The Facebook Fallacy

Are you willing to make a $1 bet predicting the general demise of the Internet advertising business? (I think the article called it a "collapse")?

I'm having a hard time understanding exactly what concrete outcome you are predicting based on your post. Are you predicting a 1:0.9 ratio? 1:0.001? 1:1.1?

My hope is that advertising, as an industry, dies (or morphs) sooner rather than later.

At best, it is visual pollution, and at worst employs subtle forms of mind control to encourage people to do what the advertiser wants. No thank you!

However, it is useful: it helps disemenate information. Didn't know about the all new BMW i3 electric car? Thanks to some ad, now you do. Most of the time you don't care, but when you do care, it can be useful.

The Internet is much better at dissemanting relevant information than advertising, however. Why should I watch an ad for a movie if rottentomatoes.com has all the info I need? Why look at car ads when websites will happily tell me the pros and cons of various cars? My hope is that eventually the best products and services for me will be peer identified an given to me when I need them. Ads will no longer be necessary. The peer review process must be paid for somehow; manufacturers may end up footing the bill, or perhaps ads from unpopular products will; either way I cannot wait for this garbage/propaganda called advertising to vanish from the earth.

Yes, the equivalent of web ads would be ads displayed in a little square on the corner of our TV. We would ignore this square and focus on the main content instead. TV ads are efficient because they interrupt the program and takeover the whole screen. In print media, there are more and more ads that take a whole page if not two, for the same effect. 'Takeover ads' are obnoxious on the web, mostly because of their low quality. Not that I know how to do it right.

That's where we NEED to move toward some easier way of frictionless micro-transactions that are secure, safe, and ubiquitous... how to do it is unclear, but perhaps a mega-site like Facebook could create such a thing.

Here's the core problem as I see it: the old (advertising) math no longer works, and that's getting people into trouble. For traditional advertising in print, radio, or television the math is simple and it's been refined over decades. Generally speaking you take the number of eyeballs or ears, you multiply by a certain factor which takes into account things like demographics and whatnot and then you're done. In large part it doesn't matter whether someone is watching murder she wrote or magnum PI or reading the paper, for each format there's a degree of effectiveness of advertising and a degree of lucrativeness for the target demographic. There are of course complications, but in broad strokes this is the way things worked.

Those assumptions completely fall apart on the web. Because the web is not just passive. It's interactive. And that changes the equation tremendously because it means that the effectiveness of ads can vary by an enormous degree depending on activity. When people are searching, for example, relevant ads (not just random eyeball hijacking brand promotions) are actually useful, and thus highly effective. When people are trying to communicate with their friends there probably isn't a good advertising context at all most of the time and almost all ads will be seen as useless interruptions and thus vastly less effective (they won't be relevant and can't as easily be made relevant). And there is a huge variety of other activities on the web that don't fit into convenient molds.

Now, does that necessarily mean that advertising revenue is a thing of the past? Obviously not, as in some cases there are circumstances where the potential for effective advertising is even greater than with traditional media. But it does mean that the math is far more complex. And it might mean that just because you have a direct line into a huge amount of eyeballs you may not be able to monetize that traffic to the same degree (by orders of magnitude) as an equivalent amount of traffic of people engaged in a different activity.

Additionally, we've seen the writing on the wall in terms of "eyeball hijacking" highly interruptive advertising in the modern age, it's just out of date and out of touch. Monetizing web traffic effectively requires a much smarter approach. In the ideal case advertising is so well targeted and so effective that it is welcomed and often not even seen as an ad.