Finance

Vass Bednar: Digital ads are a desperate gamble in a fantasy economy

Digital advertising is about as useful as making medical decisions by shaking a Magic 8 Ball

Article content

The recent implosion of the FTX exchange seems to have cemented cryptocurrency’s status as a shambolic investment scheme while further busting the internet myth of the brilliant billionaire. But bitcoin isn’t the only imagined digital economy that consistently manifests as a mirage. A more durable dreamscape exists that many more of us are buying into, and it’s frothy, largely unproven and similarly under-regulated, only it dictates the fortunes of the world’s largest technology companies. It’s the digital advertising industry — and it is about as useful as making medical decisions by shaking a Magic 8 Ball.

Advertisement 2

Article content

Digital advertising brings in billions of dollars in revenue to Meta Platforms Inc.’s Facebook and Alphabet Inc.’s Google in Canada, with Amazon.com Inc. also emerging as a significant third player, according to recent research from Carleton University’s global media and internet concentration project. Advertising on Google’s search engine and YouTube brought in an estimated $6.2 billion, or $162 per Canadian, in 2021. Meta earned just under $4 billion last year across Facebook, Instagram and WhatsApp, claiming one-third of Canada’s online advertising market, and derives almost all of its revenue from such ads globally. Amazon, a more recent entrant, made an estimated $1.2 billion in revenue from advertising, or almost 10 per cent of all online advertising in Canada. Together, these three tech conglomerates accounted for around 90 per cent of the online advertising market and more than two-thirds of all ad money in Canada.

Article content

Advertisement 3

Article content

The online advertising industry is clearly profitable for massive platforms. But we should not confuse its profitability with effectiveness. Platforms earn money when an ad is viewed or listened to by a captive consumer, but that digestion doesn’t guarantee a purchase will occur. Indeed, that elusive purchase is nothing more than a reverie, and we’re all crushing the Kool-Aid in believing it’s a sure thing.

Other research demonstrates that micro-targeted digital ads simply don’t work. As former Google employee Tim Hwang said in his 2020 book Subprime Attention Crisis, ad tech could be the next internet bubble. Further, the returns on investment in digital marketing have been proven to be embarrassingly poor for the companies advertising.  One study found that ad-tech middlemen are substantially enriched by the online advertising game, sucking up as much as 50 per cent of all online spending. Another study found that automated micro-targeting performed slightly worse than random guessing. Meanwhile, digital ads are often credited for purchases that would have been made anyway, making them “the most widely used shell game in business today,” writes Sinan Aral in The Hype Machine.

Advertisement 4

Article content

Nonetheless, the ability to collect information about people as they prowl the internet predicates online giants’ ability to command advertising dollars for totally random results. That’s led to a company policy knife-fight between Apple Inc. and everyone else after the tech giant forced developers to obtain explicit consent from users. This has resulted in even less accurate micro-targeting — Facebook’s recent software update practically begs people to subject themselves to being tracked. Apple’s change means online advertising now generally costs more, translating into increased costs for small businesses hoping to reach new and relevant audiences online, on top of the digital fees extorted from developers on mobile application stores. All of this expenditure and effort hinges on the promise that advertising expenditure is richly rewarding, a necessary investment for e-commerce players.

Advertisement 5

Article content

Maybe it is time we start seeing online ads for what they really are: a desperate gamble in a fantasy economy. Digital advertising is not that different from investment attempts in the FTX exchange, where people made speculative investments with uncertain returns. In the case of bitcoin, the lure was the prospect of monumental gains untethered from the traditional financial system. The shaky covenant in online advertising promises that a perfectly placed ad will magically and unconsciously intrigue new customers enough so they open their wallets.

Advertisement 6

Article content

While the mythology that access to smaller segments of customers will meaningfully increase companies’ conversions and sales is sticky, the concrete proof, in the form of money spent, simply isn’t there. Crowdfunding, subscriber-driven or pay-as-you-go scenarios may be more authentic and sustainable monetization models. But we have built the bulk of the digital economy on the alleged promise of advertising, itself an afterthought to the exponential explosion of social media platforms made popular by everyday people enjoying online connection, not brands pimping their wares.

A fake economy has turned our lives into a cesspool of unrelenting advertising. We dodge sponcon on social media, sponsored material in news media, undisclosed product placement on television and film, and more. Meanwhile, too many individuals have been harmed by the under-regulation of cryptocurrencies and the misleading advertising associated with them.

Advertisement 7

Article content

The Competition Bureau can take action against false and misleading advertising, as it did when Keurig Canada Inc. boasted its little cups were recyclable, but weren’t. Meanwhile, the advertising economy has made us appropriately fretful about our personal privacy, prompting the government to revise outdated privacy legislation while maintaining hypocritical exemptions for political parties that notoriously segment their advertising across a range of variables. While updates to privacy laws are welcome, we should be paying much more attention to the presumed efficacy of a regime built on a cotton-candy premise that has also manipulated the labour market, creating a new form of presumed expertise and an army of digital marketers.

In the meantime, brands continue to chase our attention, convinced we are stupidly susceptible to their advertising, which is seeping into augmented realities and even getting projected into the night sky. Though our attention remains a valuable and finite asset, digital advertising’s random wheel of fortune is the equivalent of dumping dollars into a fraudulent bitcoin exchange. We just keep pretending those investment vehicles are distinct. That’s a sweet fantasy indeed.

Advertisement

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.



Most Related Links :
Daily News Era Latest News Sports News Finance News Automobile News

Root link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button