
Is the online advertising bubble finally starting to pop? - rinze
http://blogs.harvard.edu/doc/2016/05/09/is-the-online-advertising-bubble-finally-starting-to-pop/
======
fchollet
> I started calling online advertising a bubble in 2008.

Then maybe it's time to quit punditry; that was 8 years ago and the online
advertising market has grown 2.5x since.

> I made “The Advertising Bubble” a chapter in The Intention Economy in 2012.

The online advertising market has grown 30% since.

Since no market can grow forever, at some point there will be a dip in the
industry. Maybe in less than five years, maybe in ten years. And when it
finally happens, this kind of pundit will be telling us "they had called it
correctly, before anyone else".

~~~
coldtea
> _Then maybe it 's time to quit punditry; that was 8 years ago and the online
> advertising market has grown 2.5x since._

Isn't the very nature of bubbles to get inflated? 2.5x or more?

The main difference compared to a solid venture is not that they see growth
(that's what they do best!), or for how many years they see growth, but that
it's an inflated (hence "bubble") growth that can (and eventually will)
disappear overnight.

A non-bubble industry will also see growth, and will also see decline. But it
will not see a huge sudden drop from hero to zero, unless something
extraordinary happens (e.g. a war, alien invasion, etc).

~~~
nl
The bubble in computer sales never burst - it just leveled off some and some
sales moved to phones and tablets, which grew at an even faster rate[1]

The are plenty of similar examples.

[1]
[http://static1.squarespace.com/static/50363cf324ac8e905e7df8...](http://static1.squarespace.com/static/50363cf324ac8e905e7df861/t/563e0900e4b0a6d8f0c16c05/1446906116004/?format=1500w)

~~~
coldtea
Sure, but computer sales were not a bubble to begin with.

~~~
nl
What's the difference - isn't it that same thing? New technology opens up a
new market, in which we see fast growth which then levels off?

Advertising sales have been growing for ~100 years, through newspapers, radio,
TV and now online. AS new technology grows some of the spending migrates, and
the overall market expands.

What is the argument that this is a bubble?

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subhobroto
TLDR: I feel we, the people in the online advertising industry, have failed at
our duties. We have failed to show relevant ads. People who would benefit from
relevant ads don't see it, and those who have no interest get ads shoved to
their faces.

Online advertising currently feels more tuned to marketing and branding than
actual advertising. (Ex: Seeing the same ad 20 times is crappy advertising but
good marketing/branding)

Online advertising is a powerful tool: no other medium of advertising offers
more efficient tracking and analysis metrics. Unfortunately, it's also the
most hard to do properly.

The biggest issue is most clients do not understand online advertising: they
assume it's just like TV, in that, you have a creative that you show online to
people and then hope for the best.

Online advertising is not a one way street: you can interact with the user,
see how they respond and then tailor the advertising to their needs.

No other medium offers this ability.

Consultants like patio11 make a living off this knowledge (and give away this
knowledge for free on their sites).

This inefficiency is currently arbitraged by two parties:

1\. People who understand that clients do not understand online advertising:
they offer inexpensive CPMs to agencies so that they can meet their "numbers"
(like one does in the TV realm). Then they "somehow" meet these numbers, often
in ways that does not help the client at all.

2\. Online deal sites who know a certain store/brand is offering a great deal
and create pages with deal information so that people click on the links to
the product leading to the site getting kickbacks from the store/brand. Some
of these sites keep the whole kickback to themselves and some split it with
the users, but this is money that the store/brand paid out unnecessarily
because they otherwise had failed to convert a customer directly.

------
mevile
> We are living through the latest stages of the online advertising bubble, as
> available high-quality ad space is shrinking, leading to a decline ad space
> quality, and a decline of ad efficiency.

I don't understand how it's a bubble since the decline has been steady over
the last few years. A bubble is spectacular, not gradual. A bubble expands and
then suddenly and unexpectedly pops. A bubble ends in a steep and surprising
decline. All of the trends here with fraud and growing use of ad-blocking
software have been on the horizon for a very long time.

It doesn't sound like a bubble, but talking about "bubbles" gets lots of
clicks.

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paulpauper
I started calling online advertising a bubble in 2008.

His credibility got killed in my eyes after reading that. Predicting the same
thing over and over to no avail is called being a broken clock.

What he's really predicting is that the derivative will go negative. It's
kinda unbecoming that this is the 'logic' that passes for a blog published by
school that is supposed to be really elite and prestigious.

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Alex3917
A couple days ago Shane Smith said in an interview, "I don't think it's any
secret that you're going to see a bloodbath in the next 12 months in digital
or mobile or terrestrial because what's happening it's all brand money. This
is why people are moving to subcription-based things. What brands are moving
to are finding an audience."

I have no idea what he's even trying to say, but it sounds ominous.

[http://digiday.com/publishers/shane-smith-vice-media-
intervi...](http://digiday.com/publishers/shane-smith-vice-media-interview/)

------
awesomerobot
I just want online advertising to at least be better than trying to sell me a
toaster after I literally just purchased a toaster. I only need one toaster.

~~~
mevile
I bought a new expensive GPU on newegg and now every other week newegg sends
me emails about new deals for graphics cards. In what market does that
behavior make sense? Most pc gamers probably buy a graphics card once every
two years at most unless they're filthy rich.

~~~
Bombthecat
It affects your next buy.you will think about that company and those cards
next time.

~~~
jsymolon
GPUs are the _worst_ examples. They change radically from year to year, so
spamming right after you buy is a waste of money.

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nl
If someone keeps making the same prediction for 8 years, and it doesn't
happen, and _it still hasn 't happened_ and the report the new post is based
on is pretty much nonsense (just basic maths: trying to compare growth rates
of ad spending vs increase in sales without noting the obvious thing that the
increase in ad sales is sustainable so long as it brings in more money than it
takes) then maybe it's time to update your priors.

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RubyRuby
Great read and insightful comments as well on the distinction between online
display, search, and social media advertising. Each produce similar results.

In my own digital marketing experience, we're still seeing a positive ROI on
search only ads. We stopped running display ads awhile due to the
impracticality of the approach with the rise of ad blocking software. We use
ad blocking software. We developed built-in banner blindness for display ads
when not using the software. Display ads annoy us. Why wouldn't they annoy our
target audience?

Instead of wasting money on failed advertising methods, we reallocated our
time on creating value through our blog and promoting that valuable content
(not sponsored content) through email, search advertising, social media, and
other avenues.

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Animats
Did HN cover this article already?

~~~
nl
Yes.
[https://news.ycombinator.com/item?id=11626967](https://news.ycombinator.com/item?id=11626967)

The general consensus was that the author of the report didn't really
understand what they were talking about.

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tlogan
I think the cause of the ad bubble is free VC money pouring into startups
whose customer acquisition channel is spending 100s of thousands dollars on
advertisement.

And when VC money dries out, startups will start tracking ROI and stop wasting
money on branding. And that will cause domino effect.

Of course, there might be no bubble and this is a new normal.

~~~
hunvreus
I'm pretty sure the VC money is marginally impacting ad spend; there are real,
established business in much greater scale and numbers that use online ads.

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cmac2992
There is a ton of information that is objectively wrong.

"A customer who has already made a purchase may be bombarded with redundant
repeat ads wherever he roams: what we might call the phenomenon of “repetitive
irrelevance."

Its pretty easy to not do this on a lot of ad platforms. Facebook calls it
"exclusion audiences".

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cm2012
Generally, vc backed start-ups nowadays only spend money on direct marketing
online, and get a return on every ad dollar spent. The giant established
brands buy clicks randomly, but they can afford it. Its pretty sustainable.

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Bombthecat
I'm pretty sure ad spending will keep increasing.

It's either that or you stop spending money and lose your market / niche to
the big players.

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fiatjaf
This is not a bubble.

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misiti3780
We expect Alphabet’s share price to go down by 75%…

Alphabet consists of a group of companies that are not necessarily affected by
ad dollars - no ?

edit - i guess it includes google also:

[https://en.wikipedia.org/wiki/Alphabet_Inc.#Structure](https://en.wikipedia.org/wiki/Alphabet_Inc.#Structure)

~~~
cylinder
I'm not aware of a significant source of revenue for them other than ads

