
Quantifying the Adpocalypse - nkurz
https://mule.substack.com/p/quantifying-the-adpocalypse
======
avalys
The article suggests that the stock market hasn’t priced this in yet. I don’t
think that’s true.

Facebook and Google are both down more than 20% from their recent highs (along
with the rest of the market, of course).

No one thinks that a recession is any kind of existential threat for either of
them - they both have plenty of cash and fat profit margins.

And if anything, both companies are positioned to emerge from the pandemic in
a stronger position than they started - with fewer competitors, more users,
less expensive competition for talent (* whimpers *), and acceleration of
long-term societal trends that benefit them.

Investors are not going to take their eye off the medium-term future of these
companies because of an expected few poor quarters for very well-understood
and temporary reasons.

~~~
huac
your margins go away if you don't have revenue (no ads) and increased variable
costs (more users hitting your servers) with constant fixed costs (rent,
salary, healthcare).

~~~
PeterisP
If you have sufficient reserves to last it out, then a year or two with no
margins or negative margins should not mean a huge decrease in company
valuation. If you lose 20% of your next 10 year profit because you lose 2 of
10 years, then that that justifies a 20% drop in share price but not a 50%
collapse.

~~~
huac
if you believe that, then I'll trade you 20% of my expected 10 year income for
20% of my current discounted net worth (which is theoretically what a
company's market cap should be, a discounted claim on future distributions).

revenue today (or in the shorter term) is always more valuable than revenue 10
years out. put it a different way, what if there's another "act of god" in a
few years? the probability of an extreme event occurring within a discrete
timeframe increases as your timeframe gets larger, thus your certainty in
revenue projections should decrease as you project further out.

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Urgo
Adding one more piece of data to the story, I've run a large website (Social
Blade) since 2008 where the primary source of revenue has always been
advertising. It was only last year that we started focusing more on paid
subscriptions to cover the natural drop in ad revenue that was happening
anyway.

I don't have the data yet from one of my two ad providers, but the one that
does provide me real time data I can see a 35% drop in ad revenue this month
compared to Feb while having about a 31% bump in traffic.

~~~
pnutjam
According to Fark.com, there is unprecedented drops in Ad revenue. Companies
have cancelled mid-quarter.

[https://www.fark.com/blog/DisseminationMonkey](https://www.fark.com/blog/DisseminationMonkey)

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kcorbitt
Tangentially, one positive side-effect of the pandemic lockdown I've seen is a
dramatic drop in the quantity of spam in my physical mailbox. I generally get
5-20 pieces of junk mail a week, but in the 3.5 weeks that the Bay Area has
been on lockdown I've gotten maybe 7-8 pieces total.

~~~
jdxcode
Though it seems organizations have completely disregarded CAN-SPAM.

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Supermancho
This looks like data for the public network markets. In-house and larger
corporations don't quantify on actual ad revenue. Rather, they find any sale
by an individual that saw and ad and say that a portion of the sale is
attributed to advertising. This is the "attribution" model, which is pure hand
waving.

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three_seagrass
It would be good to compare Amazon advertising spend as well.

This article is also missing the fact that we're in an election year in the
U.S. The ad spend from that alone could counter a lot of the losses from covid
19.

~~~
AznHisoka
Political ads are very small percentage of revenue for FB
[https://www.google.com/amp/s/techcrunch.com/2019/10/30/zucke...](https://www.google.com/amp/s/techcrunch.com/2019/10/30/zuckerberg-
political-ads/amp/)

~~~
three_seagrass
According to Zuckerberg, in defense against accusations that he was being
greedy by allowing them on FB.

I'd be more interested in an independent or consumer-based third party
analysis validating his numbers, since he doesn't mention PAC spending.

~~~
redis_mlc
Trump spent very little in his first election campaign, mainly relying on
saying outrageous things and tweeting (one estimate was that he added $2
billion to the value of the Twitter brand.)

How little? Enough that all the Silicon Valley advertising companies missed
their quarter, either unaware or wilfully ignorant that he wasn't spending
money.

~~~
kevin_thibedeau
He wasn't trying to win.

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AznHisoka
I am unsure you can even rely on analyst estimates to determine what investors
are expecting from FB/Google when they report earnings soon. Will anyone be
surprised if FB comes out and say they will experience a 20% decline in
revenue in Q2?

~~~
radkapital
Yes, sell side analysts expectations are basically expectations of the big
participants in the market unless there is disclosure / news from the company
or price action on the stock that can influence the outlook.

~~~
AznHisoka
The estimates are just absurdly wrong though. Ask any investor and most will
just laugh at those estimates. 99% of estimates for all companies haven’t
dramatically been decreased yet. So I would take these estimates with a grain
of salt.

~~~
huac
yeah that's the point of the article.

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buboard
the author is suggesting that ad spending online correlates with increased
sales. is that the case? seems a big part of ad spending is simply part of
burning VC money regardless of outcome.

~~~
WalterBright
A successful marketing exec once said "We know that half our marketing budget
is wasted. We just don't know which half."

~~~
sbierwagen
[https://en.wikipedia.org/wiki/John_Wanamaker#Legacy](https://en.wikipedia.org/wiki/John_Wanamaker#Legacy)

