"The goals of the advertising business model do not always correspond to providing good quality search to users. We expect that advertising funded search engines will be inherently biased towards the advertisers and away from the needs of users." Wrote Google founders Larry Page and Sergey Brin in an academic article for Stanford University back in 1998.
Apparently one Mark Zuckerberg also had an aversion to intrusive advertising when he first launched his Facebook platform, but both he and the guys from Google needed to demonstrate to their investors that they could actually make money from the billions of people they'd managed to attract as users. Advertising quickly became the main source of income for all the early large-scale websites - mostly because everything else failed. It will be interesting to see how the likes of Twitter and Snapchat, who face the same dilemma right now - lots of users but no profits - address the issue of 'monetising' their popularity.
Even in the early days of the internet advertising was not without its problems, advertisers saw their brands appearing alongside unpleasant or explicit content which led to the invention of the much loathed pop-up ad as a way round the problem. And resorting to advertising was also not without its detractors: "I think we took the easy way out frankly." Wrote American media scholar, blogger, internet activist and now MIT director Ethan Zuckerman. "I think we should have been charging for services. We didn't consider that we were going to end up putting users under surveillance."
To be fair, the methods Google and Facebook devised to integrate advertising were nothing short of ingenious and they've made billions of dollars from their respective solutions. Google came up with Adwords, a new advertising funding model which targeted users with limited tailored ads based on their search criteria, with advertisers paying to get the top spots. The cream on this particular cake being the dutch auction process Google came up with to sell the space which sees advertisers driving up the costs by bidding against each other to get to the top. A brilliant piece of business.
Facebook sells its advertising on brand awareness and the data they accumulate from users and their likes and dislikes. Brands have their own pages so that users can interact directly with them and with that engagement comes data. Facebook sell their users' data to advertisers who value, very highly, the targeting this affords them. "Billions of users worldwide have simply handed over a treasure trove of detailed demographic data and exposed themselves to highly targeted advertising." Zuckerberg once called Facebook users 'dumb fucks' for handing over so much information about their private lives, but has got rich by selling that information to advertisers. Again, you have to say it's brilliant business.
There is, however, something of a backlash. Firstly, new EU regulatory controls, in the form of GDPR, are protecting the use of consumers' data and giving control back to individuals on what data is held about them and how it's used.
Secondly, there also seems to be the start of a shift away from some social media channels, whether it's a reaction or an evolution isn't yet clear, with Facebook users falling by 1 Million in the US and Canada and falling numbers of young users who are moving to trendier platforms leaving the main demographic of Facebook users as the over 50s. In the key 12-15 age group only 40% now count Facebook as their main social media platform which is down from 52% 12 months ago with most of these moving to Snapchat. Time spent on Facebook by its members also fell by an average of 7% last year. It should be noted that this decline hasn't affected Facebook's financial performance as yet, with revenues up 47% in the last quarter to over $9B.
Which brings me to the third and most significant sea-change as there is a growing rebellion from the organisations that account for most of this revenue, the advertisers and brands themselves.
As well as the fall in numbers of users, which is inevitably a concern for advertisers as they're all about reaching their target audiences en masse, there have been issues around the controls over content association and branded adverts appearing alongside extremist or explicit content.
Johnny Hornsby, founder of advertising agency The&partnership, now owned by WPP Group, has been warning of an industry boycott for years arguing '..it's like the Wild West with Youtube (owned by Google) and Facebook. If they are going to take people's advertising money it's their duty to ensure that their media inventory is safe. In the old media world if you sprayed swastikas on posters they'd be removed in hours, so why can't digital platforms do the same? They don't need to enable the entire inventory to accept advertising. They could say 'we will check and only when it's 100% clear will we enable it to receive ads'. If behaving well means the tech companies make less money, it's a price they should be willing to pay."
Proctor and Gamble, the world's biggest spenders on advertising, recently cut their digital spend by $100 Million in a quarter in protest at their ads appearing alongside Nazi content and, interestingly, they reported this had no affect on revenues. Unilever's marketing director Keith Weed, who has one of the world's biggest advertising budgets, warned he would pull his cash if sites didn't clean up their acts: "We cannot continue to prop up a supply chain...which at times is little better than a swamp in terms of transparency." He said last week.
There has also been reduced spend and threats to boycott digital advertising by agencies who are increasingly questioning the metrics they're provided with given the fact that advertising is bought on volumes of targets reached. In a recent experiment by The Sunday Times, they created an ad for 20 to 34 year olds of which Facebook claimed their audience was 17 million in the UK. However, according to the census, there are only 12.3 million in the UK of that age in total, never mind how many of those don't use Facebook. There have been similar bloated figures claimed in the US and Australia too."For a long time, marketers were taking digital metrics without too much questioning," says Brian Wieser of Pivotal Research in New York, "in large part because they did not know what the right questions were. A combination of things over the past 2 to 3 years have made questioning digital a more acceptable practice."
Added to these at best optimistic, at worst fraudulent figures, there's the issue of bots and fake users often part of the criminal activities of organised crime and large-scale scammers. According to industry estimates, about half of ads viewed are by networks of hacked devices programmed to generate fake clicks with the huge growth area of video ads being the biggest area for discontent. It's estimated that scams where criminals create fake traffic costs industry £16 Million annually. Advertisers pay big rates to be inserted into videos, however Facebook counts a 'view' when it's just of 1 pixel for seconds so companies are questioning if their ads are even being seen. "The sophisticated advertisers are beginning to understand the value of measuring quality versus just pure tonnage. An ad that isn't viewed has no value." Comments John Montgomery of New York based, WPP owed agency GroupM. Concerns shared by Keith Weed, who also warned he would pull ads if sites couldn't prove they were being viewed by humans as opposed to robots.
As well as that from the advertising industry, there is a build up of criticism and growing broader concerns over social media. Leading voices such as George Soros [see bd2 blog post 30th Jan 2018] compared Facebook and Google to the oil and mining companies that exploit the physical environment and that social media companies exploit the social environment. Mark Benihoff, a software Billionaire, likened social media's addictive qualities to that of tobacco and that it needs public health style regulation. And former Facebook Executives Sean Parker and Chamath Palihapitiya [see bd2 blog post 12th December 2017] have disowned Facebook amid worries of psychological damage to young people. This criticism has seen Facebook react by appointing 10,000 police to monitor content and by changing its news to prioritise trusted feeds. The regulatory bodies have reacted too, along with GPDR the EU recently handed Google a record-breaking £2.14bn fine for abusing its dominance of the search engine market in building its online shopping service, which has far-reaching implications for Google.