I definitely think there's an advertising bubble and it's popping.
Lots of startups' "business model" is "growth and engagement" - pump up user and "engagement" numbers and VCs will throw money at you, and maybe you even get a bigger sucker that outright buys you out. Spend all that money on advertising & marketing to keep these "engagement" numbers going up, all while having no actual product users pay for.
This in turn means there are other startups that specialize in providing advertising/marketing services. For example, there are dozens of startups out there who try to reinvent push notifications, even though in practice they make a lot of tasks harder in exchange of features most probably will never need. Those are overvalued and are only propped up by the aforementioned companies' VC money being spent on them to keep the "engagement" coming. Same with analytics which are used by these companies to measure (with dubious degrees of accuracy) the "engagement", which become less necessary if you have a profitable product and the main analytic becomes "how much $$$ has landed in my bank account today?".
Once the music stops, all of that crap will come crashing down.
> I definitely think there's an advertising bubble and it's popping.
This is something I’ve been thinking about a decent amount over the past few years. Advertising is the cash cow that underpins a good chunk of tech firms’ value. But the purpose of advertising, ultimately, is to drive sales of real goods and services.
Are those tech firms really driving actual consumption to a degree that justifies their value? I suppose it’s possible, but the massive growth in tech firm valuation doesn’t seem to be paralleled by massive growth in the “real” economy.
"I definitely think there's an advertising bubble and it's popping."
And Twitter is the tip of the pin popping that bubble. Going to be fun seeing Facebook and Google in particular get reset too. I've long considered online advertising to be barely above modern day snake oil.
>"I definitely think there's an advertising bubble and it's popping."
Isn't online advertising mostly just two companies though - FB and Google? And they have very deep pockets no? Or did you mean more that there's an ad tech bubble?
>"Lots of startups' "business model" is "growth and engagement" - pump up user and "engagement" numbers and VCs will throw money at you, and maybe you even get a bigger sucker that outright buys you out. Spend all that money on advertising & marketing to keep these "engagement" numbers going up, all while having no actual product users pay for."
I believe this is what the article referred to as "capital as a strategy."
Lots of startups' "business model" is "growth and engagement" - pump up user and "engagement" numbers and VCs will throw money at you, and maybe you even get a bigger sucker that outright buys you out. Spend all that money on advertising & marketing to keep these "engagement" numbers going up, all while having no actual product users pay for.
This in turn means there are other startups that specialize in providing advertising/marketing services. For example, there are dozens of startups out there who try to reinvent push notifications, even though in practice they make a lot of tasks harder in exchange of features most probably will never need. Those are overvalued and are only propped up by the aforementioned companies' VC money being spent on them to keep the "engagement" coming. Same with analytics which are used by these companies to measure (with dubious degrees of accuracy) the "engagement", which become less necessary if you have a profitable product and the main analytic becomes "how much $$$ has landed in my bank account today?".
Once the music stops, all of that crap will come crashing down.