Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The math’s not pretty on digital advertising’s future revenues? (2017)

medium.com

Post reply on HN
Print view View original

111–120 of 176 posts

Re: The math’s not pretty on digital advertising’s future revenues? (2017)

#111

Post by rosege »

themagician wrote: post #62
MarkMc wrote: post #41

Wow this article is so very wrong - Google and Facebook have enormous advantages over Disney because (a) they have other people producing valuable content for free ; (b) they know much more about each viewer than Disney. Google's revenue today is six times as large as it was a decade ago. And I expect its revenue in a decade to be at least 3 times as large as it is today. The reason is that many of the causes of past…

The content that Google and Facebook produce is garbage. It’s only barely better than nothing at all. Most people would not pay for the kind of content that shows up on Facebook and YouTube by so-called “content creators”. Facebooks ads are garbage except in certain circumstances. Everyone knows this, including the big brands, but they continue to do it because it makes the board happy when they see their brand on FB…

Agreed. I once bought something I saw on a Facebook ad and it was such terrible quality and took so long to be delivered that I'm extremely sceptical of anything else I see advertised there now and don't think I'll ever order anything from an unknown company from there again.

Re: The math’s not pretty on digital advertising’s future revenues? (2017)

#112

Post by manigandham »

user5994461 wrote: post #83
manigandham wrote: post #27

Another nonsensical article about adtech. This is not how the industry works. Apple does not have a chance at buying Google because they have the same market cap. Google and Facebook have a massive advantage in scale and precision which is why 2 of the top 10 biggest companies on the planet are ad networks. The valuations come from the sheer profit they generate, not their assets, and how much Disney spends on conten…

>>> What matters is getting a positive return. In theory yes but not in practice. Many companies run ads as strict losses, until they stop spending or die, then another company will eventually the spot. The revenue equilibrium is about where Google is paid all revenues from the customers it brought. The company gets more customer but makes neither a profit nor a loss. It's very close to that in practice. It's really…

That's just business mechanics. If your customer acquisition costs are equal to your sales then you're reached breakeven and the next steps are to either reduce your costs or increase your sale price to continue growth. Nothing is static and you have to keep working on the math to optimize the business at that moment.

I don't see what this has to do with Google taking your profit.

Re: The math’s not pretty on digital advertising’s future revenues? (2017)

#114

Post by MarkMc »

darawk wrote: post #67
gibybo wrote: post #54

Earlier quoted context omitted.

Earnings multiples reflect the amount of future earnings growth. He laid out an argument for larger future earnings growth.

None of the growth oriented items he listed are even remotely capable of justifying 2x the multiple of other media companies.

I'm not too familiar with other media companies so I don't know what the correct multiple should be, but here's my math on Google:

1. Over the past 13 years world GDP per capita has grown about 3% per year. So it's reasonable to think that the people who are currently connected to the internet will on average be 30% richer in 10 years

2. The average amount of time that people spend on the internet could grow 20% in 10 years

3. The amount of advertising Google can show per hour might be 20% higher in 10 years

4. Google might improve its ad algorithm 10% per year - ie. 160% over 10 years.

5. Having more personal data might improve Google's ad algorithm by a further 10% over 10 years

6. Most extra people connected to the internet over the next 10 years will be much poorer than existing users, so let's say that this growth only contributes 10% to revenue over 10 years

Estimated revenue growth is therefore: 1.3 * 1.2 * 1.2 * 2.6 * 1.1 * 1.1 = 5.9

But there is also the chance of significant regulation and other risk factors so let's cut that revenue growth estimate in half to 3.

Google won't need 3 times the number of engineers or data centers to service that growth, so Google might be reasonably expected to quadruple its profit in 10 years.

Re: The math’s not pretty on digital advertising’s future revenues? (2017)

#115

Post by tehwebguy »

b_tterc_p wrote: post #86
themagician wrote: post #62

Earlier quoted context omitted.

The content that Google and Facebook produce is garbage. It’s only barely better than nothing at all. Most people would not pay for the kind of content that shows up on Facebook and YouTube by so-called “content creators”. Facebooks ads are garbage except in certain circumstances. Everyone knows this, including the big brands, but they continue to do it because it makes the board happy when they see their brand on FB…

99% of YouTube may be garbage but there’s still some great content in there

Exactly, the same is said about TV / cable / satellite and those have infinitely less content.

Anyone can upload to YouTube, of course most of it sucks!

Re: The math’s not pretty on digital advertising’s future revenues? (2017)

#116

Post by adventured »

o_nlogn_420 wrote: post #18

It's important to bring up that in the last year AT&T bought Time Warner, Direct TV, and other media companies, as well as As Tech pioneer AppNexus to try and merge Digital, OTT, and linear advertising all together in an effort to make up ground on Google and Facebook

AT&T is about to be the next GE. The acquisitions are the desperate flailing before the spiral down (GE did the same thing, it's all financial engineering with minimum real sustainable strategy). They're spending $8 billion per year just on debt interest now with very little organic growth in their business.

$170 billion in long-term debt with only $8 billion in cash. Negative $128 billion in net tangible assets. And a very rich dividend to maintain. Eerily similar to GE's doomed setup. ~80% of their income is going to the debt and the dividend, which is a foreshadowing of the debt vs investor value battle that is looming. When they're forced to slash that dividend, the stock tanks, the rest of the process unspools quickly.

Once debt of that magnitude grows larger than their market cap - as a signal of inbound distress, it's pretty much a point of no return for mega cap companies. They'll cross that line with the next recession (or sooner) and will never fully recover thereafter, ending in bankruptcy or piecemeal liquidation. I'd bet on their debt interest costs nearly catching up to their net income in the next six or seven years.

Re: The math’s not pretty on digital advertising’s future revenues? (2017)

#117

Post by bobthepanda »

darkpuma wrote: post #99
StevePerkins wrote: post #85

Earlier quoted context omitted.

I believe your second sentence negates the first. But even if it didn't, Patreon is a glorified busker's tip jar. There are only a small number of individuals on earth who can make a full-time living from it. There's no sign that this model could work at scale for a large corporation. Even if it theoretically could, in practice your second sentence would again come into play.

>There's no sign that this model could work at scale for a large corporation. Why should it? Most of the content people are now enjoying day to day isn't coming from large corporations. What we're witnessing now is the infancy of a shift away from the centralization of entertainment started by the industrial revolution (with access to printing presses, radio broadcasting, etc being relatively limited by economies of…

Well, we are discussing if Google and Facebook's digital ad revenues will be able to continue to rise.

If Google is going to show ads on a content creator's channel because they map to the demographic I want to advertise to, what is stopping me from just cutting out Google and paying the content creator directly? That way I can exercise more fine-grained control over what my ads don't show up next to, the content creator gets more money, and everybody is happy except Google. But what is Youtube's value add other than as a commoditized video-hosting platform?

Re: The math’s not pretty on digital advertising’s future revenues? (2017)

#118

Post by ethbro »

darkpuma wrote: post #99
StevePerkins wrote: post #85

Earlier quoted context omitted.

I believe your second sentence negates the first. But even if it didn't, Patreon is a glorified busker's tip jar. There are only a small number of individuals on earth who can make a full-time living from it. There's no sign that this model could work at scale for a large corporation. Even if it theoretically could, in practice your second sentence would again come into play.

>There's no sign that this model could work at scale for a large corporation. Why should it? Most of the content people are now enjoying day to day isn't coming from large corporations. What we're witnessing now is the infancy of a shift away from the centralization of entertainment started by the industrial revolution (with access to printing presses, radio broadcasting, etc being relatively limited by economies of…

> Most of the content people are now enjoying day to day isn't coming from large corporations.

Taking that at face value, it's still the Google vs Apple argument.

"The content people are enjoying" is not nearly as valuable as "the content people are willing to pay for." It's easy to get someone to watch free stuff.

And in terms of total revenue, I'm skeptical that quantity of free content + ads can beat quality paid content + ads over the long run.

Separately, the democratization of media doesn't mean we've improved the net quality. For every Groklaw PJ, there's 1,000 poorly-informed rants.

It's important we now have more outlets for people to express themselves, but professionalism = talent + dedication. And most people don't have both of those.

Re: The math’s not pretty on digital advertising’s future revenues? (2017)

#119

Post by cinquemb »

darkpuma wrote: post #99
StevePerkins wrote: post #85

Earlier quoted context omitted.

I believe your second sentence negates the first. But even if it didn't, Patreon is a glorified busker's tip jar. There are only a small number of individuals on earth who can make a full-time living from it. There's no sign that this model could work at scale for a large corporation. Even if it theoretically could, in practice your second sentence would again come into play.

>There's no sign that this model could work at scale for a large corporation. Why should it? Most of the content people are now enjoying day to day isn't coming from large corporations. What we're witnessing now is the infancy of a shift away from the centralization of entertainment started by the industrial revolution (with access to printing presses, radio broadcasting, etc being relatively limited by economies of…

I am seeing this as well. I think the big platforms like ran by alphabet/facebook/etc have been a boon in showing people what's possible and helping to grow the market, but I cant be bullish on them in the long term as the medium people exchange content and attention on becomes interchangeable and cheaper for individual and small orgs to deploy (as well having more control in aligning their incentives with their own goals rather than mega platforms goals and incentives).

I'm not ready to take a position in the markets against them yet (but I dont know when, also there's alot cheaper weaker companies out there now to take positions against), but it would probably be something like buying the stock, selling long dated ITM calls, buying medium dated slightly to deep otm puts.

Re: The math’s not pretty on digital advertising’s future revenues? (2017)

#120

Post by judge2020 »

harry8 wrote: post #101
hyperbovine wrote: post #79

Earlier quoted context omitted.

I would pay to use Google. Especially if it meant they would remove the tracker from out of my ass.

Pay me and I'll lie to you about what Google will do if that's what will make you happy. No sillier than paying Google given their credibility is zero and there are so consequences to them for lying.

What are you referring to? I can't think of one incident where Google straight lied to the customer about what they do. They also remove tracking and ads from certain partner websites if you do decide to pay for it: https://contributor.google.com/v/beta
Post reply on HN