that music, film, and books are exceptions to the advertising-supported nature (mostly, there are a few exceptions, mostly minor, though the expanding length of trailer and pre-film advertising in theatres would also be an exception ... this may have been mentioned in an Ezra Klein episode). And speaking of Klein: that podcast includes advertising. I find myself averse to listening when I know I'm going to have to hear those (e.g., I can't intervene to skip the ads, such as when I'm doing household tasks), and will avoid listening to it. There are a number of other podcasts which are similar, a surprisingly large number being of what are nominally public-radio programmes --- Freakonomics comes to mind. Combined with IMO lackluster quality, I'm actively avoiding many of these, and have unsubscribed to several. Independent and academic podcasts are more my style, History of Philosophy by Peter Adamson and Complexity from the Santa Fe Institute being among the best. And more recently, the vast expansion of direct marketing over p2p networks, most notably landline and mobile telephony, is making the experience of subscribing to those services increasingly undesirable. Much in the same way as spam and simply information overload seems to be making open-standards, universal-access email much less widely used (many organisations no longer publish email addresses, or respond to emails where such addresses can be found), an overall frustration level can in fact kill general use of a medium or channel. John Gottman's five-to-one ratio of positive to negative experiences, originating in relationships but apparently having broader applications, may well play a role here. If even a relatively small minority of experiences over time with a technology, medium, or channel are negative, that impression tends to strongly discourage long-term favourability. See: <https://www.gottman.com/blog/the-magic-relationship-ratio-according-science/ https://www.gottman.com/blog/the-magic-relationship-ratio-ac...> (for the relationship side, the ad/media extension is my own suggestion, though I suspect others have argued similarly). As Nextgrid's comment notes, the real problem with advertising is that it's a race-to-the-bottom market, especially where high-value / highly-attractive audiences flee. Higher-quality advertisers similarly depart, and both the products marketed and methods utilised tend to ever-increasing toxicity in both figurative and literal senses. As I mentioned a couple of months ago, advertising ultimately has a reverse-Midas touch: it turns gold to shit: <https://news.ycombinator.com/item?id=32669503 https://news.ycombinator.com/item?id=32669503> Part of the constant-platform-migration trend seems to be explained by highly-valued audiences tending to be early adopters of such platforms. Early advertising returns are high, and for all parties (publishers, advertisers, and audiences) the initial experience tends to be positive. With both wider adoption and early-adopter defections (leaving the media/platform), that kicks off the death-spiral dynamic.
scarface74 4y ago
You’re over complicating things. Apple’s Ad Tracking Transparency feature which allows iOS users to opt out of tracking. FB admittedly as much last quarter. It’s amazing how much more effective a 10 line change to App Store rules was in protecting user’s privacy than a bloated 99 section 11 chapter law - ie the GDPR.
- disgruntledphd2 4y ago
  > It’s amazing how much more effective a 10 line change to App Store rules was in protecting user’s privacy than a bloated 99 section 11 chapter law - ie the GDPR. You should remember this in the future, when Apple have become even worse than FB in terms of advertising. Device growth has stalled, and services (i.e. advertising) is gonna be their new iPhone.
  - scarface74 4y ago
    The App Store has been basically no better than a flea market for over a decade. I doubt that it could get worse.
dboreham 4y ago
After a stint years ago in the adtech business, I adopted a personal rule never to invest in any ad-revenue-based company. (Of course through ETF holdings I can't avoid them).
- Nextgrid 4y ago
  Besides moral concerns, advertising might be a good investment at the beginning. I predict TikTok will make a killing as they ramp up advertising on their platform now that they've gained a huge audience. However, returns will diminish over time and eventually disappear.
schmichael 4y ago
> Advertising is ultimately a doomed business model as it works against your users' interests From the dawn of mass media it has been subsidized by ads. Newspapers, radio, magazines, television, movies (through product placement), music (through sponsorship), podcasts, and even outside of media: sports, schools, mass transit, etc. Ads have been a monetization strategy across a mind bogglingly broad cross-section of society for over 200 years. Individualized ads may get regulated out of existence or maybe even out-competed by more consumer friendly options, but people by and large like the subsidies ads provide. Ad supported music, tv, and movie streaming is wildly popular. HN users often post archive.is links to bypass paywalls which actually opts into a paid-for-by-ads experience. What we see with meta is their ads becoming less valuable and their stock reflecting that. I think it’s a huge mistake to draw any conclusions about the business of ads other than ads are controlled by the platform. Apple is hoping these ad dollars flow to them, not that the ads go away.
jwithington 4y ago
I think you're conflating "infinite growth" with "unsustainable." Advertising can be a sustainable business model. Radio, television, billboards, etc. sustain themselves through advertising. We can quibble about their growth rates, but if advertising were unsustainable, then these industries wouldn't exist in their current form. I think you're actually rejecting the idea that a company can sustain infinite growth through advertising. I think that's a little different from being wholly "unsustainable."
- wspeirs 4y ago
  It's interesting though that both radio and TV switched to pay models: cable/premium channels and Sirius/XM for radio. Billboards are providing anything to the user, they're just giant signs that say "go buy this"
user_named 4y ago
On the contrary, advertising is a business that will always exist and thrive, never decline and always grow unless the population starts declining.
fauigerzigerk 4y ago
I have a different hypothesis (I know it's a controversial one). Ad based business models have a redistributive effect. Services like Facebook are paid for in proportion to spending power whilst usage has a completely different distribution. So wealthier users are effectively subsidising less wealthy users, which enables broad network effects and economies of scale. People will always pay to influence other people. I think advertising while being annoying is one of the less malign forms of doing that. It also has privacy preserving characteristics as there is nothing more destructive for privacy than making a payment. That doesn't mean we shouldn't regulate to limit ad targeting. I think we should.
- whimsicalism 4y ago
  I work in the industry and I agree with your take.
- r00fus 4y ago
  > It also has privacy preserving characteristics as there is nothing more destructive for privacy than making a payment. This is a very interesting take and I'd like to see some further delves into this.
ehs 4y ago
I must be some of the few persons in the world which enjoy ads in FB, I can even confess that I sometimes log there to search if there any attractive offers regarding to clothing or vacations. It centralizes many offers of different services I’m looking for, but I am very lazy to actively search for them. IMO the drop is due to the loss in confidence of the shareholders on the vision of the company.
alberth 4y ago
> The problem in my opinion is that we have reached peak advertising. Advertising is ultimately a doomed business model as it works against your users' interests, yet requires those users to willingly use the product and engage with the ads. Isn't the problem much simpler. It's a shift in users attention to other social networks like TikTok, plus Meta already capture the total addressable market. It's hard to continue growth when you've essentially plateaued and now users are spending less time on your site.
- disgruntledphd2 4y ago
  Nah, this is all about Apple and their ATT changes. Like TikTok are losing money hand over fist, so it's not that the advertisers are moving to them, it's that advertisers have essentially been forced to give a bunch of the money they were previously giving to Fb to Apple.
hbarka 4y ago
“Dark Money Political Ads Proliferate on Facebook and Instagram Ahead of the U.S. Midterms, Enabled by the Platforms’ Policies” https://www.newsguardtech.com/misinformation-monitor/october-2022/ https://www.newsguardtech.com/misinformation-monitor/october...
throwaway743 4y ago
They're placing all their bets on their meta quest pro and pushing people into the metaverse. Complete control over that environment, combined with the new vr headset's eye tracking+other sensors, would likely make them the best A/B testing / irl ad performance data platform on the block... if it's successful. Imo, they haven't really proven their case for their metaverse, the price point for the headset is wayyy too high for mass amounts of users to join in, and likely wouldn't join anyways since I'm not on fb/ig and don't trust em
raydev 4y ago
> A lot of people blame Meta's VR attempt, but I don't think that's the problem. Analysts explicitly think the VR effort is overfunded. It's the problem according those who are trading.
isk517 4y ago
I feel like VR is partially to blame in the sense that it is showing that Meta is a one trick pony, a trick that you pointed out is rapidly losing it luster.

datadata 4y ago

The game theory of firms choosing to advertise seems to be prisoner's dilemma like. The only equilibrium is for both firms to advertise at a loss. If either firm stops advertising, the other firm's ads become more effective and it will steal market share. As a consequence of this, I think advertising will always persist irrationally unless the system if changed to prevent this irrational behavior. A really high tax on any ad spend would probably work.

whimsicalism 4y ago
That's not what "at a loss" means and is also not irrational. High tax on ad spend would be a throwback to our Christian moralist days where we decide that some spending is good spending that we like and other is bad spending. Most attempts to ban payment for boosting speech have failed, see citizens united.
- datadata 4y ago
  I'm sorry, but have we ever left "those days"? There are dozens of examples of sin taxes on things like Cigarettes, Gambling, Alcohol, Carbon Emissions, etc.
  - whimsicalism 4y ago
    Carbon has clear negative externality. Most of those other taxes were first instituted during periods of much greater Christian beliefs in the US than now.
    - datadata 4y ago
      So are you OK with a sin tax if it is on something with a negative externality? Do you think advertising does not have any negative externalities?
      - whimsicalism 4y ago
        Carbon is not a sin and that is not the historical reason it is taxed, unlike say alcohol and cigarettes. Many of these other things may have externalities, both positive and negative, but not so clear cut as carbon.
        jlund-molfese 4y ago
        The reason you're getting downvoted is because you compared a tax on ad spend to "Christian moralist" taxation in the United States, otherwise known as sin taxes. But you changed your definition of a sin tax halfway through the thread. These days, sin taxes like those on soda are often not motivated by religious concerns, at least in the US. They're taxes on goods or services that are harmful to individuals or society.
    - qwytw 4y ago
      And Cigarettes, Gambling & Alcohol don't?
potamic 4y ago
Tax on advertising is a very interesting idea. Everyone understands that is a necessary evil and most parties would rather not do it given the chance. But how do you classify what advertising is? Buying adspace on a website or billboard might be obvious? What about other forms like content creation, influencer marketing etc. If you create some websites or videos related to your services, is that considered advertising?
- whimsicalism 4y ago
  Exactly. It wouldn't survive a court challenge.
- datadata 4y ago
  I think you only need to track financial transactions, advertising companies would have to report and be taxed on income. The government has shown moderate competence at being able to implement things like this (maybe there are some areas where there is a lot of tax fraud, but generally it works). It is an interesting question you raise about second order effects-- would there be ways to work around this to get advertising for free?. For example maybe spam would become more common and intrusive and be used by more reputable companies. Note that ideas such as "hashcash" were solutions to effectively put a fee on email spam. The root of what is troubling about this all is that free speech isn't a sufficient framework in the modern world where attention and time are constrained.
  - r00fus 4y ago
    How do you separate advertisement companies and, say, entertainment companies that happen to just do product placement? I'm in favor of taxing ads, but it'd need to be comprehensive definition unless you want some unintended consequences.
    - vlovich123 4y ago
      Product placement is advertising. You only need to tax the transaction for the advertisement not “advertising companies”. It does get more complicated about how you define that it’s an advertisement vs not. And there’s lots of “paid placement” stories even in “respectable” newspapers that masquerade as news but would be hard to pierce the veil on as advertisement instead of just “free speech”
dredmorbius 4y ago
Among the sea-changes in the publishing industry was the abolition of exceptionally high taxation rates on advertising in the UK in the early 19th century (circa 1830 or so). I've only read peripherally about this and don't have any good sources handy, but it's a historical fact which strikes me as quite interesting.

whimsicalism 4y ago

Seems premature to crow the death of advertising when not a single social media company has been successful with this alternative scheme you are imagining. The market is contracting because when rates are high and capital is expensive, ad spending is one of the first you cut.

Nextgrid 4y ago
Not a single company succeeded because up until now, advertising both produced greater returns and neither people nor regulators were interested in its privacy implications. Now people (and most importantly regulators) are starting to pay closer attention, so the tide might be turning, up until the point where advertising becomes such a minefield that its costs will make alternative monetization models more profitable.
- bostik 4y ago
  [Caution: contains strong language.] I can't believe I'm the only one who considers advertising as an active negative signal. That is, if you're pushing ads, you are loudly telegraphing that your offering is not good enough to be discovered organically, and is therefore shit. Paying for so-called influencers is even worse: if you do that, you are - and there's no kind way of putting this - paying for others to whore their opinions on your behalf. If you want to make your wares visible in my sphere, find ways to make these appearances interesting, original, inventive and sufficiently unobtrusive. If you can't, tough. Take your toxic waste where it belongs.
  - whimsicalism 4y ago
    You're not the only one - I generally also considering advertising a slight negative signal (although not for the reasons you describe.) I just assume there is some other lower cost competitor that spends less money on advertising and returns the margin to me.
  - davidivadavid 4y ago
    So basically all products are shit. Gotcha. Seems like a sound model. "If you want to make your wares visible in my sphere, find ways to make these appearances interesting, original, inventive and sufficiently unobtrusive" Yeah, that's also called advertising. Sorry.

thehappypm 4y ago

I don’t think so. I think ad spending is in a temporary slowdown due to economic concerns, and Meta is losing users to TikTok so it’s got less eyeballs to monetize as well. Google for example grew ad revenue this quarter YoY.

mc32 4y ago

Tangential but I'd be happy to see them become a second-rate company like Yahoo! I understand Advertising and Marketing have positive social functions, but I also think we are getting oversaturated with it and need to pull back to a "saner" level. Humanity doesn't need the latest crap to survive as a species.

jstx1 4y ago

I don't know if you have an actual reason to attribute Meta's performance to their business model (apart from not liking advertising). They could reasonably run a steadily profitable business based on advertising without expecting to grow forever.

Nextgrid 4y ago
People learn to ignore ads over time (if not deploying technical countermeasures such as ad-blockers), so even maintaining stability is IMO impossible as the effectiveness of the advertising (and thus the revenue from advertisers who pay for it) will diminish.
- dtauzell 4y ago
  I ignore ads, but do occasionally buy stuff from Facebook ads. For example, I ordered some guitar picks. I like that if I am interested I can look at the comments and get some immediate reviews and discussion about the product.

wussboy 4y ago

I want to hear more about how advertising is a doomed business model. We've had advertising for centuries... But I'd love to know it was going away...

titzer 4y ago
I must have missed the viagra ads in "A Tale of Two Cities."
- AlanYx 4y ago
  You jest, but "A Tale of Two Cities" was published in just under three-dozen weekly instalments in a periodical that did have advertising.
harpiaharpyja 4y ago
I think there's some confusion here. By "advertising" GP is referring to the business model where you offer a product to users, but your revenue comes from advertisers targeting those users. IIUC they are not claiming that basic practice of advertising goods and services you provide is doomed.
dredmorbius 4y ago
Mass-market advertising in the modern sense dates to about 1860, or about 160 years. That's over a century, but not "centuries". As a significant social and economic dynamic, it's younger yet. As I've recently posted to this thread, Hamilton Holt's 1909 account is an excellent introduction to the beginning of this period: <https://archive.org/details/commercialismjou00holtuoft https://archive.org/details/commercialismjou00holtuoft> Google's Ngram Viewer suggest that the terms "advertising agency" and "advertising copywriter" only came into vogue during the 1920s, which would be only just at the century mark: <https://books.google.com/ngrams/graph?content=advertising+agency%2C%28advertising+copywriter+%2A+20%29&year_start=1800&year_end=2000&corpus=15&smoothing=3&direct_url=t1%3B%2Cadvertising%20agency%3B%2Cc0%3B.t1%3B%2C%28advertising%20copywriter%20%2A%2020%29%3B%2Cc0 https://books.google.com/ngrams/graph?content=advertising+ag...> I don't have a ready reference for ad spend evolution over the entire 20th century, but based on the 1980--2000 data, it seems likely highly skewed to more recent times: <https://www.visualcapitalist.com/evolution-global-advertising-spend-1980-2020/ https://www.visualcapitalist.com/evolution-global-advertisin...> There's probably a pretty good historical basis for the series Mad Men to have been set in the years 1960--1970. <https://en.wikipedia.org/wiki/Mad_Men https://en.wikipedia.org/wiki/Mad_Men>

outside1234 4y ago

It is even more simple than that. Apple has kneecapped Meta's advertising business with their privacy controls.

rapind 4y ago

I’m not so sure the advertising parasite hasn’t killed the host. At the very least, I’d say it’s winning, and that it evolves much faster.

m3kw9 4y ago

As long as you can attract attention, ads will work. Fb can still attract plenty also there is still no better way to attract attention than a mobile phone

togs 4y ago

Traditional ads might become less effective. But all social interaction is mediated by ads now.

williamcotton 4y ago

> Is there value in Facebook's products (whether current, or future VR-based ones)? Yes. Is there enough value to justify a overinflated stock price that only got there due to a combination of monopoly position as well as temporary gap in regulation against spyware? Doubt it, and so does the market. The market also doubts the future VR-based ones. If you think there is value in those future VR-based products then I would say take a chance and buy the dip! Institutional investors are not as deeply involved with computing as we are on this forum.

jhickok 4y ago
There is value in VR in that there is at least some demand that Meta is meeting. 1bn+ in quarterly revenue is not nothing. But assuming their VR business could become profitable, the valuation justified by a billion in revenue is still much much much lower, so the dip would be a ways down still.

dustingetz 4y ago

advertising at its essence is dissemination of information to the people who seek it. it’s a win/win done right and essential to an information society

cloutchaser 4y ago

This is a very broad statement. Google's search ads revenue are growing just fine... Youtube is down though. WPP is seeing increased ad spend as well. Conclusion? Probably that apple has fucked facebook to such an extent that it's threatening their entire business. This isn't much to do with advertising in general.

berkes 4y ago

If that were true, we'd see other companies that rely on advertising to drop similar, or at least drop as well. Google, ClearChannel, IPG, and even Amazon. But those aren't collapsing. What you say is probably one reason, though. But the actual crash is more likely because Meta didn't innovate and move away from-, or diversify their advertising-model over time. So rather than a steady change through continued innovation, A&M etc, they are now forced to bet on a giant pivot. For one, this makes investors nervous. Meta has performed several M&As though, some of which proven extremely profitable and successful. But while e.g. Instagrams' userbase is different from FB, their income is based on almost the exact same model of targeted advertising. FB failed to move into ecommerce, video, streaming, etc. and diversify their income significant. Something that Amazon or Google do much better.

allie1 4y ago
FB/Instagram became boring for a very long time. Their recent pivot to "discovery" is a move in the right direction, but they are still ways off from staging a return. And all this is overshadowed by the Metaverse. They've invested so much reputation wise (changing their name even) that it's very hard for them to back down, maybe impossible considering who makes that call.
- berkes 4y ago
  > Their recent pivot to "discovery" is a move in the right direction, I'm not following META closely. But isn't this another pivot to diversify their userbase, rather than diversify their revenue-stream? Or is there some plan to monetize this "discovery" outside of their common "targeted advertising"?
whimsicalism 4y ago
Google is dropping. Amazon doesn't rely on advertising. The advertising market is definitely slowing with the high rates.
- berkes 4y ago
  Amazon doesn't rely on a single revenue stream. But Advertising certainly is an important income stream. It gets its own chapter in the earning calls. ~$9 billion in 2021, which is more than subscriptions (Prime etc), at ~$8 billion[1] [1] https://www.insiderintelligence.com/insights/amazon-revenue/ https://www.insiderintelligence.com/insights/amazon-revenue/ , https://s2.q4cdn.com/299287126/files/doc_financials/2022/q2/Q2-2022-Amazon-Earnings-Release.pdf https://s2.q4cdn.com/299287126/files/doc_financials/2022/q2/...

allie1 4y ago

FB advertising works extremely well, little less so after Apple's changes, but still it's a beast. If you look into FB financials, revenue per user has more room to grow, outside US if nothing else, but I think US as well. So "advertising model broken" isn't really true. It is irritable and despicable/deplorable in some ways for sure. But it works.

xhkkffbf 4y ago

I've got to disagree. I've been involved in many projects and companies where we needed to reach out to potential partners and customers around the world. Advertising was essential. I'm sure there are better ways to do it but as long was we need to get someone else's attention, it will be there.

mbesto 4y ago

> Advertising is ultimately a doomed business model as it works against your users' interests, yet requires those users to willingly use the product and engage with the ads. Sort of, but not quite. We had already kind of reached peak advertising, this isn't recent. More specifically the following trends: - Advertising has been and is expected to continue to grow at a measly 5% per year on average[0] (compare that to say like 10% on Software) - Digital advertising's cannibalization (e.g. the pie shifts) of traditional media is slowing down and hitting diminishing returns - We're hitting peak media use at 12 hours 9 minutes per day[1]. There's just physically not enough hours in the day to consume more media. - There are more players trying to capture that consumption. Facebook's properties's use are diminishing compared to competitors (e.g. basically TikTok). TL;DR - Pie only grows 5% per year, digital is getting close to eating a majority of the pie, and people that aren't Facebook are eating that pie and Facebook can't compete. [0] https://www.imarcgroup.com/global-advertising-market https://www.imarcgroup.com/global-advertising-market [1] https://review42.com/resources/how-much-time-do-people-spend-on-social-media/ https://review42.com/resources/how-much-time-do-people-spend...

dredmorbius 4y ago
It's interesting to note that mass advertising has gone through several stages, and a number of previously highly-active platforms are now pale shadows of their previous selves. Some of this is a matter of shifting technology and related advances, but there also seems to be a pattern of burning through audiences through frustration. Arguably, advertising initiated in bulk print (newspapers and magazines), see Benjamin Day's The Sun (1833). I've mentioned Hamilton Holt's Commercialism and Journalism (1909) many times, it's an excellent summary of early advertising-based publishing, and its many problems: <https://archive.org/details/commercialismjou00holtuoft https://archive.org/details/commercialismjou00holtuoft>. Radio stole the thunder from print as a more passive and accessible medium, television from radio. Targeted cable offerings sniped over-the-air broadcast. And now online advertising is dominating both print and broadcast. I'd argue that billboard advertising has shown similar patterns as well, expanding rapidly with highway construction, seeing a strong backlash (beginning in the 1960s, notably by Lady Bird Johnson: <https://www.sandiegoreader.com/news/2001/jun/21/what-happened-ladybird-johnsons-anti-billboard-law/ https://www.sandiegoreader.com/news/2001/jun/21/what-happene...>), and over the past several decades, trending strongly to very low-value advertisers ("gentlemen's clubs", lottery and casino ads, the classic anti-goods of alcohol and tobacco, as well as the increasingly ubiquitous "your message here" placeholders, being strong indicators of this, particularly outside high-wealth metro regions). I don't recall who made the observation, but in the content industry, it's interesting that music, film, and books are exceptions to the advertising-supported nature (mostly, there are a few exceptions, mostly minor, though the expanding length of trailer and pre-film advertising in theatres would also be an exception ... this may have been mentioned in an Ezra Klein episode). And speaking of Klein: that podcast includes advertising. I find myself averse to listening when I know I'm going to have to hear those (e.g., I can't intervene to skip the ads, such as when I'm doing household tasks), and will avoid listening to it. There are a number of other podcasts which are similar, a surprisingly large number being of what are nominally public-radio programmes --- Freakonomics comes to mind. Combined with IMO lackluster quality, I'm actively avoiding many of these, and have unsubscribed to several. Independent and academic podcasts are more my style, History of Philosophy by Peter Adamson and Complexity from the Santa Fe Institute being among the best. And more recently, the vast expansion of direct marketing over p2p networks, most notably landline and mobile telephony, is making the experience of subscribing to those services increasingly undesirable. Much in the same way as spam and simply information overload seems to be making open-standards, universal-access email much less widely used (many organisations no longer publish email addresses, or respond to emails where such addresses can be found), an overall frustration level can in fact kill general use of a medium or channel. John Gottman's five-to-one ratio of positive to negative experiences, originating in relationships but apparently having broader applications, may well play a role here. If even a relatively small minority of experiences over time with a technology, medium, or channel are negative, that impression tends to strongly discourage long-term favourability. See: <https://www.gottman.com/blog/the-magic-relationship-ratio-according-science/ https://www.gottman.com/blog/the-magic-relationship-ratio-ac...> (for the relationship side, the ad/media extension is my own suggestion, though I suspect others have argued similarly). As Nextgrid's comment notes, the real problem with advertising is that it's a race-to-the-bottom market, especially where high-value / highly-attractive audiences flee. Higher-quality advertisers similarly depart, and both the products marketed and methods utilised tend to ever-increasing toxicity in both figurative and literal senses. As I mentioned a couple of months ago, advertising ultimately has a reverse-Midas touch: it turns gold to shit: <https://news.ycombinator.com/item?id=32669503 https://news.ycombinator.com/item?id=32669503> Part of the constant-platform-migration trend seems to be explained by highly-valued audiences tending to be early adopters of such platforms. Early advertising returns are high, and for all parties (publishers, advertisers, and audiences) the initial experience tends to be positive. With both wider adoption and early-adopter defections (leaving the media/platform), that kicks off the death-spiral dynamic.

scarface74 4y ago

You’re over complicating things. Apple’s Ad Tracking Transparency feature which allows iOS users to opt out of tracking. FB admittedly as much last quarter. It’s amazing how much more effective a 10 line change to App Store rules was in protecting user’s privacy than a bloated 99 section 11 chapter law - ie the GDPR.

disgruntledphd2 4y ago
> It’s amazing how much more effective a 10 line change to App Store rules was in protecting user’s privacy than a bloated 99 section 11 chapter law - ie the GDPR. You should remember this in the future, when Apple have become even worse than FB in terms of advertising. Device growth has stalled, and services (i.e. advertising) is gonna be their new iPhone.
- scarface74 4y ago
  The App Store has been basically no better than a flea market for over a decade. I doubt that it could get worse.

dboreham 4y ago

After a stint years ago in the adtech business, I adopted a personal rule never to invest in any ad-revenue-based company. (Of course through ETF holdings I can't avoid them).

Nextgrid 4y ago
Besides moral concerns, advertising might be a good investment at the beginning. I predict TikTok will make a killing as they ramp up advertising on their platform now that they've gained a huge audience. However, returns will diminish over time and eventually disappear.

schmichael 4y ago

> Advertising is ultimately a doomed business model as it works against your users' interests From the dawn of mass media it has been subsidized by ads. Newspapers, radio, magazines, television, movies (through product placement), music (through sponsorship), podcasts, and even outside of media: sports, schools, mass transit, etc. Ads have been a monetization strategy across a mind bogglingly broad cross-section of society for over 200 years. Individualized ads may get regulated out of existence or maybe even out-competed by more consumer friendly options, but people by and large like the subsidies ads provide. Ad supported music, tv, and movie streaming is wildly popular. HN users often post archive.is links to bypass paywalls which actually opts into a paid-for-by-ads experience. What we see with meta is their ads becoming less valuable and their stock reflecting that. I think it’s a huge mistake to draw any conclusions about the business of ads other than ads are controlled by the platform. Apple is hoping these ad dollars flow to them, not that the ads go away.

jwithington 4y ago

I think you're conflating "infinite growth" with "unsustainable." Advertising can be a sustainable business model. Radio, television, billboards, etc. sustain themselves through advertising. We can quibble about their growth rates, but if advertising were unsustainable, then these industries wouldn't exist in their current form. I think you're actually rejecting the idea that a company can sustain infinite growth through advertising. I think that's a little different from being wholly "unsustainable."

wspeirs 4y ago
It's interesting though that both radio and TV switched to pay models: cable/premium channels and Sirius/XM for radio. Billboards are providing anything to the user, they're just giant signs that say "go buy this"

user_named 4y ago

On the contrary, advertising is a business that will always exist and thrive, never decline and always grow unless the population starts declining.

fauigerzigerk 4y ago

I have a different hypothesis (I know it's a controversial one). Ad based business models have a redistributive effect. Services like Facebook are paid for in proportion to spending power whilst usage has a completely different distribution. So wealthier users are effectively subsidising less wealthy users, which enables broad network effects and economies of scale. People will always pay to influence other people. I think advertising while being annoying is one of the less malign forms of doing that. It also has privacy preserving characteristics as there is nothing more destructive for privacy than making a payment. That doesn't mean we shouldn't regulate to limit ad targeting. I think we should.

whimsicalism 4y ago
I work in the industry and I agree with your take.
r00fus 4y ago
> It also has privacy preserving characteristics as there is nothing more destructive for privacy than making a payment. This is a very interesting take and I'd like to see some further delves into this.

ehs 4y ago

I must be some of the few persons in the world which enjoy ads in FB, I can even confess that I sometimes log there to search if there any attractive offers regarding to clothing or vacations. It centralizes many offers of different services I’m looking for, but I am very lazy to actively search for them. IMO the drop is due to the loss in confidence of the shareholders on the vision of the company.

alberth 4y ago

> The problem in my opinion is that we have reached peak advertising. Advertising is ultimately a doomed business model as it works against your users' interests, yet requires those users to willingly use the product and engage with the ads. Isn't the problem much simpler. It's a shift in users attention to other social networks like TikTok, plus Meta already capture the total addressable market. It's hard to continue growth when you've essentially plateaued and now users are spending less time on your site.

disgruntledphd2 4y ago
Nah, this is all about Apple and their ATT changes. Like TikTok are losing money hand over fist, so it's not that the advertisers are moving to them, it's that advertisers have essentially been forced to give a bunch of the money they were previously giving to Fb to Apple.

hbarka 4y ago

“Dark Money Political Ads Proliferate on Facebook and Instagram Ahead of the U.S. Midterms, Enabled by the Platforms’ Policies” https://www.newsguardtech.com/misinformation-monitor/october-2022/ https://www.newsguardtech.com/misinformation-monitor/october...

throwaway743 4y ago

They're placing all their bets on their meta quest pro and pushing people into the metaverse. Complete control over that environment, combined with the new vr headset's eye tracking+other sensors, would likely make them the best A/B testing / irl ad performance data platform on the block... if it's successful. Imo, they haven't really proven their case for their metaverse, the price point for the headset is wayyy too high for mass amounts of users to join in, and likely wouldn't join anyways since I'm not on fb/ig and don't trust em

raydev 4y ago

> A lot of people blame Meta's VR attempt, but I don't think that's the problem. Analysts explicitly think the VR effort is overfunded. It's the problem according those who are trading.

isk517 4y ago

I feel like VR is partially to blame in the sense that it is showing that Meta is a one trick pony, a trick that you pointed out is rapidly losing it luster.