Online advertising is like Las Vegas.
Let’s break down the dynamics of the different participants in order of decreasing power:
- Google and Facebook are the owners of the entire Vegas strip.
- Adtech companies operate the individual casinos.
- Big brands are the whales who lose boatloads of money and don’t care.
- Ad agencies are the sharks sitting at the table scooping up money.
- Botnet operators are the mercenaries who offer special sunglasses that let you see your opponent’s cards.
- Publishers are the naive tourists who aren’t there for the games.
- Small brands are the desperate gamblers who scrape together a few thousand dollars to wager.
Looking at the dynamics this way, you have to ask: who is online advertising actually broken for?
Google and Facebook skim lots of money off the top while keeping their hands relatively clean. Adtech companies and agencies rake in boatloads of fraudulent money in an unregulated industry.
Big brands lose lots of money, but the account managers who are spending those budgets don’t care because it is other people’s money. CMOs at the big brands aren’t held accountable because there aren’t good metrics with which to hold them accountable.
Botnet companies have a great business model. They get to arbitrage data center traffic, buying it at cost and reselling it to run scripts to click on ads.
Publishers keep making money despite putting out mediocre content and stuffing it with ads. They are content with a race to the bottom with the exception of tech-savvy publishers like Washington Post.
Small brands lose lots of money in aggregate, but they don’t understand the bigger picture.
Vegas continues to operate even though it puts a bad taste in a lot of people’s mouths. As perverse as the incentive structures are, there isn’t much reason for anything to change.
Originally published at www.quora.com.