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Tell HN: Monetizing Websites with Advertising Will Lead to Economic Collapse

(Reposted from an earlier comment.) I am deeply concerned about the increasing quantity and intrusiveness of website advertisements. Not that I and others find them unpleasant or obtrusive. I am convinced that today's ads are a "coal mine canary", warning us of impending economic collapse. Via HN I recently found a chart of advertising spend as a proportion of the GDP since the 1920s or so. It is just about always 2%. So if the economy is booming, then advertising will boom in a sense, but only in a strictly limited way. It is very easy to make a new website, it is not hard at all to attract people to it, but it is quite difficult to come up with ways to monetize a website other than by publishing ads. Consider eCommerce - you need warehouses, people to ship the product, you have to deal with payment processing, keeping Kevin Mitnick out, backing up your DB. My own site mostly has articles and essays. When I first tried AdSense in 2004, within just a couple of hours I could tell that I would earn three grand that month. Registering for then implementing AdSense was quite a lot easier than than selling physical products. The total number of websites is growing far faster than either the GDP or the population, thereby yielding less and less advertising money per web page. Typically, webmasters try harder to convince visitors to their sites to click their ads. Hence we have "Like us on Facebook" popups before we can even determine whether we actually _do_ like the content. This House Of Cards is going to break down - and _soon_. I myself recently installed Privacy Badger and NoScript; I blackhole analytics servers in my hosts file: "127.0.0.1 www.google-analytics.com". My own website would be an acceptable solution for some: I don't use it directly to earn money. I work as a coder, however my site helps me to promote my consulting services. But there are many sites that are quite costly to operate. There isn't much they can do to cut those costs.

v_ignatyev 12y ago
Are you sure that causation between advertising spendings and economic collapse exists? When economic collapse came (as it is now in my country) the advertisement spendings grows, because business people want to warm up consumers, to maintain sales level and to reduce debts and inventory costs. Obviously, competition become growing and small or inert businesses start to fail or throw off from the market. And it's the time, when new businesses come, the economics reorganize and recover itself.
dirktheman 12y ago
Let me get this straight: you're saying that because you see a lot more online ads, you assume that people spend more money on advertising, raising above the magical number of 2% of GDP so this will trigger an economical collapse? Aren't you jumping a few steps here? You're saying that historically, about 2% of GDP is spent on advertising. I'll take your word for it, but if it's true: it's not a guarantee that this will be the case in the future. Also: 'Advertising' does not equal 'Website ads'. So if the 2%-rule is a universal truth, maybe businesses will spend their budget elsewhere. That's very likely, because of the saturation of online marketing makes it less effective, forcing companies to spend their advertising budget on other means. We both agree on the fact that website ads are less effective nowadays, right? But how exactly would this lead to a economic collapse?
- MichaelCrawford 12y ago
  Your reply is precisely why I reposted what at first was a comment. I am quite devoted to my writing, however I regard as my worst fault that I quite commonly lose my readers. I have done this to you. What I'm going to do about it - and this was my plan but I couldn't say so within HN's 2000 character limit - is to write up a well-researched article that addresses my thesis in far more depth. No, I'm not saying that anyone will spend more money on advertising. That's part of the problem, you see. I don't know in much detail but I can readily see how there would be a largely fixed proportion of the GDP that goes into ad spend. What I'm saying is that there is less advertising money to go around, among those who publish ads. Three ways to address this are for ads to get cheaper - that is, to charge less money per-click or per-impression - or for ads to become "more effective" in the sense that the click rate for the average ad is somehow increased. The third way is for there to be a greater total quantity of ads. Compare the web advertising you see today, as opposed to what you saw when I myself started with adsense in 2004, and compare again to the simple banner ads that were typical when I first used a banner-exchange service back around 1997 or 1998. In 1998, a commercial website could make good money with one single tastefully design IMG link banner ad per page. That's how I flogged my consulting business - I wrote lots of technical articles, each with just one banner ad that linked to my resume, then later to a page that described my business. In 2003, I spent a month quite obsessively researching and writing what turned out to be a hugely popular article on legal music downloading, as well as the history of copyright in the US, as well as how to approach copyright reform. The real meat of that article for most readers was a whole bunch of laboriously researched links to sites where one could download such music legally - such as my own piano tracks. For the most part, at the time such legal downloads were from indie musicians such as myself, offering their MP3s so as to draw traffic and organic links to their sites. So I wrote that in 2003, then let it sit on autopilot for a solid year before someone suggested I try AdSense. That's why I was able to get three grand that first month. It averaged $3,500.00 for about three years then slowly declined, eventually it totally tanked I expect as a result of iTunes offering DRM-free music downloads. There is no doubt whatsoever that the success of iTunes is due to my article. That really is what I was hoping to achieve. I wasn't trying to promote "free music downloads". No: I was promoting "legal music downloads". That's quite a different thing. Were I to write an article like that today - to spend a solid month working 24/7 to research it, emailing hundreds of people with the request that they critique it, then to spend a solid year posting the link all over G-d's Creation... ... how much do you expect I could earn in adsense? Even were I to publish it ad-free for a year, I expect I'd get somewhere between ten and a hundred bucks per month. The problem we've got is that advertising does not do anyone any good whatsoever, unless someone spends some real money on something they need or want. The businesses who sell things that people need or want pay for advertising so they can move their products or services. The growth an ad spend is, over a period of about ninety years, almost but not quite strictly proportional to the GDP, with the constant of proportionality being 0.02. $advertising = 0.02 * $GDP (Roughly) What I've been seeing since the subprime meltdown, is that many people know that lots of money can be made, somehow, in high-tech, yet many of these same people really aren't that sophisticated with high tech. Quite commonly I see - especially at LinkedIn - posts that say things like "Can you suggest any iPhone programming tutorials". I'd be down with that if the poster had ever written any software of any significance. But I see lots of queries like that from people who can't even get Hello World to build, let alone run to completion. Also a common problem today is that while we do have job growth, we have terrible underemployment. Back in the day, few people held part-time jobs. If you were offered a job at all, you could reasonably expect forty hours. A bookkeeper whose name will never escape my lips once told me that employee benefits must be equally given to all employees, otherwise the benefits will be taxed as salary. This has to do with that, during World War II, the US Government imposed wage caps so as to keep down the cost of war materiel. The armaments firm needed a competitive advantage to attract new employees, so they started offering health insurance, then somehow managed to keep Uncle Sam from regarding that insurance as hourly pay or salary. However the requirement to pay benefits equally to all, does not apply to part-time workers. So today we even see experienced managers working part-time. I find that to be the case in many of the cafes and restaurants I frequent. So you're working part-time, you get no benefits, higher education is collassally expensive and would burden you with usurous student loan debts. How could you possibly feed your hungry child? The very-common advice at WebmasterWorld is to do just what I did: write article about what you already know, care about or are at least willing to learn - then publish ads alongside your written content. That worked really well up until the subprime meltdown. But what we see now are vast numbers of people working diligently, feverishly - desperately - to write such content, then publish those ads... ... but the total ad spend is still 2% of GDP, despite that the number of webpages is growing far our of proportion either to the overall GDP, or to the net-connected population of the world. Rather than "working smarter, not harder", these unsophisticated webmasters are working harder, by using canned javascript and the like to post "Like Us On Facebook" the instant I visit an otherwise intriguing article I find on HN, or quite commonly they solicit my email for their newsletter. I am quite commonly cool to subscribe to newsletters - but only AFTER i've read ENOUGH articles to convince me that the newsletter will be of value to me. If I really do Like an article, I'll post the link directly on my own Facebook wall. I can't say I've ever just clicked a Like button in an article. There are all kinds of ways for online advertising to be made more effective with some time, effort and insight. What I see are the kinds of desperate measures that result in famine victims eating their seed corner. Please let me be clear: I am grateful for your response. My actual hope is, if not to actually prevent such an economic collapse, at least find some way to contribute to its prevention by bringing my concerns to the attentions of those who are in positions to do something about it.
sarciszewski 12y ago
> keeping Kevin Mitnick out That has less to do with technology and more to do with psychology.
- dev-ious 12y ago
  I guess OP means security in general.
eevilspock 12y ago
One of the things I want to do is an economic analysis of advertising. Specifically, what is the overhead that advertising imposes as compared to an economy where consumers paid directly for the products they used? Clearly there is no free lunch, and we still pay for the so-called "free stuff" that advertising "gives" us, it's just that it feels like we're not paying for it. Your HN profile provides no email address, which means I can't email you, nor can those that might offer you the job that your profile says you seek.
- MichaelCrawford 12y ago
  Oopsy-Doodle. Thanks for letting me know. mdcrawford@gmail.com http://www.warplife.com/mdc/
allendoerfer 12y ago
I see a causation here, too, but not universally. Websites running on unpaid open source software, monetizing trough ads or SaaS services for bigger VC-funded online startups just postpone the point where money is made. It is therefor critical, that these funded startups provide an additional service for consumers to buy (growing the economy) or disrupt another industry. If they are financed by advertisement and the spending does not originate from former TV advertisement and they are growing faster than other non-advertisement B2C parts of the economy, they are effectively lowering the profitability of other advertisers or their customers. I am not an economist so I do not know if decreased profitability of advertisement spenders causes an economic collapse, especially with falling manufacturing costs. What is clear in my opinion is, that if said funded players can not get their customers to decrease their profitability and the industry has to lower their prices instead, it will affect the whole tail of B2B and ads-based companies that provide services almost exlusively for them.

v_ignatyev 12y ago

Are you sure that causation between advertising spendings and economic collapse exists? When economic collapse came (as it is now in my country) the advertisement spendings grows, because business people want to warm up consumers, to maintain sales level and to reduce debts and inventory costs. Obviously, competition become growing and small or inert businesses start to fail or throw off from the market. And it's the time, when new businesses come, the economics reorganize and recover itself.

dirktheman 12y ago

Let me get this straight: you're saying that because you see a lot more online ads, you assume that people spend more money on advertising, raising above the magical number of 2% of GDP so this will trigger an economical collapse? Aren't you jumping a few steps here? You're saying that historically, about 2% of GDP is spent on advertising. I'll take your word for it, but if it's true: it's not a guarantee that this will be the case in the future. Also: 'Advertising' does not equal 'Website ads'. So if the 2%-rule is a universal truth, maybe businesses will spend their budget elsewhere. That's very likely, because of the saturation of online marketing makes it less effective, forcing companies to spend their advertising budget on other means. We both agree on the fact that website ads are less effective nowadays, right? But how exactly would this lead to a economic collapse?

MichaelCrawford 12y ago
Your reply is precisely why I reposted what at first was a comment. I am quite devoted to my writing, however I regard as my worst fault that I quite commonly lose my readers. I have done this to you. What I'm going to do about it - and this was my plan but I couldn't say so within HN's 2000 character limit - is to write up a well-researched article that addresses my thesis in far more depth. No, I'm not saying that anyone will spend more money on advertising. That's part of the problem, you see. I don't know in much detail but I can readily see how there would be a largely fixed proportion of the GDP that goes into ad spend. What I'm saying is that there is less advertising money to go around, among those who publish ads. Three ways to address this are for ads to get cheaper - that is, to charge less money per-click or per-impression - or for ads to become "more effective" in the sense that the click rate for the average ad is somehow increased. The third way is for there to be a greater total quantity of ads. Compare the web advertising you see today, as opposed to what you saw when I myself started with adsense in 2004, and compare again to the simple banner ads that were typical when I first used a banner-exchange service back around 1997 or 1998. In 1998, a commercial website could make good money with one single tastefully design IMG link banner ad per page. That's how I flogged my consulting business - I wrote lots of technical articles, each with just one banner ad that linked to my resume, then later to a page that described my business. In 2003, I spent a month quite obsessively researching and writing what turned out to be a hugely popular article on legal music downloading, as well as the history of copyright in the US, as well as how to approach copyright reform. The real meat of that article for most readers was a whole bunch of laboriously researched links to sites where one could download such music legally - such as my own piano tracks. For the most part, at the time such legal downloads were from indie musicians such as myself, offering their MP3s so as to draw traffic and organic links to their sites. So I wrote that in 2003, then let it sit on autopilot for a solid year before someone suggested I try AdSense. That's why I was able to get three grand that first month. It averaged $3,500.00 for about three years then slowly declined, eventually it totally tanked I expect as a result of iTunes offering DRM-free music downloads. There is no doubt whatsoever that the success of iTunes is due to my article. That really is what I was hoping to achieve. I wasn't trying to promote "free music downloads". No: I was promoting "legal music downloads". That's quite a different thing. Were I to write an article like that today - to spend a solid month working 24/7 to research it, emailing hundreds of people with the request that they critique it, then to spend a solid year posting the link all over G-d's Creation... ... how much do you expect I could earn in adsense? Even were I to publish it ad-free for a year, I expect I'd get somewhere between ten and a hundred bucks per month. The problem we've got is that advertising does not do anyone any good whatsoever, unless someone spends some real money on something they need or want. The businesses who sell things that people need or want pay for advertising so they can move their products or services. The growth an ad spend is, over a period of about ninety years, almost but not quite strictly proportional to the GDP, with the constant of proportionality being 0.02. $advertising = 0.02 * $GDP (Roughly) What I've been seeing since the subprime meltdown, is that many people know that lots of money can be made, somehow, in high-tech, yet many of these same people really aren't that sophisticated with high tech. Quite commonly I see - especially at LinkedIn - posts that say things like "Can you suggest any iPhone programming tutorials". I'd be down with that if the poster had ever written any software of any significance. But I see lots of queries like that from people who can't even get Hello World to build, let alone run to completion. Also a common problem today is that while we do have job growth, we have terrible underemployment. Back in the day, few people held part-time jobs. If you were offered a job at all, you could reasonably expect forty hours. A bookkeeper whose name will never escape my lips once told me that employee benefits must be equally given to all employees, otherwise the benefits will be taxed as salary. This has to do with that, during World War II, the US Government imposed wage caps so as to keep down the cost of war materiel. The armaments firm needed a competitive advantage to attract new employees, so they started offering health insurance, then somehow managed to keep Uncle Sam from regarding that insurance as hourly pay or salary. However the requirement to pay benefits equally to all, does not apply to part-time workers. So today we even see experienced managers working part-time. I find that to be the case in many of the cafes and restaurants I frequent. So you're working part-time, you get no benefits, higher education is collassally expensive and would burden you with usurous student loan debts. How could you possibly feed your hungry child? The very-common advice at WebmasterWorld is to do just what I did: write article about what you already know, care about or are at least willing to learn - then publish ads alongside your written content. That worked really well up until the subprime meltdown. But what we see now are vast numbers of people working diligently, feverishly - desperately - to write such content, then publish those ads... ... but the total ad spend is still 2% of GDP, despite that the number of webpages is growing far our of proportion either to the overall GDP, or to the net-connected population of the world. Rather than "working smarter, not harder", these unsophisticated webmasters are working harder, by using canned javascript and the like to post "Like Us On Facebook" the instant I visit an otherwise intriguing article I find on HN, or quite commonly they solicit my email for their newsletter. I am quite commonly cool to subscribe to newsletters - but only AFTER i've read ENOUGH articles to convince me that the newsletter will be of value to me. If I really do Like an article, I'll post the link directly on my own Facebook wall. I can't say I've ever just clicked a Like button in an article. There are all kinds of ways for online advertising to be made more effective with some time, effort and insight. What I see are the kinds of desperate measures that result in famine victims eating their seed corner. Please let me be clear: I am grateful for your response. My actual hope is, if not to actually prevent such an economic collapse, at least find some way to contribute to its prevention by bringing my concerns to the attentions of those who are in positions to do something about it.

sarciszewski 12y ago

> keeping Kevin Mitnick out That has less to do with technology and more to do with psychology.

dev-ious 12y ago
I guess OP means security in general.

eevilspock 12y ago

One of the things I want to do is an economic analysis of advertising. Specifically, what is the overhead that advertising imposes as compared to an economy where consumers paid directly for the products they used? Clearly there is no free lunch, and we still pay for the so-called "free stuff" that advertising "gives" us, it's just that it feels like we're not paying for it. Your HN profile provides no email address, which means I can't email you, nor can those that might offer you the job that your profile says you seek.

MichaelCrawford 12y ago
Oopsy-Doodle. Thanks for letting me know. mdcrawford@gmail.com http://www.warplife.com/mdc/

allendoerfer 12y ago

I see a causation here, too, but not universally. Websites running on unpaid open source software, monetizing trough ads or SaaS services for bigger VC-funded online startups just postpone the point where money is made. It is therefor critical, that these funded startups provide an additional service for consumers to buy (growing the economy) or disrupt another industry. If they are financed by advertisement and the spending does not originate from former TV advertisement and they are growing faster than other non-advertisement B2C parts of the economy, they are effectively lowering the profitability of other advertisers or their customers. I am not an economist so I do not know if decreased profitability of advertisement spenders causes an economic collapse, especially with falling manufacturing costs. What is clear in my opinion is, that if said funded players can not get their customers to decrease their profitability and the industry has to lower their prices instead, it will affect the whole tail of B2B and ads-based companies that provide services almost exlusively for them.