I basically agree that what Amazon (and Google for that matter; disclaimer: I work for Google on display ads) is intent and intent is huge. Much as Facebook would like to become the de facto Internet, I don't see it ever capturing that intent (let alone Twitter).
That being said, I think people discount what an inordinate amount of good advertising has done and just focus on the negatives (eg the "shit you don't need"). For example:
1. While you might be able to afford a few dollars a month to pay for the cost of GMail, as one example (note: I have no idea what the cost would be here; I'm just making up numbers), would you? People are highly reluctant to spend on this. But more to the point, what about people in Africa or Asia for whom a few dollars a month is a significant sum of money? Those people can enjoy the same service with an ad-supported model; and
2. Traditional advertising channels (print, radio, TV) weren't affordable to smaller businesses. Things like Adwords have allowed many businesses to exist that otherwise couldn't before the advent of online advertising. How many jobs do you think this has created and supports?
But I do see the whole "eyeballs-then-advertising" SV model as peaking if it hasn't already. Facebook may well be the 800 pound gorilla that broke the camel's back on that one.
And while the author notes that advertising space is growing faster than purchasing power not all advertising space is created equal. What you simply has is a diversity of distribution channels for your advertising. That's a good thing. But not everyone will succeed with an ad-supported model, that's true.
To the author's problem of working on big problems, I agree. The fact that SpaceX spent less developing a launch system and reentry vehicle than was spent buying Instagram [1] with its 13 employees makes me sad that so many bright minds are working on the apocryphal social network for cats.
[1]: I realize with the 50%+ drop in Facebook's IPO price, that sum is now significantly less.
1. First item first: Gmail is free because the rich consumers using it are worth a few dollars a month in ads. Those free users in Africa who don't have the money can only exist due to cross-subsidy. The ad model helps them only by accident. Until they have money to spend, they can only detract from the value of Google's ad inventory.
2. To address the second question, the cost of traditional media: Adwords made new businesses more feasible because of the intent harvesting. It allowed people to pay to advertise to consumers who specifically wanted something, as opposed to a demographic block.
Instead of advertising to every 25-55 man who might want a corvette, they could advertise to men who were thinking about a Corvette right now. Previously, it cost serious bucks to reach those men thinking "right now" because it was dumb luck -- advertise to enough men in the right demographic, hit a few guys who had the intent.
To a significant extent, the additional data provided by Twitter and Facebook is no better or more useful than traditional demographic data made available by TV stations. Knowing you're a soccer mom with an SUV in Baltimore is only slightly more useful than inferring that from the market, income bracket, sex, and age group of viewers on a TV block.
Worse, a lot of that broad-demographic advertising is branding. It will always be easier to make an impression with a 30 second full audio/video TV segment than with any kind of internet ad.
Twitter/Facebook targeting information might be revolutionary in combination with TV ad inventory. Pairing that same data with internet ad inventory is (patently) not nearly as valuable, and it never will be.
There could a freemium approach as well. The paying users get a better experience (more storage space, faster delivery, faster search), and the free users get the basic package. Seems to work for Dropbox and they dont show me ads, except ads for Dropbox itself.
I'll chime in. If we want to provide GMail free to people in Africa, then we just do it. Govt subsidize it or something. Quit shoe-horning philanthropic efforts into somebody's business model.
I wonder if Google could "solve" #1 by moving to more of an affiliate model. Like say Gmail went to a model where it cost $10/yr - but you could earn it for free for a year by performing various tasks - spending $100 on Amazon, book a hotel through Hotwire, whatever, stuff like that.
For the "desirable" 1st world citizen, that's still free - it's stuff they do anyway. Everyone else either pays the $10 or goes elsewhere. Win-Win-Lose
To expand on the concept of intent from the point of view of the user... I don't mind ads... when I am looking for ads. Otherwise they are at best a nuisance and at worst polluting. Here is a useful heuristic for a search engine that wants to improve on Google: If(contains adsense), then (probably a junk article, exclude).
What ad platforms like Facebook, Google, and most others is missing is some form of curating. A hobby of mine is woodworking. In the past I have been involved in amateur radio and know several people who still are. We homeschool our children. I bring this up because when I encounter a magazine on one of these topics I buy it, largely for the advertisements. I want to know what products are available. Repeated another way, not only am I looking at the ads, but I am PAYING for the privilege of looking at the ads. Why? The ads are always on target, directly related to the topic of the magazine. The number of scam ads are close to 0. I don't click on an ad to be taken to a "landing page" asking me for an email address to sign up for a service that doesn't exist yet.
Want to fix ads online? Develop an environment where the ads are that good that I want to see them and will not be wasting my time.
There is no such thing as a free lunch. Advertising simply shifts the cost of the lunch to the price of the advertised products, and then adds additional costs.
Using Google for example, in addition to the natural cost of its services, we one way or another pay the following additional costs:
• Cost of building and operating Google's ad infrastructure and business. Huge.
• Cost of ad production, ad agency, and other overhead. Huge.
• Cost incurred by the advertiser's competitors who don't need to advertise, but are forced to do so to not lose customers to the other. Expensive advertising arms race ensues. Huge.
• Social cost. I'd argue this is the largest. The health of society, democracy and the free market rests on the populace being well informed, not misinformed, not manipulated. The rare cases where advertising is honestly informative are far outweighed by dishonest or manipulative advertising. If you don't see this, I won't try and convince you right here, right now. There are better ways to inform the public about good products, for example something like Yelp but without Yelp's conflict of interest which stems from, yes you guessed it, advertising!
Who do you think ultimately pays these new costs (in addition to the original costs)?
As to your point about the developing world, or the poor for that matter: I think you are trying very hard to feel better about your job. I understand. I had to work on an advertising system for a few years. But advertising often targets the least informed and the least educated in society, and when it does, it wreaks its greatest social cost.
I'd dump money at Google if they monetized Gmail. While Google brand is great and proven, other services that are 'free' gives me the impression that it won't last and not safe or guaranteed. Gmail is the exception - and I'd fork money gladly if they ever decide to charge for it.
Third point - some advertising actually advertises things that you like and will enhance your life.
I know that's not a particularly popular opinion, but looking around me, I can see several things I first heard about via advertising, later purchased, and still enjoy.
The flipside of 1. is that people in Africa still need to get internet access, which is not free. So one way or another they are paying for email. You could make the same case for cellphones, yet competition and innovation is driving adoption around the world. I'm not convinced that an ad-supported model is "cheaper" for those people. Furthermore, it only works because their number is not high enough to incur a substantial cost. If it did, given that the purchasing power of those people is negligible, Google's fiduciary duty to its shareholders would be an incentive to degrade the service, make them pay, etc.
2. Things like Adwords have allowed businesses to exist...
What sort of businesses? SEO?
You fail to to recognise that business directories aka the yellow pages in some countries were around long before Google or Adwords existed. That's where small business advertises.
Neither Google nor Adwords is anythng like print, radio or TV. It's like the yellow pages. Except Google has has the lure of being a gateway to noncommercial content. There's reason to use Google even when you have no intent to purchase. There's little reason to use the yellow pages unless you are planning a purchase of some sort.
As such you have millions of people looking at Google search pages who are not looking for anything commercial in nature. And that audience presumably makes Google look like a more attractive place to advertise to a small business than the yellow pages. Whether it is actually more effective for these advertisers in terms of sales is another question.
We come back to that word again: intent.
For an advertiser, targeting a large crowd of people, _some_ of who may have an intent to purchase might seem more appealing than targeting a small group of people who _all_ have intent to purchase.
Whether it's more cost-effective for small business to devote its limited resources toward targetting the crowd or toward targeting the small group is still an open question. For Google, it's not necessary to answer that question. As long as advertisers believe the big crowd, which may include lots of people lacking any intent to purchase, is a better choice, there's no reason to question if it's true.
Maybe public libraries should start selling ad space? Surely some patrons might have an intent to purchase or could be persuaded to make one.
Google has its origins in a web-based library project at Stanford so this comparison is not as bizarre as it might sound. Subtract the non-commercial "library" aspect of Google and what's left? Adwords? SEO? Content farms, on-demand "articles" laced with display ads?
I basically agree that what Amazon (and Google for that matter; disclaimer: I work for Google on display ads) is intent and intent is huge. Much as Facebook would like to become the de facto Internet, I don't see it ever capturing that intent (let alone Twitter).
That being said, I think people discount what an inordinate amount of good advertising has done and just focus on the negatives (eg the "shit you don't need"). For example:
1. While you might be able to afford a few dollars a month to pay for the cost of GMail, as one example (note: I have no idea what the cost would be here; I'm just making up numbers), would you? People are highly reluctant to spend on this. But more to the point, what about people in Africa or Asia for whom a few dollars a month is a significant sum of money? Those people can enjoy the same service with an ad-supported model; and
2. Traditional advertising channels (print, radio, TV) weren't affordable to smaller businesses. Things like Adwords have allowed many businesses to exist that otherwise couldn't before the advent of online advertising. How many jobs do you think this has created and supports?
But I do see the whole "eyeballs-then-advertising" SV model as peaking if it hasn't already. Facebook may well be the 800 pound gorilla that broke the camel's back on that one.
And while the author notes that advertising space is growing faster than purchasing power not all advertising space is created equal. What you simply has is a diversity of distribution channels for your advertising. That's a good thing. But not everyone will succeed with an ad-supported model, that's true.
To the author's problem of working on big problems, I agree. The fact that SpaceX spent less developing a launch system and reentry vehicle than was spent buying Instagram [1] with its 13 employees makes me sad that so many bright minds are working on the apocryphal social network for cats.
[1]: I realize with the 50%+ drop in Facebook's IPO price, that sum is now significantly less.