Will the Ad-Tech and Content Market Dry Up Soon?

It’s been a while since I looked at the stock numbers for the industry. I’ve got a few key companies on my list that I’ll check periodically (like once every 6 months when I’m bored) and with the talk of a possible new tech bubble burst, I think it was time to re-examine the performance of these companies. So what’s going to happen?

There’s been rumblings in the industry about how adtech and its symbiotic relation to content are showing signs of weakening. Reports by analyst groups have shown that despite ad spending, the rate of return from digital ads have proven to be quite horrid in terms of conversions. This is really reflecting in a few adtech and content company stocks such as Leaf Group, Rubicon Project, Twitter and Snap. But what is truly going on here?

I think the core issue is that the content-ad model that traditional media companies have used for years is slowly eroding away. In the past, the audience were treated as passive viewers where the only two options of bypassing  an ad was to channel surf or not turn on the tube (or in the case of magazines, flip extremely quickly past all the garbage).

TV though had used advertisement mostly to create brand awareness. Those memorable jingles were there to help you pick the more identifiable brand over a generic, cheaper one that could perform on a similar manner. Or showing up to a chain as opposed to the mom n pop shop down the street that was known by word of mouth alone.

Online advertisement changed the game since the amount of noise signals increased exponentially. Social augmented the noise even worse to the point where traditional brand names were seen as potential scams as friends and trusted high end bloggers, etc. connected with newer brands that would outshine the traditional ones.

Of course, the online advertisement world would place most of the blame on recent failures to AdBlockers but that is more of a solution than something that can put their crisis on. Certainly, AdBlockers have helped cull the white noise, but many AdBlockers would partner with groups to white list companies that would have nefarious means of injecting themselves into sites.

The real culprit of the failing of the online digital advertisement age is simply that people are more educated about what they want to see and that advertisement prevents them from obtaining the content they want. The notion of paywalls came far too late in the game and expectations of freemium type of content were laid long before the maturity of adtech could kill such expectations in their infancy.

Most ads themselves fall short because they are akin to a shotgun blast where one hopes that they can get a hit in a radius. But quite often there is no intelligent connection between the user and the ad presented. At the same time, when a user visits a site, they are there to consume a particular piece of content, not the ad itself.

If anything adtech has probably hurt brands in a very horrible way because of presenting their solutions in very intrusive ways that have created dissonance between the viewer and the brands. Rather than aligning the trust with a brand, ads and adtech have ultimately alienated the viewer.

Social is a meta between content and adtech in this realm that has its issues as well. The idea that ones friends could provide ads to each other at little to no cost to the advertiser is highly appealing. However, over time the incentives for doing this polluted itself as well as increased the amount of noise that would drive people away from the major social platforms.

The real problem is that adtech has failed to solve any problem, which is why it’s in a death spiral. Subverting a user’s experience on a site does not help the brand nor the viewer, which is the thing that adtech has destroyed. The only real companies that are solving the brand to viewer connection issue are Google and Amazon (and to a degree ebay) because of the existing intent.

Here’s what adtech companies fail to grasp: they need to determine the intent of a user ahead of time. Meaning that the only time a conversion can occur is when a viewer wants to buy something. This cannot occur at any other time no matter how much you force the issue. People hate being forced to do things or worse yet coerced into doing something, which is what adtech is attempting to funnel them into as an experience.

Thus, a company such as a Google, which owns the search market, Amazon, which is quickly owning the entire product market and the occasional ebay, which has the individual market, practically dominate this space. Companies like Snap, LeafGroup, etc. are nothing more than vaporware at this point with an ever increasing debt due to people and data dependencies that aren’t paying for themselves.

Sure, they might have some novel service that people want to use, but monetizing that service through a lame adtech channel has proven flawed. Merely tossing an ad for impressions is such a hopeless notion that adtech companies should go bankrupt for thinking of a substandard idea.

The funny thing throughout this whole phase was that there was a promise of data warehousing/banks which would allow companies to make better decisions. If such an idea truly existed, then I haven’t seen it.¬† I can’t tell if the AI just isn’t there or these companies lack the ingenuity to do something useful with this information.

Now, I doubt all of these companies will go under. A few will survive. But those that do are the ones that do not position themselves as a digital marketing type of company. Having a unique core which makes money or provide a service that people are willing to pay for will always trump vanity stats. Until data and vanity stats become a true currency, I only see doom for this market. But then again that’s not entirely a bad thing.

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