What happens if online advertising is just a big, fat bubble?
So. Big Tech monopolies are in the news this week the Department of Justice sued Google over how it maintains its search dominance and it search dominance is the key to its business model, which is that it makes eighty percent of its revenue from digital advertising facebook by the makes ninety, nine percent of its revenue from advertising and the profitability of targeted ads is also a big reason why tech companies are constantly collecting so much data about us and there's a multibillion dollar ad tech industry that exists because all of this makes so much money. But what these ads didn't actually work all that. Well, Tim Wong is a former public policy executive Google where he worked on artificial intelligence and machine learning and he's of the new book subprime attention crisis I. Think this is an interesting important distinction right? which is it's not necessarily to make the argument that advertising never works categorically right? We have examples of it working. The question is whether or not the market as a whole really lives up to the promises that it's made and the promises made is that data driven. Automated form of what's known as programmatic advertising is a kind of advertising that's way better than billboards or magazines or the kind of madman style of advertising and I think ultimately, it may be that we are exactly where we were decades ago. Right? which is we actually don't know which half of the money spent advertising works in which one is wasted. We just very difficult to tell. Is, there an awareness of this? I mean I know that you know after for example, Cambridge Politica, there was a lot of conversation about how there are lots of promises related to micro targeting and that it just might not be. Realistic. Like do advertisers are they starting to understand this? Well, I, think there's a lot of willful blindness in the Advertising Space you know so this book that I just wrote, it opens on a really strange experience that I had going to a marketing conference where a professor laid out all of the evidence right? You know sixty percent of people never see ads ad blocking up all around the world it was just dead space the. Advertisers kind of refuse to engage with it, and you know it's one of the things I've been thinking a lot about because it's similar to patterns that we see and other market bubbles right where there's these deep structural problems with the industry. But a lot of the people involved either don't want to hear it or they don't believe it I mean listen I'm very familiar with the idea of the belief that technology must be working even. All. Evidence to the contrary. But I do want to ask you about targeting specifically because it seems like there's a lot of technical reasons it doesn't work. But what about this idea that there's a massive amount of data collection that ads can be so specific and personalized that you literally cannot resist them are you saying that's also not true Yeah I. Mean You brought up Cambridge Analytical earlier? I mean there's a fascinating report that just came out from the UK privacy regulator that was basically their research to say look there's all of this kind of. Metric advertising does it make a difference and the conclusion? There was no there actually was not any significant difference and there's two reasons for that. One of them is a lot of researchers find that a lot of the data being used as faulty and messy and doesn't work and I think the other one is whether or not. This data actually helps you to target a message better is really unclear. There's a great researcher by the name of Allesandro. Who's been doing some work on if you have targeted ads versus non targeted ads, does it actually make a difference and conclusion is it does but really only by a small margin, much less than you think. Could it also expose the fact that a lot of these companies no longer want the data for advertising like they want it for machine learning. Yeah I. think that's ultimately you know I think one of the great questions and responses I've had to the book is people say so why have we built this enormous surveillance infrastructure? This thing just doesn't work I. Think people have traditionally thought. Oh, well, it's because Mark Zuckerberg wants to build a mind control ray that's his advertising system. You know the reality is that it has been collected for other reasons and for sure I think things like the promise of machine learning is is one of the reasons that people collect this data. What Can. Be Done. Do you think I mean? This is a big complicated technology question. You've got companies spending a ton of money and companies that rely on this for their whole business model. Like what could solutions even look like? One of my worries about this is that again, if you study the history of market bubbles, a lot of what we see is very reminiscent right to the say the subprime mortgage crisis of two, thousand, seven, two, thousand, eight, and there is a momentum here in the problem with bubbles is that. While, it may look great in two, thousand, seven, I think we were saying how great economy is doing. At some point they pop and I think the human costs will be great. It's really not just a matter of whether or not you know Mark Zuckerberg has less. Fewer billion dollars right I think you gotta think about all the media that's relying on this ecosystem that journalism that relies on it and many other places that advertising touches online, and so I I tend to believe in the idea that we have to find ways of deflating this bubble and so I'm really interested in kind of the ability to both spread the public word about some of the problems in this marketplace. But also I think there's room for regulation I. think There's room to enforce transparency in the marketplace to try to make sure that you know expectations about this match up with reality. There's been just as a regulatory matter there been a lot of questions about banning targeted advertising. Should that happen? Yeah I I do think. So and I think in some ways you know in may be the thing that pops the bubble right because for the longest time, advertisers have been basically holding to the position that we need all this data order to do our business to target our ads and what we're seeing as things. GDP are the European privacy law and CPA to California privacy law rollout is in many cases the market just keep chugging along even though our advertisers have a lot less access to data and I do think that that kind of realization that all this data might actually not have been very. Meaningful might actually 'cause you know sort of expectations or perceptions about how great this stuff is to kind of crash to Earth, and so you think these privacy laws have these two effects. One of them is to protect privacy, which of course is important but I think the other side of it is actually in May of like you know strip the veil off this market that I think has been kinda shrouded for so long Tim. Wong is the author of the new book subprime attention crisis. How big a bubble are we talking here? Digital advertisers will spend over one hundred and forty billion dollars in the US in twenty twenty.