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Is the Advertising Bubble ready to Burst?

     
12:19 am on Jun 9, 2016 (gmt 0)

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What do you think of this article? As a publisher? As an advertiser?

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. Awareness for fraud is growing, and soon, clients will cut their online ad spending, and demand higher accountability. This will destroy the high-margin market of automated reselling worthless ad space, and will force advertisers to focus only on prime publishers, with expensive ad space.

This is a re-run of the online advertising crash of the early 2000s, when the proliferation of banners and pop-ups destroyed any value these ads had (and led people to install pop-up killers, just like with ad blockers today). It took one Google to come up with contextual advertising to bring the market back to life.
[kalkis-research.com...]
3:50 am on June 9, 2016 (gmt 0)

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I believe the general public understands that advertising is a necessity (or evil necessity), but it is like anything else: it needs to be done in moderation. Trust issues aside, when you are deluged with ads while trying to read a simple article or browse some websites, or have to wait for a page to load because of ads, it gets annoying and you become oblivious. And, IMHO, when you see an ad for the same product over and over again, it can actually become a turn off to that product. Why do you think people with DVRs speed through commercials (rhetorical).
4:07 am on June 9, 2016 (gmt 0)

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<begin rant>
What I'm not seeing is any sense of history.

If you currently make your living via internet advertising, one of two things must be true: #1 you are young enough that you can readily contemplate a career change, or #2 you are old enough to remember when internet advertising did not exist.

This is not a case of some line of work, with associated lifestyle, being handed on through the generations: my grandfather did it, and I expect my grandchildren will do the same thing. Fact is, nobody knows. It may remain an integral part of the economy ... or it may be more analogous to someone in 1916 considering themselves set for life because they'd carved out a niche in the brand-new profession of playing the piano in movie theatres. It didn't exist when they were growing up, but now that it's here, there's no reason to think it won't be around forever.
</rant>
4:07 am on June 9, 2016 (gmt 0)

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I do not think it will burst. A period of decline is likely.

My biggest fear is that even good quality small sites will lose out, as it becomes simpler for advertisers to only deal with known quantities.
4:57 am on June 9, 2016 (gmt 0)

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This is the ordinary shake out. As with the early days of PRINT (think newspapers) There's only so much space on the vetted/known properties.

Ultimately it will be brand name/largest in a niche that gets the goodies and all the rest will have to find something else.

We might like to think we are "the best" and "here advertisers want to be!" but that just ain't the case for 99.99992% of all the websites out there. (Made up number, but probably not that far off given the gazillions of ad hanging low quality websites out there seeking "gold in them thar hills".

That's why, a few years back, I made a change and began to court advertisers for sites with real quality which suited both them and me, etc. More work, longer hours, custom... but it pays better in the long run.

There used to be a real meaning behind the words "sponsored by..." particularly in radio and tv.

Will the automated ad market disappear? Probably not. Fractions of pennies do add up over scale and for the web slingers without a clue they will have product to put in their third party inserts.

But I have no doubt that "business as usual" is about to change. And most likely it will be from the ADVERTISERS not the publishers. After all, it's their money involved.
6:16 pm on June 9, 2016 (gmt 0)

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What do you think of this article? As a publisher?

Advertising Bubble? The advertising field is evolving not popping...
6:49 pm on June 9, 2016 (gmt 0)

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I think Edge is onto something there.

I've long been of the belief that the advertising model online publishers labor under has been a mistake. The Internet advertising model was founded on the belief that it could be sustained in a similar way to the print advertising model. That was a huge miscalculation.

There is no advertising bubble to pop. Only bubbles of expectations. The industry is slowly waking up to the reality but it's still grasping for direction. But the industry won't find a direction until it has a map and that map is intellectually understanding the advertising ecosystem we are now in. Once that's understood (I have my ideas), then a better path to monetization will be realized. That's all I'm saying for now. ;)
7:15 pm on June 9, 2016 (gmt 0)

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Tangor pretty much sums up my feelings. I think it will be, at least initially, like Panda - it will mostly kill off a lot of sites that few people will miss, as well as taking out a couple that we do.

Where it goes long term, I don't know, but a lot of publishers will need to find different models. Some will be ad-driven just like in print or television, but subscription, micropayment, pledge and other models will become a more frequent part of the mix.
8:01 pm on June 9, 2016 (gmt 0)

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So I am confused by the article, but I am certain that the authors do not know what they are talking about.

A bubble is described as:
an asset at a price or price range that strongly deviates from the corresponding asset's intrinsic value

The claim is that there is an advertising bubble, so the cost of advertisements are are much higher than the value they provide. OK I got that.
They go on to claim that once the bubble bursts, the cost of advertising will rise. Now I am confused. Normally when a bubble bursts prices decline.

Yes Google makes most of its money from advertising revenue. True. But I am almost certain that most of this revenue does not come from display ads showing on third party publishers websites. Most of the revenue comes from ads appearing in search results and other Google controlled properties such as Gmail. Claiming that there is wide spread click fraud on Google's own properties, is a stretch at best.

The money has been going to "subprime" publishers, well I have not seen it, over the period covered the linked articled, my earnings have declined.

Another claim made is that "Advertisers are Idiots", they have no way of gaging the effectiveness of their ad campaigns. I do not advertise, but if I did the only real metric I would worry about is that when I spend on advertising the my sales grow as a result if I stop advertising, sales decline. If this simple feedback loop does not occur, then advertising i likely not effective. I would imagine that most advertisers use a similar metric with varying degrees of sophistication.

Needless to say I think that the report is thin, and baseless.
8:52 pm on June 9, 2016 (gmt 0)

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Advertisers aren't idiots. Until the slop/collateral/fudge/error/whatever you want to call it exceeded 10% of spend that's what woke them up. There's a secondary "revolution" in progress among users and ISPs, both of which carriage the bandwidth on their expense for such advertising, and who are also past the 10% cost overhead "allowance" or "ignorance".

Sounds like broad brush strokes ... but it has taken those same brush strokes to become obvious over the last few years. Court cases are in progress, users are installing ad blockers, advertisers are reducing spend ... something is going on and unless/until the ad servicing companies step up and do their middleman job RIGHT it will only get worse.

Not doom and gloom, kiddies, just facts which need be addressed, SOONER rather than LATER.
3:42 am on June 10, 2016 (gmt 0)

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Yes, as many of us have long been suggesting, some very sloppy practices by advertisers and ad networks are hurting the entire ecosystem, obvious issues that need fixing as the web becomes less user friendly...

Rich media ads are making many news websites unusable, on desktop as well as on mobile. Ad networks are distributing malware even to big-name sites. Platforms like Google's AMP, unfortunately, may be what's needed to deal with this technically, and also to deal with the ad blockers, which themselves may be playing both sides of the fence. AMP, if not an ad blocker, could be described as an ad filter.

Ad targeting also has issues. Retargeting, eg, has gotten incredibly sloppy. Because of the multiple ecommerce sites pushing these ads for a given purchase, coupled with layers of ad bundling, shoppers are plagued by floods of ads for something they've either already bought or decided they didn't want. At the least, these ads represent wasted advertising dollars. The "feedback" buttons on these ads are useless attempts to justify the flawed models that are delivering them. A simple "I've already bought this" button, eg, might help.

It amazes me too, that with all the affinity targeting that's possible online, how completely inappropriate the ads are on most web videos.

As I see an increasing number of formerly ad-supported sites, now out of necessity blocked by paywalls, I fear that there's potential for a threshold which can threaten the fundamental viability of a network.

All this brings to mind an early interview with Google co-founders Sergey Brin and Larry Page, and a subscription model Page had in mind, which might not be workable now, but it was an appealing vision at the time...

Google founders Brin and Page on public radio
June 1, 2001
https://www.webmasterworld.com/forum86/26.htm [webmasterworld.com]

[Page] hoped for a subscription model of something like $20 a month for all content, with payments going to content creators using a model similar to what's used with music on radio now. He also gave a fanciful example of how he envisioned that search technology might eventually be interfaced with the real world on portable computers, making neon signs obsolete....
10:58 am on June 10, 2016 (gmt 0)

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Awareness for fraud is growing, and soon, clients will cut their online ad spending, and demand higher accountability.

It took one Google to come up with contextual advertising to bring the market back to life.

I doubt the zombie traffic Google is billing advertisers for is going to bring the market back to life. If anything, it will accelerate advertisers leaving their services behind as I did.
11:07 am on June 10, 2016 (gmt 0)

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Not all bubbles burst with a bang, some just rapidly deflate. Anyone who has hung around this forum for any length of time has watched the bubble grow and are now watching it gradually deflate, at least those paying attention.
12:53 pm on June 10, 2016 (gmt 0)

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The ad is a bubble?)) HAHA.
Not a bubble, then, but Munster describes the cycle as more like a "pendulum."

"It shifts from positive, to negative, then goes back to positive. Right now we are in the part where there is skepticism from investors, but that's going to pass. So my recommendation for our outlook is that the pendulum will be swinging again for ad tech because investors will start looking at these businesses and realize they have something," he said, adding that more players joining the space — the cloud companies, for example — is confirmation that the sector still has a chance to grow.

[businessinsider.com...]

[edited by: engine at 10:13 am (utc) on Jun 11, 2016]
[edit reason] added attribution to quote [/edit]

1:21 pm on June 10, 2016 (gmt 0)

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Claiming that there is wide spread click fraud on Google's own properties, is a stretch at best.

I do not advertise, but if I did the only real metric I would worry about is that when I spend on advertising the my sales grow as a result if I stop advertising, sales decline.

@NickMNS

You made both these statements in the same post. Having admitted that you do not advertise, how can you state that click fraud on Google properties is a stretch? I do advertise on Google's properties and have greatly reduced my spend because of what appears to be widespread click fraud that has cost me many thousands of dollars in wasted marketing dollars, not to mention lost sales.

I'm sorry to point your contradictory statements out, but it has become even more common on this forum for people to post opinions about topics that they are not actively engaged in. Such unqualified opinions create noise and disinformation for those who come here seeking answers.
1:35 pm on June 10, 2016 (gmt 0)

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"Advertisers aren't idiots." -tangor

I respectfully disagree. People are idiots.

Anyway...

The point of that unsigned analysis by Kalkis was very simple: Google's stock is overvalued. (I don't know if that is right or not.) I don't think what they are saying applies to most website publishers.

What I have learned is there are only so many widgets to sell and only so many people to buy them. I know that sounds obvious, but it was a hard-won lesson for me. (Food is great to sell; people always need it. Every. Single. Day. Alas–or thankfully, if you're someone who eats food–there are a lot of people doing this already and it's tough to do online.)

The cost of advertising is the cost of acquiring attention. Can you bring a lot of attention by people who might be interested in a widget at a very low cost to the firm making the widget? Yes? Awesome. No? Are you willing to say you do, anyway? (This is a proven biz model.)

Tougher than selling attention to widgets is selling widgets. This is becoming especially true if you don't make the widgets, but even if you are a maker of widgets, there are people looking at making what you making better or cheaper (or both). At the same time, buyers are widgets are asking themselves, "Do I really need a widget?" Example: autos.
2:08 pm on June 10, 2016 (gmt 0)

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@mrengine
Let me begin by saying that my statement about not advertising was in reference to my knowledge of what metrics are used to gauge the success of an advertising campaign. Knowledge gain by advertising is not relevant to whether Google engages in fraudulent practices or not.

Having admitted that you do not advertise, how can you state that click fraud on Google properties is a stretch?

Having admitted that you DO advertise, how can you state that click fraud is rampant on Google properties?

What additional knowledge specific to the topic of Google engaging in click fraud do you gain from advertising with Google. None, the only thing you know is that you advertised with Google, and the return on your investment was less than expected. The reason for this is not known to you, you have an opinion, but opinions are not knowledge.

it has become even more common on this forum for people to post opinions about topics that they are not actively engaged in.


What makes you think that only people that are directly engaged in a specific activity have a greater right to this discuss it than others. I do not need to jump off cliff to tell others that jumping off a cliff will likely result in death. Moreover, the fact that someone, may have survived a cliff jump, does not make death as a result of jumping less likely. Even if the survivor claims the contrary.

Finally, I am actively engaged in advertising, not as an advertiser but as a publisher, so I am actively engaged in the topic, not that that should matter.
2:17 pm on June 10, 2016 (gmt 0)

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The author lost me with the idiotic statement, "Worse, they have led their clients into pay-per-display advertising instead of pay-per-click, much less efficient and difficult to track."

PPC is direct-response advertising, and direct-response advertising has always been a small part of the overall advertising market. Most advertising is about building awareness or communicating a message. Why should that be any less true online than in the world of print and broadcast advertising?
5:55 pm on June 10, 2016 (gmt 0)

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much less efficient and difficult to track


Efficiency i don't know but surely more difficult to track. If someone clicks on your ad, they've clicked on your ad and you know it and can track if they make a purchase. If someone visits a page with your ad on you have no idea if they noticed it, no idea if they are an appropriate viewer for your product, you know nothing at all about the effect of that ad appearing but you still pay.
7:35 pm on June 10, 2016 (gmt 0)

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If someone clicks on your ad, they've clicked on your ad and you know it and can track if they make a purchase.

But for many (most?) things, that isn't how advertising works.

Take an ad for a new Cadillac, or a TV commercial for Budweiser, or an ad in a lifestyle magazine for Rolex watches. The goal of the ad is to make you think:

"Cadillac isn't just for old people--that new CTS-V sounds pretty hot."

"When my buds and I party, Bud is the beer to pour."

"A Rolex will show that I'm a success."

The advertiser doesn't expect you to rush out and buy a Cadillac, a case of Budweiser, or a Rolex--or even to make an inquiry. Tracking responses is secondary to measuring recall (which is done with research, not by counting ad clocks).
8:20 pm on June 10, 2016 (gmt 0)

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I think the author is fixated on third party ad networks and confuses them with online advertising. Yes, they are a significant proportion; no they are not, by large measure, synonymous with online advertising.

Online ad spend has been and continues to increase YoY both regionally and globally.

Yes, third party automated ad networks are prone to fraud and malware; yes there is a growing kickback against both.

Whether the networks, including Google, can salvage their current methodology is worthy of interest and a bag or three of popcorn.

Quality ad space is not shrinking, however it is increasingly selling ad space directly. At multiples of the networks' rates.

Folks need to raise their eyes from Google et al and see that online advertising is growing, vibrant, and extraordinarily profitable to all concerned.

Of course once one leaves automagical advertising for more custom fits quality becomes a much higher bar and the effort required is also greater but so too are the rewards. Frankly, the current fuss has been great for revenue - I've raised rates 6-times in past two years and the waiting list is not lessening.

There is an entire online ad world, an entire web ad economy that is not Google and clones.
Really.
9:58 pm on June 10, 2016 (gmt 0)

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What additional knowledge specific to the topic of Google engaging in click fraud do you gain from advertising with Google. None, the only thing you know is that you advertised with Google, and the return on your investment was less than expected.

Even if I were to only rely on ROI as a gauge of fraud, it would still provide more information then someone who admits he does not advertise at all because you have no paid traffic to analyze. No paid traffic from Google, in my opinion, leaves you on the sidelines and your opinions on click fraud entirely without merit. Only those who advertise on Google, or manage paid accounts, can view the traffic patterns and quality of paid traffic to form an opinion based on actual hard metrics and not hearsay.
11:07 pm on June 10, 2016 (gmt 0)

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If g is your only method of advertising, then much of that is true.

If g is NOT your only method of advertising then all statements are rather false.

I sell ad space directly. I know what is viewed, what is clicked, and for what time period(s). The advertiser(s) and I have reasonable expectations on ROI, theirs and mine. As noted by others in this thread there's more to web advertising than g. But it is hard work, takes dedication and "salesmanship" as well as a first class site that has a good fit for both you and the advertiser. Not for the lazy or the faint of heart. THIS kind of advertising will be here forever ... the automated plug and play without vetting any party, is entering a troubled time when ad quality is low and advertising space is too large.
12:21 am on June 11, 2016 (gmt 0)

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As someone else said a traditional bubble implies that prices are going to the peak of historical amounts.

As an advertiser I do not see that. Tools for managing advertising, ROI, and reporting are getting better. This should lead to a more stable market, not a less stable one.

As a publisher I've not see any crazy inflation of rates I'm being paid. Again, tools are getting better, targeted advertising (see above), header bidding. All these help to better match advertisers with visitors.

As a content consumer I see a couple of things that the market needs to change. (1) stop approving sites that have more ad space then content; (2) stop approving these "list" sites that have one point, two sentences, and 10 ads per page; (3) stop the sensationalized click bait ads; (4) stop misleading ads.

I expect that low quality sites will take an ad revenue hit in the near future (maybe that's the "bubble") but high quality sites that are designed for a good visitor experience will continue to function as is, with CPM rates and fill rates adjusting with the wider economy.
5:54 am on June 11, 2016 (gmt 0)

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2011, while Google's revenues continued to grow, the average ad cost has declined. Larry Page described this while discussing the company’s Q4 2011 results as "a decline in ad quality" (Chart 1). More and more ads are being displayed, each one earning the company less and less.
[kalkis-research.com...]
btw Online Advertising is just booming in 3rd world countries and we're seeing CPC growth through Google Adword alternatives.

Advertising Bubble? The advertising field is evolving not popping...
I agree with Edge.

there will always be competition, therefore there will always be advertising ...

1) more competition means higher price in advertising
2) more publishers means lower price in advertising

Which will grow faster (in different subjects & advertising channels) may be the question and unknown...
2:25 pm on June 11, 2016 (gmt 0)

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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. Awareness for fraud is growing, and soon, clients will cut their online ad spending, and demand higher accountability. This will destroy the high-margin market of automated reselling worthless ad space, and will force advertisers to focus only on prime publishers, with expensive ad space.


as an online advertiser, and one that helps other people...its a war zone.
Everything is shrinking because sanely priced keywords are in SHORT supply. In local markets, its pretty bad if you have a service that costs into the thousands
you CANNOT break into the market online at all... you are shut OUT, because the big guys are willing to throw their entire checkbook at each click on each keyword
im talking 50.00 to 500.00 a click

Its like their crack time of online marking doesn't do work but just lists the hot local keywords with 10000000000000000000000000000000.00 per click with no ad budget oversight.
heck maybe the receptionist is doing it .

but it seems big money is locking up every local industry and instead of the internet helping the little guy...its the wall of china
9:05 pm on June 12, 2016 (gmt 0)

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Maybe Google will again save the day with their [contributor.google.com...] way to opt out of ads and micro-pay instead.
 

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