Are Social Media's "Ads For Eyeballs" Valuations About To Be Eviscerated?

Tyler Durden's picture

Authored by Mark St.Cyr,

There’s a peculiar tone emanating from the social media space. It’s a little hard to hear, but if you listen closely, it’s there none the less. That sound is the sudden gasp of realization that the most dominating reasoning and defense that encompassed the entire social media space may in fact being laid-to-waste right before their screens. That horror?

The eyeballs for ads model doesn’t work. And – it’s being stated by one of their own. (Insert the scary music tones here)

In a blog post the online publishing platform Medium™ stunned what I refer to as “The Valley” (i.e., the everything social and disruption purely for its own sake devotees) when it announced two stunning proclamations. The First: It was jettisoning about one-third of its workforce. Second: The reasoning behind it, Here’s an excerpt, to wit:

“We also saw interest from many big brands and promising results from several content marketing campaigns on the platform.

 

However, in building out this model, we realized we didn’t yet have the right solution to the big question of driving payment for quality content. We had started scaling up the teams to sell and support products that were, at best, incremental improvements on the ad-driven publishing model, not the transformative model we were aiming for.

 

To continue on this trajectory put us at risk?—?even if we were successful, business-wise?—?of becoming an extension of a broken system.

 

Upon further reflection, it’s clear that the broken system is ad-driven media on the internet. It simply doesn’t serve people. In fact, it’s not designed to.”

I encourage you to read their entire post for your own conclusions. So, with that said, I’ll now give you my “two cents.”

Is it not funny how the “ads for eyeballs” model which was the be-all, end-all model to $BILLION dollar riches and IPO cash out dreams suddenly finds itself being shunned (i.e., self implied “Needs another model”) by none other than a company whose CEO once founded one of social media’s most coveted “ads for eyeballs” companies? (e.g. Twitter™)

Now to be fair the article does in fact state 2016 was their best year yet, with “readers and published posts up 300% year on year.” Those are impressive statistics. Also, I don’t know anything other than what I read in the aforementioned post. It may be in fact this outlet wishes to transform itself, or its business model, purely for the sake of journalistic integrity. And if that is indeed the case I wholeheartedly commend them. Yet, what falls short via my acumen is the timing. Here’s the reasoning…

Let’s use just one of the said key metrics: “Readers.”

If an “ads for eyeballs” designed platform experiences a 300% year-over-year growth in the sole bedrock, fundamental, metric of the “ads for eyeballs” formulation. Would that not mean, or at least one could rationally infer, the YoY profits realized by supplying ads to a tripling of “eye balls” in one year warrants an explosion of generated profits?

For another sentence caught my eye which doesn’t seem to fit if readership was up 300%. e.g., “Even if we’re successful.”

This is a very critical point to ponder. i.e., If a 300% increase in viewership YoY didn’t move the needle as to not state “even” implying that it is not – than what would?

Again, for It needs to be repeated: The basic core metric that allows the entirety of the “eyeballs for ads” argument to even exist – is – the reasoning behind dismantling, and jettisoning one-third of the company?  Remember, they state, “Our vision, when we started in 2012, was ambitious: To build a platform that defined a new model for media on the internet.”

It can be reasonably assumed it did just that – and in spades! (e.g. 300% growth in “eyeballs” this past year alone.) And for that comes the conclusion to immediately lop off 1/3 of staffing and announce a complete change or overhaul to its business structure?

This is like stating (if we’re to take the reasoning at face value) “We’ve tripled the #1 key metric that supports (and advertisers will pay for) the entire “ads for eyeballs” model, and for that accomplishment – we’re downsizing, and laying off 1/3 of you. Great job, and here’s looking at 2017, cheers!”

Something just doesn’t square here from my perspective, or opinion.

Let me express it this way: What can be rationally inferred by anyone with just a modicum of business acumen in this underlying quandary? Or said differently:

What was the decision-making process that impelled a company to jettison one-third of its personnel along with simultaneously stating a dismantling of its former business model first (and that’s a very key point) not after it tried to change that very model as some form of “work in progress” putting what can only be inferred as an ever-increasing hardship on both authors, or content providers, If, the sole intention is to reward those content creators to begin with?

Is that not as they say “Throwing the baby out with the bath water?” Unless…

A 300% increase in readership didn’t mean squat to paying advertisers because – all they were getting was the bill for more “ad sales” and no sales. So they in-turn are now stating: Thanks, but no thanks. (Think P&G™ and its decision to jettison one of Facebook™ most coveted ad models)

Personally, I feel it’s more of this, than the former, and is becoming so prevalent, it can no longer be ignored. i.e., The writing’s on the balance sheets.

There’s a reason why I make this point. For I once was involved with advertising (albeit years ago) and actually ran and designed a campaign for a multi-national consumer brand which still runs to this day decades later. And it is this:

Advertisers rarely scale down or remove ad dollars from venues that produce sales. And what they surely won’t do, is remove or scale-down ads from a venue that can demonstrate increasing sales. Especially one that has shown a growth in audience of some 300% YoY. For if the audience has grown, surely, that implies any successful prior ad sales during that period should also have been the benefactor of explosive sales results. Maybe not 1 for 1 as in 300%, however, explosive in comparison YoY should be apparent nonetheless.

So in reaction to this – you’re now going to tell not only those advertisers, but also those which benefited by osmosis: Thanks, but we’re not going to take “that” money anymore? And along with it (as implied by how it was generated per the article) will more than assuredly see “readership” drop? Along with asking them to either continue campaigns or start anew?

How does that make sense from a business perspective I ask? Why wouldn’t an attrition model be implemented first? i.e., Make changes as you go, and as the “ad revenue” was still coming in, and scale down on a more favorable time schedule? i.e., Not jettison one-third of its employees onto the unemployment rolls right after the holidays. Unless? Hint: Maybe it wasn’t.

Again, if you take the rationale stated in the above article at face value? It’s very hard to infer anything else but. Sure, it sounds altruist and is absolutely fine if that’s the true driver. However, with that said, here’s another one of those very troubling questions that seem to pop into my mind which I can’t seem to jettison:

How are the remaining advertisers now going to view Medium? i.e., Is the remaining audience for 2017 worth what they were paying in 2016? After all – Medium openly stated or implied “that” prior audience is not what they want, and with it, will reshape into something different. That “different” can rationally be assumed as – smaller. Also: how are advertisers now to view all the other “ads for eyeballs” purveyors after this revelation? Are their sales metrics (i.e., eyeballs) worth paying for?

And it is there which lies-the-rub, for that is diametrically the opposite of everything “The Valley” currently stands on. Or, more importantly – is funded and valued by Wall Street.

And yet, here is Medium, itself a well coveted outlet of “The Valley” openly stating “ads for eyeballs” doesn’t work, even in the face of 300% eyeball growth, which is the metric-of-metrics of everything that is “The Valley.”

If I’m correct in my understanding of advertisers, and advertising? That “new vision” will not be well received in today’s business climate, for that meme was told, and more importantly – sold to them incessantly, fueling and enabling the entire “ads for eyeballs” model that supported multi-$BILLION valuations and IPO cash out dreams at their expense. Literally.

Again: now with Medium itself openly stating it doesn’t work? Or, at the very least, isn’t worth it?

Let’s just say for many of today’s priced for perfection “eyeballs for ads” companies? It may as well be another nail in the proverbial “it’s different this time” coffin. For this time – it may be advertisers themselves that are reading the “news.”

With all the above said let me clarify one point, for I’ve been asked this on multiple occasions whether at a speaking event, or by friends:

I’m not saying there’s no place for the “Ads For Eyeballs” business. That’s a foolish notion. You may in fact be reading this article on one supported by that very model (and if you are I encourage you to support those advertisers should you need of their services). What I am stating unequivocally is this:

The rationale that the “eyeballs for ads” model coupled with “it’s different this time” incantations was the “magic formula” as to engender social media companies, and other unicorns of “totally worth it” valuations for IPOs along with market-cap valuations of not only $BILLIONS of dollars, but $10’s, and for others $100’s of BILLIONS on its face was ludicrous at best – delusional at worse. Period, end of fable.

I used the word “fable” specifically for this purpose: What does “it’s different this time” have in common with “Once upon a time?” Hint: Reread the above paragraph.

I can’t help but to keep remembering back how similar this revelation is to another which I was taken to task by many a Silicon Valley aficionado when the announcement that Jack Dorsey would be CEO of two companies simultaneously. The rationale emanating from “The Valley” once again has that same ring to it. i.e., It is us, as in you or me, which just doesn’t get it. There are others suggesting Medium or others should now do some M&A as a result of this.

That might be possible, however, may I suggest a pause for anyone thinking about M&A in 2017 for this reasoning…

If the “eyeballs for ads” model is indeed broken, or at the least no longer the valued metric to warrant the taking of advertisers ad dollars? There’s a whole lot of “valuations” about to find reality at never-mind “bargain prices” rather, at “fire sale” offerings in the very near future. After all…

We all know what happens when someone yells sell “fire!” In a crowded trade theater.

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Croesus's picture

Marketers are a bunch of pandering assholes who oughtta be shot.

For everyone who claims how great Reagan was...HE was the reason you see pill commercials everywhere.

"Ask your doctor about....", usually followed by "Have you or a loved one been injured, after using the drug -------? Call the law offices of...."

TBT or not TBT's picture

What then, should we think of those who pay the digital admen for the eyeballs and page hits?    

Whatever, you can monetize my eyeballs after you pluck them outta my cold, dead, head!

weburke's picture

great article. huge ramifications.

weburke's picture

if twitter cant make money on 15 million trump tweet recipients daily, selling gun ads, or whatever, with millions of retweets, daily....

So, the present system is an organized corporate system of payments for media, presumably, cultural and political, goals. Not an eyeballs for dollars system. Part of the ownership of the peoples brains for the tyranny agenda

Mr. Universe's picture

The advertising model is dead. Just like the NFL/NBA/MLB. They exist only for one reason. Corporate perks and selling mass consumables for more than their worth. Why should I have to freaking subsidize any product because they put out money to produce and advertise on "insert a POS here"? Entertainment and the payment of said stars has been way out of whack for quite a while now, just like that of CEO's. Hell you can't let your kid go to the field and play ball all day like I did, if we had a baseball that is. First off the field is locked up, second, so are the kids, third you can't have little Billy hurt himself before Little League, Fourth, Liabilty, liabilty..who is going to pay after Johnnie's feelings are hurt because Bruce hit another home run off him? In my my day everyone beaned Johnnie with our gloves and told him told suck it up. Darn, that's a hate crime.

fx's picture

The link to PG in the article actually doesn't say that P&G moved away from FB. Only that they went for a broader audience targetting instread of the highly specific, granular effort undertaken earlier. Given that huge inaccuracy which contradicts the major thesis of the article, I have to take everything else presented with a huge grain of salt. That being said, I have never quite understood whether or not these online and moble ads really produced a sufficient RoI for the company paying for them. Would love to get some hard numbers. We are now 10-15 years into these advertising strategies and if they wroked really poorly, they would have shrunk, but they are expanding. Maybe they do work, after all? maybe not for everybody and on every platform (e.g. TWTR is dead imho, as are myriads of smaller advertising companies). But for Google and Fb they sure seem to bring in lots and lots of cold, hard cash.

Verniercaliper's picture

What the hell does this word salad mean? Clarity please. Is the "ads for eyeballs"premise  the problem or is Medium just a poor company? 

ChemtrailPilot's picture

Shit mang, does anyone still not use Adblock in this glorious year of 2017?

Nexus789's picture

Since the last reset it has blocked 260,000 plus useless ads. Pages load faster and spy and malware has gone. You have to be a bit slow not use it. 

HRH Feant's picture

I consider Internet ads as nothing but trash. I rarely click on them. Why? Easier to do a search, go directly to a site that sells that product, and buy it directly.

buzzsaw99's picture

i spend a lot of time on line and buy a lot of shit on line but i can't remember ever buying anything because of an ad.

shovelhead's picture

I think they're figuring out most people on the webz do exactly the same thing.

I know what I want and now I google prices and your ads have nothing to do with it.

Or, I saw the ad and I could use that. Who sells it cheaper or with a better return policy or warrantee ?

Going Loco's picture

Still using Google? How quaint. Haven't you clocked that their search engne is broken?

techpriest's picture

I've been on the other side of it. An ad is a pre-qualifier - usually the people who click on it are already interested in the product, and 1-in-1,000 viewers buying the product is acceptable in many circumstances.

Also, my wife's research study was having trouble finding people, and Facebook ads have brought people in. Granted, the cost of acquisition is currently about $9/person, but this isn't much for what they are doing, esp. compared to participant compensation.

In other words, it works even if 99.9% of people who see the ad are annoyed or don't care.

dark pools of soros's picture

Is she researching guys with small cocks? Cuz facebook is full of fags with no dicks

techpriest's picture

For the record, she does research on potentially replacing painkillers with dietary supplements you can make yourself. Turmeric with black pepper, paprika, and blueberries are three examples. There are a lot of people with pain problems who use Facebook, because they like to look at family members sharing pictures. I don't use Facebook for much except marketing, but hey, if they want to give away their activities and personal info they are free to do so.

Or maybe you can just keep projecting your problem onto other people.

dark pools of soros's picture

yes all comics project their issues it seems.. twas a joke..  but there is nothing wrong with painkillers, they are fucking great and people just need more soul in their lives so they just don't sail on a rush with no emotion..  how about you just give the junkie a guitar or some paint and let them have fun and quit their shit job and failed marraige 

 

they won't OD if they love themselves again

 

CRM114's picture

Not having a go directly, but isn't 99.9% failure a tremendous waste of human time, and thus potential?

What about the moral aspect of annoying people / wasting their time?

Physical Ads, even TV ads, can be tuned out without any particular effort, but internet companies are finding ways to force people to watch ads.

techpriest's picture

No, a 99.9% failure rate in Internet ads is not that much of a waste.

For perspective, on Facebook it's about 50 cents for 1,000 ad impressions, depending on the market, etc. For Google ads it's ~$3-4, more for keyword advertising on certain keywords.

So, if you can spend $5 and complete a single $100 sale, it's a great deal. Or at my old job, the corporation was selling a $400 a month software package and after optimizing the digital ads, we were able to generate good leads for a $100 cost of acquisition. At $4/1,000 impressions, that would mean a success rate of 1 in 25,000, or a failure rate of 99.996%. Love it or hate it, they could employ a team of ten Americans on that.

CRM114's picture

Thanks for the response. I can see how, with large software packages sold through lead generation, it's easier to track ad effectiveness.

So, the ads represented 25% of the cost of the product? For the first month at any rate. What was the average length of product use?

I was aiming more at the moral aspect of obliging 24,999 people out of every 25,000 to spend time on something they'll never purchase/use. This seems to be a change over former ad formats, where ignoring ads required negligible time and effort. I do get the moral benefit of employment for 10 Americans - but I'm interested in the use of 'compulsory' advertising. Is the effectiveness of TV/print/billboard ads now almost zero?

 

techpriest's picture

I did digital marketing so I can't say anything about other media. For the product, I didn't do a lot of sales but IIRC the typical contract is 6-12 months. When we started optimizing we were at $300/sale, so 75,000 people instead of 25,000.

On the 1/25,000 question: in a perfect world, marketers would be so clairvoyant that they would only ever talk to people who were ready to buy, and never waste anyone's time. Marketers would also love it because they would be paying nearly zero per new customer. However, marketers do not have that kind of power. So, a lot of the ad targeting technology is meant to bridge that gap. Using the research study example, we can target the ads to only people who are in the right age range and have interest in something to do with the study (that's all the more info we have), and are close enough to the research site (nobody would drive 100 miles for $100 in compensation). This way, *your* time is never wasted because you never see the ad.

I do think that the forced-ad approach will ultimately fail. Good marketing involves drawing in interested people, and showing them how your product solves the customer's problem, so you both profit. This means not filling up a site with so many crap ads that people need to use ad blockers. Unfortunately, there are morons + con artists who think that web ads are a magic black box, and more ads = more money. Don't waste time on sites like that.

Long-term, I think that online marketing will become more placement-based over time, and possibly more server-side than the current client-side Javascript model. The former will lend a lot more legitimacy to what's being sold (since your online reputation is at stake), and server-side ads would get around most adblock software (for technical reasons a little beyond the scope of this topic).

Taint Boil's picture

Same here  .... never clicked on an ad in my life. If see something I want I would just Google it and pick the best price (is clicking on Google clicking on an ad?) I'm sure all the "clicks" are legit ROFLMAO ... can you imagine actually clicking on a Facebook ad  - too funny ..... well my fake Facebook account ... just use it to stalk bitches.

StackingSilver's picture

Try AdBlock plus (with element hiding helper), uBlock origin, ghostery, noscript, plus greasemonkey and user scripts for certain websites. The best internet experience is ad-free

EddieLomax's picture

Same here, having an ad to raise awareness of your company makes sense, but the idea that someone will follow that link to get a better deal than checking the whole market via a few searches doesn't make any sense.  And the more obtrusive they make the ads the more it feels like the ad is just a scam to lure in the gullible.

I think the ad revenue hasn't really grown proportionally to the economy in the last few decades, the money being spent on TV and Radio is just now being shared now with internet.  When people wake up and realize this a lot of unicorns are going to be dog food.

techpriest's picture

At my old job, the marketing was 1) dudes in the telemarketing room calling lists, 2) digital ads, and 3) a little bit of radio. That's also the order of spending priority.

I imagine other big companies are moving the same direction.

wisehiney's picture

This new "media" are all a bunch of socialist assholes anyhow.

They are just giving up, now that despite all of their best efforts

......biased headlines, slanted stories, fake news, etc and despite

all of their massive donations to corrupt tyrants......

the Deplorables defeated them.

So now the worn out weasels admit their lies and accept their defeat.

More Trump wine and laughter all around.

CRM114's picture

Doesn't look to me like they've admitted their lies yet - still making excuses.

"It's not the content, it's the presentation",etc. 

CRM114's picture

What is an "ad", please?

I have Adblock and Ghostery, so I've never seen one.

wisehiney's picture

p.s. I rarely click on any ZH ads, but I always enjoy looking at the ones with jiggly tits.

SumTingWongJr's picture

I'll always watch the ones with big tits.

DavyRoySixPack's picture

The relationship between Information, the Internet and Man and a fiat currency has allowed for a Faux financialization to construct itself under o spices of inflated P/R ratios (Facebook, ex).

A conjunction of the fascist unipolar globalism model has fostered a misappropriation of capital - with the attempt to force consumption through propaganda.

The relentless march towards centralization will only keep valuations and advertising dollars at odds with basic common sense.

No, a better model for internet content would be a block chain based tiered subscription market.

A subscription market which also becomes a new currency.

But, this would involve a higher consciousness on the part of all earthlings.

TuPhat's picture

I wouldn't buy it.  Did you forget the sarc tag?

Donald J. Trump's picture

I thought the guy was pretty clear, that ads for eyeballs was broken because it sucks.  People don't want it and are willing to pay to not see it.  It is not as effective as Silicone Valley thinks it is because they're shoving it down everyone's throat, from users who get pissed off at it, to advertisers who believe what the advert sellers are telling them.  I for one hate when I'm forced to watch an advertisement, and I usually don't watch it on purpose and it leaves me pissed at the advertiser, being counter productive.  It actually creates the opposite of what the advertisers intends, someone who is angry at the company for forcing them to watch an advertisement.  For some reason, print and TV commercials never affected me this way.  I could always not pay attention and go on to what I was doing.  But forced advertising pisses me off at the advertisers.

shovelhead's picture

I use ad block so I dont see them but I watched a remake of War and Peace on HULU and I almost quit watching a pretty good production because I hadn't seen TV ads in years. I had forgotten how stupid, noisey and annoying they were.

At least You tube docs let you skip them when they show up in 15-20 minute intervals. They got 2 seconds to show me nice tits or they're outta there. I'm not shallow though because I'll let a nice ass run too.

I'm well rounded like that.

McDuff71's picture

...to be honest what I look for in most advertisments is well thought through 'breast placement' - it certainly incerases my ball time as measured on the metric shaft index ;)..seriousy though, everyone knows this shizz is just very expensive hot air no?...apparently NOT (yet ;))...

buzzsaw99's picture

i am constantly amazed at how much is spent on advertising. google, facebook, and all the rest but also on the msm. i purposely don't buy name brand products because that is what you are paying for, advertising. also, if i see an ad that annoys me i boycott that product even if i was planning to buy it. advertising used to be cute, with jingles, and such. now it is annoying propaganda of the worst kind.

dark pools of soros's picture

Don't you want to see yourself as a multicultral cuckhead jumping into your new Subarooo or as the dopey whiteboy being the fool in a beer commercial?

 

kareninca's picture

If even a tech-moron like me can figure out how to download Ad-Block, there must be very few people actually watching ads.  I see no ads.  Who is still seeing ads online?  My 92 y.o. father in law?  He doesn't buy anything; I do the shopping.

The companies that are charging for these ads (that would be you, Facebook) are ripping off their clients.

techpriest's picture

Being someone who advertises - trust me, a lot of people are watching in one form or another. At least enough to make it worthwhile.

You don't have to be one of them, though. Don't buy a product if the company isn't giving you a good deal.

CRM114's picture

Tell me more.

Can you see sales spike after advertising (or drop when you don't)?

Do people tell you they "saw the ad" when they buy?

How do you know it works in general, and for specific ads?

I mean,what mechanism(s) for you (I know the theory).

techpriest's picture

Google has a free analytics package, and out of the box it will tell you where people are coming from and what they do on your site. So, if someone clicked a link from ZH to a site I own, I could tell that someone came from ZH.

After that, there's an additional free service, Google Tag Manager (GTM), which lets you create custom tracking scripts. So for example, I can say that x% of people who came from an ad on ZH ended up buying a product (because GTM tracks every move you make on my site), whereas y% from an FB ad bought. You can see the results of an ad campaign immediately.

You can also narrow it down with A/B testing, where you rotate ads with different words and images. So, "Free Download" might get 15% more people than "Click Here." There is even a way to track how you scroll up and down the page, where you spend time, how the mouse moves, etc. Much of the "big data" craze is people trying to get something useful out of the info, but IMO a lot of it is hit and miss.

Google has the best free product, but you can also code your own or pay for fancier services. Optimizely is another popular tracking service. Finally, it's possible to code your own, now that database-driven web apps like Drupal make it very easy to set up an API for your tracking script to call. A personal goal of mine is to eventually code up a "Drupal Analytics" package that would let people get away from Google (they harvest all of the data), and use open source instead.

Noscript + Incognito/Private browsing is a great way to stop multi-session tracking, and to appear like a different person every time. Add Tor to scramble your IP. Otherwise, assume that literally every interaction with every web page is tracked. With phone apps I know they are also working on using the camera to track your eyes so they can estimate what you are looking at on the screen. If you use a smartphone, I would recommend Tor + Orfox if you want to keep your info private.

CRM114's picture

Thanks.

I'd used basic Google analytics to track internet visitors to the website of a non-profit I volunteered with, and based on that we added features to the website and the physical location. We got increased physical visitors that year.

 

I did not know about the ad stuff though,and thanks for the privacy stuff.

techpriest's picture

I would definitely recommend checking out GTM if you can find someone who knows Javascript. Optimizely is also nice for A/B testing. and doesn't require as much code knowledge.

ToSoft4Truth's picture

Social media works great.  The operators of social media are billionaires and not interested in ad revenue. 

 

Bruce Jenner types were legitimized using social media. 

White/Black mating was accelerated using social media. 

Trump won using social media.

The value of social media is the manipulation of you, me and the others.

 

 

 

shovelhead's picture

Don't you have to be there to be affected?

Well then, there you go. Don't walk in a cow pasture if you don't like shit on yer shoes.

I don't care at all if you have shit on your shoes. Why would I?

Rebel yell's picture

Maybe readers posts were up 300% or there was a 300% increase in people posting content, not met by anyone reading the content? Not sure. Words can, at times be deliberately evasive.

Media Author Ev Williams quote:
In terms of momentum, 2016 was our best year yet. Key metrics, such as readers and published posts were up approximately 300% year on year.

heuvosYbacon's picture

This article is written without much effort or skill.

The reader should not have to fight through opaque jargon and unlcear prose in order to understand what the author is trying to convey.

The article gets a F, for incompetent use of language, and the editor gets a D for allowing it to be posted as it stands.

Rebel yell's picture

I believe that this was sensationalism since Ev Williams direct quote is posted as follows:
In terms of momentum, 2016 was our best year yet. Key metrics, such as readers and published posts were up approximately 300% year on year.