How Digital Advertising Markets Really Work
prospect.org
How Digital Advertising Markets Really Work
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Re: How Digital Advertising Markets Really Work
#2One of the best articles I've read on the internet so far. Eye opening.
Re: How Digital Advertising Markets Really Work
#3> Consumers can pay for ad-free video subscription services like Spotify Premium or Hulu—why can’t they in search or social networking? Why are these markets stuck?
The article has very pragmatic observatiosn but this is not one of them. This won't work, people won't pay with money for what they can easily pay with their targetting data. Private data is worthless in any other context than advertising, there is no opportunity cost.
I also think it didn't touch on advertisers themselves, who bear a big responsibility for this situation. Agencies like IAB have done less than nothing to fix this situation, they ve made things worse. We need more ethical ad platforms, but we also need more ethical advertisers.
Re: How Digital Advertising Markets Really Work
#4> Consumers can pay for ad-free video subscription services like Spotify Premium or Hulu—why can’t they in search or social networking? Why are these markets stuck? The article has very pragmatic observatiosn but this is not one of them. This won't work, people won't pay with money for what they can easily pay with their targetting data. Private data is worthless in any other context than advertising, there is no opp…
The richest people are the ones who advertisers really want to reach (in the article, the hypothetical beer ad sells at $2 CPM vs the hypothetical private jet ad at a $2000 CPM). At the same time, the richest people are the ones who can afford to pay whatever subscription fee FB or Google would charge. I don't think that there is a lack of demand, it's just that the people who make up that demand create an adverse selection problem, the users who would opt out are the ones who make your platform valuable.
I don't think that antitrust regulation solves this particular adverse selection problem. It's certainly difficult to compete against the established giants, for many reasons, but this theoretical opting out is definitely not some consumer benefit that we can expect.
Re: How Digital Advertising Markets Really Work
#5I’ve worked around the ad ecosystem for a long time as a media buying agency, then an ad network, then a publisher. I think this article is spot on. Few understand the iron grasp Google has on the ecosystem. Soon they are changing the model to allow for fair competition, but thus far Google AdX has had a massive advantage by having the first and last price in every bid request. They get to see what other ad networks are paying for each request. They get to optimize their profits using data from users, publishers, ad exchanges, and advertisers, mostly because of the absolute monopoly Google DFP/Ad Manager has in the ad server market. If I were a regulator that would be my first stop.
Re: How Digital Advertising Markets Really Work
#6Also - pretty much all ad networks are rounding errors compared to Google and FB, which make up 85% of all new ad spend. The last 15% is mostly Amazon, LinkedIn, Twitter, Pinterest.
Re: How Digital Advertising Markets Really Work
#7> Consumers can pay for ad-free video subscription services like Spotify Premium or Hulu—why can’t they in search or social networking? Why are these markets stuck? The article has very pragmatic observatiosn but this is not one of them. This won't work, people won't pay with money for what they can easily pay with their targetting data. Private data is worthless in any other context than advertising, there is no opp…
This is absolutely correct.
Not only is an individual's private data nearly worthless, but they can protect it for free simply by using the Brave browser or other adblocking/tracking solutions.
People often claim that they would pay for web content if it were somehow easier or if micropayments worked better or something. I'm not sure that I believe them.
Re: How Digital Advertising Markets Really Work
#8Also - pretty much all ad networks are rounding errors compared to Google and FB, which make up 85% of all new ad spend. The last 15% is mostly Amazon, LinkedIn, Twitter, Pinterest.
Yahoo/AOL have to still be in top 5 right? I’d think Microsoft (even outside of LinkedIn) and Snapchat should have decent percentages of the leftover too. At least the former.
Re: How Digital Advertising Markets Really Work
#9If you look at the acquisitions of Google in the 00's, it's pretty obvious : in 03 they buy AdSense, 05 Analytics and Android, then in 08 Doubleclick, having their hands every part of the supply chain.
Facebook then came along and followed the playbook with the social buttons.
Brilliant move, regardless of how we feel about that.
Re: How Digital Advertising Markets Really Work
#10> Consumers can pay for ad-free video subscription services like Spotify Premium or Hulu—why can’t they in search or social networking? Why are these markets stuck? The article has very pragmatic observatiosn but this is not one of them. This won't work, people won't pay with money for what they can easily pay with their targetting data. Private data is worthless in any other context than advertising, there is no opp…
The richest people are the ones who advertisers really want to reach (in the article, the hypothetical beer ad sells at $2 CPM vs the hypothetical private jet ad at a $2000 CPM). At the same time, the richest people are the ones who can afford to pay whatever subscription fee FB or Google would charge. I don't think that there is a lack of demand, it's just that the people who make up that demand create an adverse se…
It's not really the same thing you're talking about at all, but I think there's also an interesting conflict of this type between where the largest sites are getting their user growth from now, and the users that are most valuable as advertising targets to them.
The larger sites (Facebook, Twitter, etc.) are pretty close to saturation in North America and a lot of other English-speaking countries. There just aren't many people left here that don't know what Facebook is and might still be convinced they should start using it regularly. Almost all of the growth comes from other parts of the world, but the users from those locations are worth far less in terms of advertising revenue.
If you look at Facebook's Q2 2019 presentation [1], their average revenue per user from US & Canada is now $33.27, Europe $10.70, Asia-Pacific $3.04, and Rest of World $2.13. One US/Canada user is worth more to them than 15 from "Rest of World".
However, 74% of their Monthly Active Users are from Asia-Pacific/Rest-of-World now, and that only corresponds to 28% of their revenue.
I don't really have a particular point I'm trying to make, I just think it's interesting. These companies worry a lot about showing continued user growth (or at least not shrinking), but the growth sources now don't have anywhere near the same value as the old ones.
[1]: https://s21.q4cdn.com/399680738/files/doc_financials/2019/Q2...