It’s an ad ad ad ad world… But for how much longer?
In season 2, episode 2 of the HBO corporate drama Succession, an exchange plays out that perfectly sums up the digital marketplace that we participate in. Kendall Roy, a representative of his family business / global media conglomerate, visits Vaulter, a trendy journalistic outlet that he helped acquire near the beginning of the series. When he confronts the head of the company regarding their earnings falling off a cliff in recent months, the man weakly responds that it’s all because “Facebook changed their algorithm.”
Of course, this explanation ends up being a mask for real financial discrepancies, and Kendall eventually guts the company at his father’s orders. But the excuse illustrates a real problem with today’s virtual platforms — an over-reliance on ads and the digital taskmasters that determine the exact mixture of which ones we see and which ones we don’t. The idea that Vaulter, supposedly such a successful and popular platform, can be so damaged by a mere algorithm change is a little ridiculous, (and it’s a coverup in-universe) but it’s surprisingly not that far-fetched to me.
For the last several years, ads have become like proteins in the body of digital commerce, holding the whole thing together even when they’re not the main topic of discussion. When you peel back the skin of giants like Facebook and Google, their veins are coursing with ads. Not only are these tiny particles sandwiched between every piece of real content that you see on said platforms, they are also often the lifeblood of their operations. Google is an easy example; it’s an open secret that the search engine is little more than a glorified catalog, with 87% of its revenue coming from ad space buys in the third quarter of 2018. Everything else — from the company’s faux-progressive branding to the Chromebook to the passion projects of its employees — is window-dressing, a happy distraction from the business of digital real estate.
This is all well and good from a capitalist’s perspective. The more individually targeted ads become, the less money companies then have to spend on each consumer, since it’s easier for them to figure out who’s going to buy a product and who isn’t. They can thus maximize earnings on this basis, while also winning over the corporate sponsors that buy into an ad-based financial structure. Everybody wins.
But at the same time, this process has eroded the value of actually paying for anything. So much of the social media world is free-to-play that the very idea of paying for entertainment is becoming archaic. I can scroll through Twitter or Facebook all day and be entertained by user-generated distractions — celebrity feuds, the latest viral TikTok, political scandal, etc. — and not buy a single thing. When even a trusted monthly subscription service like Netflix bumps its fees by a dollar, consumers all across the internet raise hell, outraged that someone would want to charge them a penny more to watch unlimited movies whenever they want.
This is the consequence of the modern advertising model. It’s an easy hack that looks like a rising tide that lifts all boats. But at the same time, it’s caused a complete perversion of the marketplace. Recall again the example of Google, who makes almost nothing on real products and continues to inflate its status on the basis of ads alone. This seems like a reversal of conventional wisdom — if the revenue stream from ads somehow falls through, what do they have left? An interactive map that lets you see your house virtually and a bunch of mediocre products?
Facebook takes this even further by not even having projects like Google Street View, instead wasting time on indulgences like their own currency and so on. But what do these companies really hold over their customers that keeps them coming back? Do we really have brand loyalty to any of these platforms, or have their algorithms just made suckers out of us with personalized content?
My fear is the scenario described by Succession magnified. Not so much “Facebook changed their algorithm” as some kind of major external blow to the ad-based revenue stream, or worse yet, the advent of a long-rumored tech bubble burst. Some of the brightest stars in the app age, like Uber and Snapchat, are hemorrhaging money, and have only just started to diversify their business models in the last couple of years. If Donald Trump stops using Twitter to connect with the average Joe, that company is back on the chopping block as well. The fact of the matter is that these companies are only creating the illusion that we need them — their services could easily be replaced by a savvier competitor. Not only that, but our ad-based revenue model has managed to enchant seemingly every major brand company. Everybody has incorporated some aspect of the Facebook / Google model into their business, and I’d expect to see losses across most sectors if either the mechanics of monetization or the platforms themselves see significant changes.
I hate to be a pessimist, but it seems like we could be moving away from trusting these digital giants in the near future. Butwhat happens from here? What do we rely on? Here are three trends that could provide us with hints.
Life Offscreen
Strangely enough, we might be headed back into the real world. We’ve already seen even digitally based companies begin to address marketing’s elephant in the room: these ads are f*****g annoying! Not only that, but even targeted digital ads can come off as impersonal, and often don’t resonate with consumers already overloaded with advertisements. With the advent of concepts like influencers, who simulate word of mouth marketing, and experiential marketing events, which engage with consumers face-to-face, we might be going back to the other side of the fence; a sort of digital-physical hybrid. Slightly related is Amazon’s increased physical presence, whether that’s buying Whole Foods, creating “Amazon locker” pickup locations, or building cashier-less stores.
On a side note, look how arrogant these techies are — recreating things like bookstores and mom-and-pop shops which they helped to fragment and destroy in the first place. This is a clue that any rhetoric about “making the consumer’s life easier” is mostly empty. It’s not real disruption, it’s just a linear shift from one controlling authority to another. But that’s probably an article for another time.
Anyway, this increased pervasion of the digital in the physical world is promising, mostly because it provides revenue streams that have little or nothing to do with ads. Data will continue to inform business decisions, but more in the way that Target uses it (targeted consumer catalogs, etc.) than Facebook (empty consumption). Not surprisingly, people have become starved for real-life interaction thanks to the severe introversion driven in part by social media platforms. Some musical artists have discovered this already, using quirky social media personas to parlay visibility into increased concert revenue and sponsorships — a real life scaling of one’s own brand. This is great news for attractive people — you may be in the running to become a brand ambassador some time in the near future.
The Click-Farm Economy
Of course, it’s possible that none of this sea change fully happens. Even if consumers are being harmed by the social media status quo, their habits have been effectively corralled. It’s feasible to imagine the continued existence of this hollow system, with multiple parties passing around money that stands for nothing and gains them very little real consumer confidence.
It’s reminiscent of the idea of the click farm, where various entities, from out-of-touch Republicans to the latest Disney star-turned-singer, can buy the impression of popularity, simply by sending some money to developing countries where a bunch of fake accounts are created, gaming platforms to create money where there once was none.(There is simply no way that Newt Gingrich really has 2.1 million followers on Twitter). Everyone is making money, but these are fragile revenue streams, highly susceptible to the “algorithm change” example from Succession. I see this model continuing to the point where it infiltrates normal commerce even more than it has already, but once again, if the bubble bursts, these companies will have even fewer real-world properties to bank on.
Instagram is trying to crack down on this by punishing aspiring influencers that buy followers, hoping that it looks like they have an organic following. See the sad case of influencer Arii, a young woman with over 2 million followers, who was unable to sell 36 units each of the 7 products in her fashion line. Ironically, Instagram may be missing out on some of this phantom click-generated revenue by cracking down on aspiring cool kids like her.
Cable Is Back
The most likely outcome to me is actually more of a middle ground between the two scenarios that I mentioned. Humans have grounded themselves firmly in the digital in the near future, but a diversification of options is necessary to avoid being crippled by any changes in things as fickle as algorithms or worse, consumer desire. I’ve already discussed Amazon at length here, and I’ll bring them up again as extremely successful users of the monthly subscription model. They’re not the only ones amassing content under one umbrella and poaching the market from everyone else; just look at the abundance of streaming services and you’ll see that this is a very competitive space.
The key to this strategy is that it provides a lodestar for the brand in the form of actual content to consume. Ideally, it’s a closed-circuit system profiting from a linear relationship between quality product and attention moving towards it. Advertising both within and outside of these kinds of platforms is also potentially more advantageous, since a subscription service is better equipped to entice and retain customers. It’s the same philosophy as a multi-device network like Apple; if you subscribe to a streaming service just for a couple of shows, they can more easily feed you content and keep you happy. Try to jump ship, and you won’t be able to get this content anymore. Even less sexy industries, like sports writing or traditional journalism, are starting to adopt this.
Unfortunately, the consumer has been spoiled by a world where everything is free or one targeted coupon code away from a discount. The monthly model is good once you’re an established brand, but it notably allows for much fewer major players within a space. You only have to look at the bloated TV and movie streaming sector for evidence that there are often too many choices, and they all demand your money. This creates a whole new web of convoluted value questions on the part of the consumer. How many streaming services is too many? Which shows do I value access to? Should I unsubscribe to one service and keep the other? From this we can easily see that once you let the ad revenue genie out of the bottle, it’s very difficult to convince consumers that spending money on things like intellectual property is actually worth it. I might as well just stick with something free, like Twitter. Or piracy.
So where does that leave us?
As consumers, we should be paying attention to all of these choices and trends. There is a common maxim nowadays that if the service is free, you’re the product. Your data is the reason why some of these social media services exist. From a personal perspective, it’s smart to limit your exposure on these kinds of platforms which take but seldom give back. If you really want value from your money, try to sniff out where that actual value lies, and take your attentions (and wallet) there. If you’re an investor, you might want to be wary of companies which succeed primarily on the strength of their algorithms and data collection. Before we know it, their method of building digital empires on the back of ads could radically change. At that point, a slick user interface can only take us so far.
