I would be thrilled if online advertising became unviable as a business model. Most of what makes the web suck today (megabytes of javascript on every page; clickbait articles; outrage-driven social media; warehouses of PII waiting to be bought/sold/stolen) is because of advertising. Yes, I do want to pay for the services I use.
This. So much this. But there is hope. It seems that people are starting to realize the "price" of free content and are more and more willing to pay for it.
I honestly want to see evidence for this claim. Sounds to me it makes running an ad network harder and therefore probably more expensive, but it is far from a certainty that this translates into advertisers' willingness to pay more (and pass it on to consumers).
Personally, I use ads as a signal to avoid buying certain products. If the ads are too prominent and omnipresent, it's an indication for me that I would be paying quite a premium on their marketing. But that's just me.
Let's say you're a startup trying to advertise on Google, and somebody has paid a bot network to fraudulently click on your ads. Now Google can't detect that those clicks are fraudulent, so you're billed for them.
Your channel efficiency unavoidably goes down, which increases your cost of customer acquisition because your other channels cannot pick up all of the slack.
Increasing the cost of customer acquisition is going to be bad for your business. You will either need to reduce costs (by hiring less, for example), or increase your prices.
Products/services are typically priced according to what the market can bear. If advertising costs become cheaper for a given company, for whatever reason, who's to say this decreased expense is going to be passed down to consumers in the form of lower prices?
Living in an advertising-saturated and/or privacy-deprived world is also a "cost" borne by members of society.
> who's to say this decreased expense is going to be passed down to consumers in the form of lower prices?
Because economics. I know this intimately. I have a product we manufacture and sell on Amazon along with other channels. And if I am saving $1 on a customer acquisition, I am lowering my price one dollar because that would mean I can sell more at the same profit. Because if I try to keep that extra dollar, my competition will lower their price. Basically the cost of keeping that saved dollar is more than the gain from lowering the price a dollar. That’s how competition is supposed to work.
I know my cost of goods sold and my cost of sales down to the penny and have a pretty good idea of the elasticity curve for my product: if I lower my price by $1, I would sell x more bottles. However if I lower my price by $1 right now, I would decrease in profitability unless my costs also decreased by $1. There is a point on the curve that represents the optimal price.
It would seem that fundamental microeconomics is something not taught in many schools and that’s tragic because you get statements like “who’s to say this decreased expense is going to be passed down to consumers.” Because competition is what makes this statement silly in principle.
If consumers are desensitized to targeted advertising it could make products cheaper as they'd seek out other sources of information that don't require paying Google a hefty tax.
I don't really think that the students are the ones being "helped" when google gets paid $90 a click on student loan refinancing queries. They end up paying that $$ in the end.
coldpie|5 years ago
urza|5 years ago
fumar|5 years ago
rndgermandude|5 years ago
Personally, I use ads as a signal to avoid buying certain products. If the ads are too prominent and omnipresent, it's an indication for me that I would be paying quite a premium on their marketing. But that's just me.
jforman|5 years ago
Your channel efficiency unavoidably goes down, which increases your cost of customer acquisition because your other channels cannot pick up all of the slack.
Increasing the cost of customer acquisition is going to be bad for your business. You will either need to reduce costs (by hiring less, for example), or increase your prices.
gord288|5 years ago
Living in an advertising-saturated and/or privacy-deprived world is also a "cost" borne by members of society.
briandear|5 years ago
Because economics. I know this intimately. I have a product we manufacture and sell on Amazon along with other channels. And if I am saving $1 on a customer acquisition, I am lowering my price one dollar because that would mean I can sell more at the same profit. Because if I try to keep that extra dollar, my competition will lower their price. Basically the cost of keeping that saved dollar is more than the gain from lowering the price a dollar. That’s how competition is supposed to work.
I know my cost of goods sold and my cost of sales down to the penny and have a pretty good idea of the elasticity curve for my product: if I lower my price by $1, I would sell x more bottles. However if I lower my price by $1 right now, I would decrease in profitability unless my costs also decreased by $1. There is a point on the curve that represents the optimal price.
It would seem that fundamental microeconomics is something not taught in many schools and that’s tragic because you get statements like “who’s to say this decreased expense is going to be passed down to consumers.” Because competition is what makes this statement silly in principle.
pydry|5 years ago
I don't really think that the students are the ones being "helped" when google gets paid $90 a click on student loan refinancing queries. They end up paying that $$ in the end.
0x53|5 years ago
alisonkisk|5 years ago
unknown|5 years ago
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