Google, Tim Wong, Nico Newman discussed on Freakonomics



Ecosystem functions whether it's as effective as google says it is or as ineffective has researchers like steve dallas told us earlier about his research at ebay. Ebay believed that for every dollar. They're spending they're getting fifty cents of net profits and what we showed that on average. They're losing more than sixty cents on every dollar so okay. let's try to understand this ecosystem better. I we will need a guide. Sure my name is tim. Kwong h. w. a. n. g. My day job is. I'm a research fellow at the center for security and emerging technology at georgetown and before that i was previously global head of public policy for ai and machine learning at google one recently published a book subprime attention crisis advertising in the time bomb at the heart of the internet. It's about how big tech monetizes our attention. When i started to do research by very naturally started to talk to a couple of friends who work at these big tech companies and there was a little bit like talking to someone who works in national security or the intelligence community or something like that because they would be like oh adds definitely work. But we can't tell you how are y or give you any evidence for it. Google would plainly dispute that. There is no evidence for whether online ads work. Tim wong recognizes. He is tilting at windmills here. Trillion dollar windmills. But in fact he. i grew skeptical about online advertising. While still working at google he began reading trade journals and going to conferences and this fascinating experience. Where one of these keynotes at this conference was given by nicole. Newman who basically is a big ad. Critic nico newman. Is a marketing professor at the melbourne business school in australia and he presented to really fascinating studies that his lab had done the first one was looking into the quality of data used in the ad tech industry basically demonstrating in many cases. It was incredibly inaccurate and the second one was. He took dead. Aim at hype cycle around. Ai that exists in ad tech right now where people are saying if you have this latest machine learning you have this ai. You'll give the targeting in a way that you never ever were able to do before and nico's lap did. Some experiments have demonstrated that in many cases machine learning was finding people who would have bought the product anyway anyways bringing this message to an ad tech conference is a bit like bringing a safety pin to a balloon conference that looked around being like where so angry and it was just total dead air. No one responded no one engaged with it and it got me really interested in thinking about. Is there a bubble here. A bubble like the dot com bubble or the subprime bubble or the tulip bubble. Because this is exactly the kinds of behavior that occur in other financial bubbles where the red lights are flashing but everybody industry just refuses to take a look at the real data long began thinking about how bubbles happen so the origins of every bubble come in this gap that occurs in a marketplace. On one hand you have people who believe that. An asset whether it's collateralized debt obligations or advertising inventory is extremely valuable and on the other hand what you have is declining asset value so in the prime mortgage crisis believed that mortgages rose gonna just pay out regularly forever right. When next turned the package of mortgages were actually a terrible asset. There were toxic and about to go belly up. so how can wong justify a parallel with digital advertising. I think the first piece is really the big question of do people ever see ads at all. So google actually did a fascinating study not too long ago which concluded that close to sixty percent of ads on the internet are never ever even seen the ad is delivered but it just ends up in some dumb part of the page. Right is below the fold their sideline but what about the precise targeting. The digital ads are supposed to offer a two thousand nine thousand nine hundred study this one done by three academic researchers addressed this question by measuring the impact of users cookies. Those remember are the tracking codes. Most of us allowed to roam our computers and phones in exchange for all the free information we get from companies like google and facebook. This study found that when a user's cookies were unavailable ed revenues only dropped by about four percent. Why would cookies be so ineffective. Tim wong argues that people pay a lot less attention to online ads and they used to. People often forget that when banner ads first loss on the internet there click through rate was like fifty percent completely mind-bending and it's just continue to fall and fall and fall and now it's like point zero one. Two point zero three percent. Some estimates of click through rates are higher than what sites here that said precise measurement is hard because there are so many bots clicking on adds a whole other problem with the digital ad universe but no matter how you measure it click through rates have fallen a lot as the novelty wears off habituation sets in and an ad that might have once grabbed your attention becomes invisible or worse annoying. People increasingly don't want ads. So ad blocking for example is really really increasing over time. And i think these factors not being able to see ads the questions about the effectiveness of ads and the rise of things ad blocking bring into question whether his thing that we think is so valuable is actually worth as much as we think it is but if there is such a big gap between the perceived and real value of digital advertising. Why are google and facebook worth so.

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