As you may recall, the subprime crisis was created by:
1. A market that rewarded the wrong things: namely, making housing loans even if the recipient had no hope of being paid back by the loanees, creating a flood of near-valueless assets.
2. Then, bundling near-valueless assets (the bad loans) and dressing them up to resell them as something of value to unknowing (or worse, complicit) financial institutions.
Sound familiar to anyone in media space? Let’s replace a few words and see if light bulbs go off.
1. We reward the creation of the wrong thing: namely, “impressions,” even if the consumer barely, or never, even sees them, creating a flood of near-valueless assets.
2. Then we bundle these near-valueless assets (so-called “impressions”) to resell them as something of value to the unknowing (or worse, complicit) networks, media buyers, marketers, and so forth.
The easy, common-sense reaction looking back on the subprime crisis is to look at the individual loans. Any ordinary person could have told you that individual X could never repay particular loan Y. But bundle tens of thousands of these loans, add some financial analysis jargon and...voila! Grade A assets that are being traded for billions.
Similarly, a layperson could tell you that an impression that cannot be seen has no value (besides being an oxymoron). Or that an impression that can be seen for one second has very little value. Or that a video advertisement that doesn’t have sound, or is on a page crowded with other content and fighting for attention, has little to no value.
Common sense can tell us that a vast majority of what is being defined as “assets” by our industry are near-valueless. BUT, bundle up a few billion of them, cloak it all in some “programmatic” or “data-consumer-profile-ROI” jargon, and voila! Grade A assets that are being traded for billions.
The problem is that right now a lot of people are making money off the system, so it will keep feeding itself and getting worse until the system breaks. What will the break look like? Some publishers will perfect delivering the bare minimum required to count for an “impression” -- because why do any more if they are all the same? Be ready for lots and lots of lists. And meanwhile, a number of quality publishers will look for alternatives to advertising, like subscriptions, and the effectiveness of those already-near-valueless impressions will rocket towards zero.
This problem is finally getting some attention. Last month, The Wall Street Journal’s article “A ‘Crisis’ In Online Ads: One Third Of Traffic Is Bogus” pointed out the fact that so many ad “impressions” are just completely fake and generated by bots. Around the same time, a marketing company put together this infographic with stats from ComScore and a handful of other industry number-crunchers, revealing that click-through rates have plummeted 97.5% since the late ‘90s. The use of ad blockers continues to grow 40% year-over-year. Online ad dollars are almost completely wasted.
But I don’t think we have the sense of urgency we need. And we need that because, unlike the financial services industry, advertising is not too big to fail. Millions of Americans have not placed their life savings in advertising. In fact, in part because online display ads are so terrible and so oversaturated, most ordinary people don’t particularly like advertising and wouldn’t care if it went away. And there are backups primed to take over, like subscription revenue.
I love advertising when it’s done well. Great TV commercials are cultural touchstones, and our industry has a fantastic legacy that I want very much to preserve. And thousands of companies rely on advertising to reach customers and turn a profit.
But we’re going to have to preserve our industry ourselves by making the right changes to focus on quality and preventing shady tactics so that advertising can thrive. We have to get ourselves out of the subprime advertising crisis.
Trust me, no one else is going to do it for us.