Thursday, May 28, 2015

Advertising: a sustainable utopia?

Advertising generates $50 billion annually in the US alone, but how much of that figure reflects real value? Approximately ⅓ of click traffic is fraudulent, leading to $10 billion in wasted spending annually. Counting revenue due to fraud towards the value of advertising is like counting money spent on diabetes treatments as part of the GDP -- if those figures went to zero, it would reflect a healthier ecosystem, or healthier people in the diabetes case. For people making money on advertising, it is difficult to accept that a reduction in annual revenue can mean that things are better for everyone else.

Even when ads are displayed to real people, they often create little to no value for the ad creator. According to Google, half of ads are never viewable, not even for a second. In addition, adblocking usage grew by 70% last year, and 41% of people between 18-29 use an adblocker. The advertising industry responds to these trends by making ads increasingly distracting (requiring large amounts of resources and unsafe plugins to run), collecting increasingly large amounts of data, and creating more opportunities for abuse by government agencies and other malicious actors. As Mitchell Baker put it, do we want to live in a house or a fish bowl?

There has to be a better way. Why can’t a person buy and blank out all of the ad space on sites they visit at a deep discount, since targeting machinery would no longer be relevant? Why aren’t subscriptions available as bundle deals, like in streaming video? Solutions like these are hypothetical and will remain so as long we maintain the fiction that the current advertising revenue model is a sustainable utopia.


  1. I am but a bear of very little brain, but I don't understand how ad fraud results in $10 billion of wasted spending. Isn't that factored into the price? If all ad fraud magically disappeared, wouldn't the cost per click go up proportionally?

    I can see how it diverts revenue from people who are legitimately annoying people with ads over to cheaters who are doing nothing to increase purchases of whatever junk advertisers are selling, which certainly leads to an unsustainable place if it gets out of hand. But I don't see how it substantially affects the total revenue figure. Then again, I'm not so good with money.

    (And despite the heavily biased descriptions above, I do appreciate all of the content I personally have access to as a result of this bizarro marketplace.)

  2. No, I don't think the CPC automatically goes up proportionally if ad fraud magically disappears. If you look at the White Ops study ( some campaigns have over 90% bot traffic. Those campaigns should be costing 0, because they're not worth anything to the advertiser.

    This also ignores all of the externalized costs, like malvertisers consciously targeting residential IPs who have already developed behavioral profiles that are more useful for deploying clickbots, from the same study.


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