Advertising was just one business model that people initially considered. Google originally thought 15 percent of its revenue would come from advertising. Most of their money would have come from licensing their search engine to corporate clients. this is funy; The search algorithm was the origin of automated ads. Now everything depends on ads.
In the old days, ads were sold in the same way as a newspaper: you got a call from someone who wanted to buy a banner ad on your website. Google invented AdWords in the early 2000s to give people the tools to use data about what people search for. This model generated cash from Willy Wonka’s Waterfall for Google, and subsequently created the financial engine that is at the core of what drives the modern internet experience.
Starting from this self-evident place: If I had all this data about a person, shouldn’t I be able to deliver messages to them that persuade them to act the way I want them to? There are two types of failures in this thinking: the first is a failure of correlation versus causation. You often end up targeting people who would have bought the product anyway, so the question of whether advertising is prompting you to change your behavior is unclear.
Second, everyone assumes that the data you get on people is very accurate. But this also turned out to be flawed.
Advertising works, but its impact is so limited and small that in order to see if it really makes a difference or not, you have to run these very expensive experiments. A few years ago, Procter & Gamble, one of the world’s largest advertisers, decided to cut $200 million from its digital advertising spending budget. The result was absolutely nothing changed – they sold the same amount – which is asking what the $200 million is being spent on.
Advertisers tell regulators, “Don’t take my data away because if you do, the ads will become less effective and destroy our market.” But then we don’t know what’s going on. Suddenly this begs the question, what have you been collecting all this data for all this time? The problem is that automated advertising makes money quickly. It is hard to imagine an alternative monetization model with the same pattern. It’s like the scene in Indiana Jones when you have to replace an idol with another idol of the same shape and weight.
The bubble should burst at some point. Look at the history of every other bubble in the market and you’ll see that it has exactly the same phenomenon: the underlying value of the attention that advertising garners is declining. The announcement allowed us to look at some tough questions.
Are we okay with an Internet that is growing slower and more expensive to access? In a world where everyone needs to subscribe to a search engine, should it be public or should the government subsidize access to it? How about a social network? Lots of alternatives are better from a social point of view, but they may not grow the way Silicon Valley used to.
An internet that doesn’t depend on ads means we’ll see more innovative business models. Some will benefit content creators, others will benefit businesses. Perhaps some of them will benefit the public. This will change the nature of the internet, and it will take some time to get used to.
Whether you’re a tech believer or a tech critic, you have to believe in the efficacy of technology, and many of our criticisms of technology give this myth a power you don’t actually have.
Interviewed by Alex Krutosky
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