Good Trouble for the Adman’s Soul

“If you’re just selling advertising that leads to another transaction, eventually you optimize the entire pipe to the transaction to get people to buy things, which is why all of TikTok is now TikTok shop. Because they just want you to make a transaction.” — Ezra Klein Show

Here’s a shower thought for you.

So many of the societal ills of today can be tied back to modern advertising

Societal ills such as:

Echo chambers. Polarization. Social media addiction. Isolation. Loneliness. Depression. The death of journalism and distrust in it as an institution. Privacy and data leaks. The centralization and monopolization of information. Just to name a few.

How so?

The pursuit of advertising has created a perverse incentive structure built off user data and designed to hold our attention (engagement or ‘stickiness’) in order to serve more/ sell more.

All are built off the Algorithm and Programmatic Advertising.

Half my advertising spend is wasted; the trouble is, I don’t know which half. — John Wanamaker

AdTech: the real Cookie Monster

Later this year it’s expected Google will phase out support for third-party cookies in its browser Chrome. It joins other browsers who have already ended the tracking but is significant in its size (65% share worldwide).

3rd Party cookies have been the backbone of online advertising for decades. Enabling programmatic ads to be served anyone anywhere through real-time bidding (RTB), allowing advertisers to bid on ad impressions in real-time based on user data.

Today 84% of all online advertising is bought and sold this way.

The picture of Programmatic

The benefit is that you could laser target highly personalized experiences to users, tailoring content, products, and services based on individual preferences and behavior.

The downsides:

Privacy — targeting requires data and lots of it. But the manner to get this through pixel tracking gave no visibility or control to people, until more recent privacy laws (EU’s GDPR)

• 37% of internet users (est) worldwide use ad blockers

Fraud — the opaque nature of programmatic has left it ripe for abuse. Websites developed strictly to harvest advertising ads. Bots created to mimic actual behavior and commit click fraud.

• 47% of internet traffic (est) comes from bots
• 20 to 30% estimated percent of programmatic ad impressions that are fraudulent, wasting an estimated $100B annually

Misinformation — the system isn’t very good at telling real vs fake apart (see Fraud above), which has led advertisers to inadvertently fund misinformation/disinformation sites

• $2.6B estimated ad spend on misinformation sites each year

Publishers — real ‘news’ is hurting, with the shift from direct ad buys to programmatic left many swapping ‘dollars for pennies’ as it put downward pressure on both volume and rates (CPM / cost per thousand). Forcing cuts in editorial staff, further eroding content quality into a death spiral for many

• 35% average ad dollars siphoned away from publishers by the ad tech ‘supply chain’, some as high as 98 percent

The industry, for its part, has shared concern but it hasn’t stopped it from reaping the benefits as well. The sad truth is the promise of targeted delivery and measurable results is worth the spoilage to us. It’s still cheaper than going back to direct buys before.

If you’re not paying for the product, then you’re the product — The Social Delimma

Social Stickiness

Perhaps nothing illustrates the power of the algorithm in our lives more than social sites. Facebook, Instagram, and Twitter were all once chronological, serving up posts in the order they were posted (latest first).

Then each moved to a more engagement model. In ’09 Facebook prioritized “Likes”. In ’15 it started to downrank promotional content in ’16 it further refined the model to prioritize time spent and posts that spark ‘meaningful interactions’.

For news and publishing, this has been devastating. Facebook has become the major source of traffic, too reliant. Now stories were competing with ‘friends and family’ stories as well as disinformation which tended to drive higher engagement — coincidentally this all happened right as Trump was elected. Today Facebook is a much smaller source for traffic and referral.

• -50%, trust in news media has declined by as much as half in the U.S. since Facebook was founded in 2004

For the public, the social algorithm is a temptation we can’t avoid. Time spent on social is steadily increasing each year.

Perhaps not coincidentally, 2016 is the year ‘content became shoppable’ with Instagram Shopping. It’s also around the time when we start to see social as a dominant source of news and information. Even though we don’t completely trust the information.

It’s also the point of inflection in mental health markers like ‘sadness’ and ‘hopelessness’. Today we see a whole generation who are constantly online checking their feed.

• 44% of GenZ regularly gets their news on TikTok
• $1.7T in social commerce forecast for this year, a 30% increase from ‘23

For Facebook, this has been a windfall.

The shift to an engagement algorithm has made it a one-stop-shop for much of marketing. Shop is the keyword because the algorithm ‘giveth and taketh away’ too.

Long gone are the days of organic social. We’re all subject to the algorithm and each has their thumb on the scale. If you want to make sure your message gets seen, you need to pay for it.

• 2.5–1.5% of the average organic engagement rate of a Facebook post in ‘23

“Show me the incentives — and I’ll show you the outcome”

‘Competition’

What’s been the effect of all of this?

Massive concentration of traffic.

Massive concentration of advertising revenue:

Based on advertising revenue alone, Alphabet(Google/YT) and Meta (FB/Insta) would be the #50 and #60 largest economies in the world. The size of New Zealand and Morroco, respectively.

• Alphabet (25%), Meta (14%), Amazon (5%), Alibaba (4%) and Bytedance/TikTok (<4%)

The flow of information is controlled by a select handful today.

Whereas the internet brought in the idea that anyone could disrupt the power structure (ex; Uber, Airbnb), that won’t be the case with AI which requires massive processing power.

It should come as no surprise, with these deep pockets, each is building its own AI models.

Gemini — Google’s LLM is being integrated into its Chrome browser

Meta.ai (or Llama3) — is Facebook/Meta’s LLM and is now being integrated into the search box across Instagram, Facebook, WhatsApp, and Messenger

TikTok, which built its success off the algorithm with its ‘For You’ feed, is investing heavily in using OpenAI’s technology

Amazon, also essentially an algorithm marketplace, is using AI a bit differently so far. Giving sellers access to AI tools to optimize their product pages (even product photography)

You can choose to chat with CoPilot instead of searching on Microsoft’s Bing. And so on and so on.

Enshitification: the decreasing quality of an online platform, from initially providing value to its users to eventually retracting value from both users and business customers

Why leave when you have everything you need right here?

This is where the internet of tomorrow is heading. If you’re old enough to remember, back to the AOL days when everything lived on one platform.

Why go read about this on that news site when the chatbot can tell me all about it? Why go visit this online shop when I can buy it right here?

The incredible convenience these will provide us will come at the cost of our dependence on them. Publishing was suckered into this before Facebook turned off the traffic, but only after it was now the default source of news for many. So too brands and community management. And now too with shopping.

Back to the question. Am I going to hell? And if so, which ring of it?

Perhaps we’re already in it (just read Fishbowl). The industry is as much of a slave to the engagement algorithm as the public we’re trying to reach.

Long gone are the days when advertising could create culture because so much of it has to operate in silo/hyper-targeted environments where the need to hit the marks/’Byron Sharp-it’ within 6 seconds outweighs the need to create something worth talking about.

The vast majority of what we are tasked to create is measurably ‘dull’.

All of this is of our own doing. Facilitated by our industry that chose to look the other way on privacy, misinformation, on public welfare (except when called out by the public). And prioritized hard data over soft data (like talk value). Consolidated power into the hands of a few instead of cultivating more competition. And then turning the keys to the kingdom over to the companies who gladly took it all inside.

For anyone who cares about creativity, that is a great definition of the ‘hell we hath brought’ onto ourselves.

Next (maybe) how the ad industry will ‘account service’ itself to death

Our ‘need to please’ will be the death of us all

Just because you can do something, it doesn’t mean you need to — restraint is something I admire. At the end of the day, it is still a battle between good vs. crap.” — David Droga, founder of Droga5

To learn more:

I borrow heavily from Bob Hoffman’s ADSCAM: How Online Advertising Gave Birth to One of History’s Greatest Frauds, and Became a Threat to Democracy.

Other references (beyond the hyperlinks in the article):

People vs Algorithms (podcast)Filterworld: How Algorithms Flattened Culture (book)Factually (Podcast) How the Algorithm Warps Our Culture with Kyle Chayka (author of Filterworld)Sandvine 2024 Global Internet Phenomena ReportSemrush 34 Eye-Opening Google Search Statistics for 2024Allconnect Data report: How Americans use the internetDataportal Top Digital Trends 2024MarketingDrive Just 36% of programmatic spending reaches consumers due to ‘cost waterfall’