Ask HN: If web ad spend decreases a lot, how does the tech ecosystem change?

I've been reading many articles about how web advertising may not be all that is promised. A recent Wired article talked about how much of advertising is being served to bots[0], a looming recession is going to make big companies significantly reduce their advertising budgets[1], and some companies like Uber have pulled out of web advertising at all without seeing much of a decline. This has led me to think about how much of the entire tech industry is based on the assumption that user data and hyperpersonalized advertising is worth a lot of money - should this assumption stop being true, what parts of the tech industry as we know it would survive?

[0]https://www.wired.com/story/bots-online-advertising/ [1]https://www.marketingprofs.com/charts/2010/3485/us-ad-spend-down-123-in-2009

3 points | by alexb_ 569 days ago

3 comments

  • ironlake 569 days ago
    Online advertising is a reasonably mature space. It's unlikely that it will have any radical changes without some external change. Apple made a big impact last year with their privacy changes, and maybe we'll see some shifts in ad spend or profitability down the line, for now though, it's not as though Facebook and Google have closed up shop.

    In the early days of web advertising, there was a lot of noise about how it was all a scam and no actual human ever clicked on a banner ad. Yet you still see banner ads three decades later.

    Companies have marketing budgets and the people making those decisions are not universally incompetent. Marketing budgets have existed for centuries.

    But assuming your premise is true and the value of hyperpersonalized ads drop significantly, which parts of the tech industry survive? All of them. A specialized business that's very dependent might fail, and big players like Facebook or Google might falter. (Facebook might not be able to fund their metaverse projects for example). The resulting landscape would be consolidated and boring, like radio. And the exciting growth would come from somewhere else.

    Also, why are these stories making the rounds again? Did something actually change in the industry?

    http://paulgraham.com/submarine.html

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    • alexb_ 569 days ago
      >Companies have marketing budgets and the people making those decisions are not universally incompetent

      What are the people making those decisions incentivized to do? They could either "believe" the totally-legit-no-bots-here numbers for their ads, or they could investigate into how much is wasted. If they choose the second option, either everything is above board and it was a waste of effort and money, or it's found that it's not worth it at all, in which case the budget of their department would be cut and some people may lose their jobs due to how much was wasted on ineffective web ads. Not worth the risk.

      It's not about competence or incompetence, but rather what information people are actually incentivized to seek out. There's a big conflict of interest where the people who are able to assess how good of a job the marketing department is doing is the marketing department and Google/Meta - both of which are incentivized to say that everything is amazing and it's totally worth the money. Remind me again of what happened last time people with perverse incentives pretended everything was fine with the financial backbone of an entire sector they benefit from staying alive...

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      • Jensson 569 days ago
        If nobody who came from those links bought anything then the ad spenders would stop buying ads from them. But people click and buy things, hence ad spend continues. So either bots are buying things or a significant number of people are coming through.
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        • alexb_ 569 days ago
          >If nobody who came from those links bought anything then the ad spenders would stop buying ads from them

          Who has the ability to find out if those paid links are the reason customers bought things? Google will tell you that every single person who clicks a link and then buys something bought said thing because they clicked your link (please pay google now). But if I sold a lot of product while running web ads, that doesn't necessarily mean that every web ad purchase is something that wouldn't have existed without the web ad. You COULD spend effort figuring out how much your ads actually impacted things... but see the reply above. The point is, I think everyone involved in this equation is discouraged from actually finding out how effective the ads truly are, which can lead to inflated numbers. In fact, Google doesn't even have to report accurate numbers at all, as long as they are feasible. I don't think they are doing this obviously, but it's something to think about.

  • toast0 569 days ago
    As CPM goes down, the immediate reaction is to add more ad units. Whether that's splitting articles into multiple pages, increasing the amount of the page that's ads, full page interstitials, running more distracting ads, etc.

    For sites and services that had a successful business being ad supported, when that becomes unsuccessful, there's likely to be a lot of consolidation: if the consolidated entity is large enough to run their own ad network, they may be able to make the economics work a bit better.

    You'll also see some of them try directly charging users or soliciting voluntary payments.

  • verdverm 569 days ago
    Most likely by directly charging users. People and business will have to adjust until a new equilibrium is found. Many are used to the "free" internet