How Google killed online advertising for everyone (else)

How Google killed online advertising for everyone (else)

Summary: Scale disrupts...absolutely

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TOPICS: Google
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Walmarts

(Image by Chris Dichtel.

The more I think about Google's recent introduction of paid channels on Youtube the more significant this event becomes in my mind. [YouTube launches paid channels starting at $0.99 per month]

The reason is that it is an admission of the failure of its online ads. It's an admission that revenue splits with video producers can't cover their costs of production -- even for shows that have tens of millions of regular viewers.

I subscribe to some great science and math shows on Youtube yet I barely see an ad on these high trafficked shows. It all points to an inescapable conclusion: Google is shockingly bad at monetizing online content (and not just video content).

This is Google's dirty little secret, how bad it is at monetizing online content. It's only bad for everyone else.

When your business model is based on aggregation at massive scale, the small bits of money Google makes on content is multiplied by hundreds of billions, and the results is billions in annual profits.

However, no one else can make money at those rates. Especially any media company that pays salaries to produce content.

The Youtube paid channels announcement is a watershed event. Google is admitting that online ads don't work for other media companies.

Google ads can't produce what it likes to call, a "virtuous revenue cycle" -- self-supporting media business that are able to invest in new content.

Google advertising does't work for newspaper and magazine sites...

Online advertising, as a major revenue source for nearly all businesses: media, startup, or other -- is dead. It only works for Google and other large scale Internet platforms such as Yahoo, Microsoft, AOL, Amazon, Ebay, etc. And for media businesses that harvest their content for free, or have immense traffic such as Mirror Online.

It's all about scale and not quality -- despite Google's pleas for quality content. The simple fact is that quality content doesn't earn more money through online ads. A click is a click, and so is a unique page view -- on any page. It's a currency that constantly devalues original content and discourages new production.

Google paywalls for newspapers?

Google was very much opposed to newspaper paywalls when they were being announced two years ago by major publishers.

Google argued that closing access would lead to large losses of traffic. It could't understand why newspaper publishers would turn down the large amounts of traffic it knew its search engine was sending them.

The newspaper publishers couldn't make Google understand that they weren't able to monetize the traffic because of the low price of online ads -- which is directly set by Google.

Will Google now bring in special paywalls for newspapers as it has with video content producers? It would be a good idea to help reputable news sites make money.

- - -

Google et al, the digital Walmarts in the cloud...

But can anything really be done about Internet scale and the relentless downward pressure on all types of digital economies?

It's not Googles fault that it is disrupting huge sectors of the global economy. It's in the nature of the Internet itself that the simple bludgeon of scale is the only business strategy you need.

And this is the gravity that faces our planetary economy. A relentless downward pull on manufacturing costs of all types of products and services – thanks to our hugely powerful technologies of creation.

We can make a flood of any product or service, and at such low costs that we have to constantly reign back our killer technologies, lest they literally destroy markets. What happens when we don't hold back those technologies of abundance? Where will it all end?

It'll end in about a decade -- where the common experience of most of our 8 billion plus population will be a world without work.

A hellish society or a golden age?We're good at creating the former, but we're hit, and largely miss on the latter.

Topic: Google

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28 comments
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  • html

    This article came out all HTML for me. Interesting reading :)
    danbi
    • I Would Not Go As Far As to Say Google Sucks at Monetizing the Web.

      There is only one company I hate more than Google (Bank of America), but I think I would lose credibility if I said, as this author said: " how bad [Google] is at monetizing online content"

      Google's income statement begs to differ.

      200 Million (and rapidly growing) Browsers equipped with Ad Block Plus (highly recommended), anti-trust issues, and legislation my cripple Google's ad revenue. These reasons are more likely behind Google moving more services to a pay for use model.

      Ad Block Plus also disarms Google Analytics as well as YouTube, Double Click, and Sense Advertising.
      Patrickgood1
      • Damn, No Edit Fucntion

        MAY cripple
        Ad Sense
        Patrickgood1
    • Gutenberg's Printing Press Has a Pretty Good Run

      It is a stretch to blame Goolge for the decline of newspapers.

      Would that not be similar to blaming newspapers for the decline in buggy whip advertising?
      Patrickgood1
    • A Better Solution to Newspaper Woes?

      Maybe traditional media companies would be better off to forgo online advertising revenue and promote the use of Ad Block Plus and legislation that diminishes online advertising revenue.

      If no one can generate sufficient online ad revenue, this would accelerate the displacement of online ad revenue model with a pay for use model.

      This may not be good for me, as I like free media content. But I do not see me giving up my Ad Block Plus ever.

      Ad Block Plus greatly improves the Web's user experience. Especially those really annoying video ads with the audio turned up full blast. I have my PC's audio output going into a 400 Watt per Channel Adcom Amp.

      If web designers would would learn usability, then the Web would be even better. Web Designers should also stop using jQuery, and learn CSS and javaScript rather than hacking code from other sites with no clue what they are doing.
      Patrickgood1
      • The content providers could monetize that content, by taking it out of

        Google and other search providers.

        There is an idea which I've been trying to develop which could take that content from Google, and could help in monetizing it for the providers of that content.
        adornoe
    • What???? "hold back those technologies of abundance?"

      Putting aside the incomprehensible phrase "technologies of abundance", how will holding back technology help the "planetary economy" (global economy)?

      ****************************
      The Author Says

      And this is the gravity that faces our planetary economy. A relentless downward pull on manufacturing costs of all types of products and services – thanks to our hugely powerful technologies of creation.
      *******************************

      I believe the global economy's transition from Industrial to an Information economy is going fairly well. The bigger threat to the economy is Republicans (e.g. Reagan's trickle down, piss on everyone with less than a Billion $), and their reduce spending and reduce taxes planks.

      As side benefit is this transition is pushing improvements in education. Not quick enough based on many of the uneducated comments posted on this site. (e.g. this article)

      BTW, WTF is "our hugely powerful technologies of creation"? That sounds like technology where God has exclusive access.
      Patrickgood1
      • Actually, it's the democrats who have destroyed the economy, and it's

        republicans who believe in the free-market system.

        You have things completely bass-ackwards!!!
        adornoe
  • Either my browser is messed up

    OR this article is a lot of HTML code.
    Michael Alan Goff
    • Chrome Browser?

      Renders fine with FireFox.
      Patrickgood1
  • Simple fact is online ads waste users time

    Why shouldn't users buy exactly the content they want, without ads and other stuff like SEC gymnastics bundled in.
    jnffarrell
  • "... yet I barely see an ad on these high trafficked shows"

    This is because you have AdBlock enabled.
    EnticingHavoc
    • Ah ... AdBlock ...

      ... couldn't stand the net without it ... thank you Wladimir Palant and all the other contributors ..
      Ludovit
  • What's your beef with Google

    All they are doing is giving content producers more options to monetize their content. You want ad's great. You want a paid firewall. That's available too now. If they were shutting down one that might mean something otherwise this article is meaningless.
    topgun22
  • Here's the beef...

    ...and not just with Google, but the overall concept of the digital economy. Take this illustration: You can command stupidly high ad rates for NFL games (and especially for the Super Bowl) because there is a completely finite supply of product (the games), a finite supply of ways to watch (for now) thus making the product valuable to place high-priced ads in. Now take that same product and put it on the Internet. Bam, the value of ads within it immediately drops because, in the post-Google ad world, an ad, is an ad, is an ad... Doesn't matter whether it is showing on a stream of the Super Bowl, the Indy 500, a hit TV series, a Stones concert, or a sneezing cat video. Well sneezing cat videos are cheap, so they can be supported by cheap pennies at a time revenue ads. But the NFL, IndyCar, NCIS episodes, Mick and Keith's habits, are not cheap. So as we shift to media being dependent on the Internet, that is the new reality. Music has already jumped that shark. We have now reached the point where the real revenue stream for artists are the live performances and such. Recorded music sales, unless you are in the Taylor or Carrie category are a loss item. At one time the tour promoted the record, now it is the other way around.

    Ironic. Back when the NFL was having attendance issues everyone said, why bother, the real audience is on TV. But when TV is a stream, then it quickly goes back to putting butts in the seats because they will pay the premium for the product. The ads won't command premiums because a stream is a stream is a stream, and if revenue is generated by how many clicks the ad gets, cheap quickie sites (like the cat video) will be more valuable than NFL games because who is going to click away on a banner ad watching a football game. So we have Google adding pay channels to YouTube "putting butts in the seats" to supplement or replace the pittances from ads. Wonder how long that will work?
    jwspicer
    • It's also an opportunity

      Instead of reaching 30 million you can reach 6 Billion. Different people can see different ads. Not all ad's require clicking through. You may be watching an NFL game and just a 30 sec on Coke branding that goes out to 6 billion people is all that's needed. No click through. If you are selling a product a click through might make sense. Will this hurt the cash cows and exisiting business models. Yes. But it expands the pie to 6 billion people. Creates choice in the way the ads are displayed and to whom they are targeted and it also allows the content created to pick their monetization strategy.
      topgun22
    • What About Monster.com's NFL Super Bowl Ad?

      If I recall correctly Monster's investment in a Super Bowl Ad was a pivotal decision that was a huge step forward making Monster a success with a tremendous ROI. I could be wrong.
      Patrickgood1
  • Free and Socialist...

    The new world is a perfect combination of free and socialist. The vast bulk of people with absolute freedom to publish books, or programs, or anything they desire. The old socialists. like the current news media and the intelligencia, can publish all they want for free, with perfect socialism. The old guard media and other "we deserve to lead" are only mad because the capitalists figured out the answer to technology before their man Marx did, and they are sulking...
    Tony Burzio
  • and we all pay

    For Google, Android and Youtube. Nothing is free. Everytime you buy a popular product, you pay google. A part of most product's price is to cover advertisement costs. Only the simple minded believes in a free product with a brand logo on it.
    Emmanuel Fransson
  • It's not so much Google that killed on-line advertising ...

    ... it's greed. I understand the need for advertising, it pays for things, allows web sites to stay up, and many more things, but when greed gets in the way, and a web page visit results in numerous advertisments, whether they be pop-ups or not, it doesn't get just a little annoying, it gets downright frustrating.

    That's exactly why I installed AdBlock Plus, because I was sick of seeing three or four ads every page I went to, because I was tired of waiting for a page to load because the ad server was bogged down, because I could no longer stand the barrage of pop ups.

    If everyone had kept a level head, and had NOT tried to ram multiple ads/pop-ups down my throat, I probably would not have installed AdBlock Plus.

    While Firefox (AFAIK) is the browser that has a true ad blocking add-on available, i do know that IE has a poor faximilie of one (Does Chrome?)... I would like to know what percentage of the population uses an ad blocking addon ... and how many of those installed it because they were sick of being bombarded with ads ... if ad companies and websites weren't so greedy, they might still be able to make some money at it.

    JMHO (as always)

    Ludo
    Ludovit