> 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".
Exactly. It's hard to call something a bubble when it actually displays all the characteristics of a maturing market.
Additionally, the non-online advertising market is huge. TV advertising in the US alone is almost 25% bigger than the online market[1]. People don't talk about that 40-year old "bubble" bursting, even though it seems inevitable that money will move to online.
Do people really expect there to be less money spent in advertising?
>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).
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.
You mean, computer sales were not bubble, so they didn't burst, but online
marketing, which exhibits similar characteristics, will burst, because it's
bubble? And this proves the online marketing is a bubble? I don't get this
reasoning.
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.
> 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.
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.
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.
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.
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.
Careful what you ask for... being able to exclude you based on a conversion means better tracking.
Tracking is not something that can be easily improved, either you use cookies which are acceptable, widespread, but sadly very limited in functionality or you get into the world of supercookies and fingerprinting which is not yet properly regulated and where a few players are disregarding industry self-regulation to get as much data as possible.
OK. You just bought this paperback, we won't show you ads for it anymore. What are similar things... this hardback version of the same book, are you interested in it?
And Booking.com should just learn to delete all that they know of my searches when I actually book something.
Unless it's coming directly from who you bought the toaster from they can't do that without access to your purchase history which they'd be thrilled to have but I doubt most people would want to give.
Exactly this. How is Amazon smart enough to know I have viewed item X yet not that I have just finally bought it? They should have some "oh, he bought it, let's switch" flag.
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.
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.
In the past, when I have tried to submit an article that had already been covered, I was redirected to the old discussion, but now I was able to post it, so I don't know. Perhaps it was covered and URLs differ slightly.
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.
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.
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".
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.
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".