There’s this notion that big data is going to be the foundation of the new advertising business. In other words, maybe Google and Facebook are the predecessors of services that know everything about you, that know what you like, where you want to go, where you’re visiting, what your wishes are, and deliver you stuff before you’re even sure if you want it.
This will all be driven by computerized algorithms. This is not humans deciding “I’m going to buy this spot on this TV show at this hour.” This is an algorithm reacting to a cookie in 36 microseconds and bidding your attention to four or five buyers who want to get an ad in front of you at that exact moment when you might be interested in making a vacation decision. That assumes that you are willing to give up all your data and have no concern for privacy. And needless to say from an advertiser point of view, this is kind of the Holy Grail.
There is an assumption that young people don’t care about privacy anymore. I think that’s probably a false assumption. I think the NSA revelations and all the things like that have had some effect on people rethinking that assumption. Maybe 28-year-olds actually do have an expectation of some privacy and may not be willing to surrender all the data for free to advertisers in order to be living in this world.
What’s more troubling is one would think that all these new targeting techniques from online advertising would raise CPMs, that’s cost per thousand, and they’re not because the laws of supply and demand do not apply on the Web in terms of advertising, whereas in TV there’s a fixed number of advertising spots per hour. And so supply meets demand, everything sells, it clears. But online, there’s an infinite number of ad inventory spots. Anybody can put up a blog, put advertising on it. You go to the pirate sites and there’s just hundreds of thousands of pieces of advertising all over those sites. So the pressure is always downward on the CPMs. And no matter how good the targeting is, there’s a constant downward pressure because there’s too much supply and not enough demand.
In Their Own Words is recorded in Big Think’s studio.
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