7 ms·
I don’t think this is a case of “nearly perfect competition driving prices down so nobody makes a profit” (e.g., you working for a social media company trying t
by looping__lui 4y ago
I don’t think this is a case of “nearly perfect competition driving prices down so nobody makes a profit” (e.g., you working for a social media company trying to argue how perfect competition this is ;-) ) - BUT potentially rather a case of “monopoly power of social media charging so much for customer acquisition that it drives profits to zero”; so rather a shift in profit from high prices from the manufacturers pocket to Zuck et als pockets…
- xapata 4y agoIt's an auction. The buyers are driving up prices until it's no longer profitable.
- looping__lui 4y agoWith only one seller ;-) That’s usually kind of what you call a monopoly. A bit like just a single entity selling oil and then arguing “oh this is a free market because we auction of the oil…”
- MichaelZuo 4y agoNo? Alphabet, Facebook, Microsoft, Apple, Tencent, Alibaba, Baidu, Bytedance, Yandex each have more than 1% of digital ad spend marketshare, and none of them have 50% of total marketshare. They compete in many areas too. I think there are credible Indian competitors growing too.
- looping__lui 4y agoTheres OPEC, theres Russia, theres Iraq, … These companies have margins >>20% whereas the advertisers barely break even.
- MichaelZuo 4y ago> Theres OPEC, theres Russia, theres Iraq, … These companies have margins >>20% whereas the advertisers barely break even. How is oil & gas relevant to digital ads?
- looping__lui 4y agoI was relating an example from oil oligopolies with the Ads market. Social media making $$$ whereas the companies buying Ads barely breaking even is not equal to an “open efficient and free market” as the initial thread suggested.
- MichaelZuo 4y agoThere can exist different market dynamics in different sectors? I'm not really sure why your trying to compare oil & gas with digital ads, it doesn't make any sense. You can't extrapolate conclusions based on the market dynamics of one to the other.
- looping__lui 4y agoI don’t agree with how you measure market share in order to try and argue that we do not see an abuse in negotiation power by Meta et al. Here is another oil&gas comparison: OPEC countries aren’t distorting the market in their favor, because oil is just a fraction of the total energy market (e.g., nuclear, wind, solar,…)
- xapata 4y ago> just a fraction 1/1 is a fraction. What fraction is oil of the total energy market?
- MichaelZuo 4y agoI still don't see how this is relevant.
- russiasux 4y agoThis is hard core wrong. Only the preferred buyers have access to the product that everyone wants to buy. They negotiate above and beyond the auction system and the platform obfuscates that by making it more difficult for the users who are not preferred and must participate and in the "free market" to tell why their ads perform poorly. Spoiler alert: it's because they are being sold garbage impressions while being shown "analytics" that make the lay person believe it's their content, or ad, or targeting, or whatever... and not the fact that the platform just pooled all the valuable impressions outside the auction and gave them to a preferred customer who never touched the auction system to begin with.
- looping__lui 4y agoWow, that I did not know - but totally believe
- xapata 4y agoIf that's true, that demonstrates the sellers aren't exercising monopoly power to set prices artificially high. A preferred buyer means someone able to negotiate.