Ad-Tech

A Barbarian Does Some Bubble Bashing

rick webb1 A Barbarian Does Some Bubble BashingRick Webb weighed in on all the tech bubble talk this weekend with a post that adds the much needed context from the advertising industry. As co-founder of the Barbarian Group, an interactive marketing agency, Webb gets down and dirty with the advertising budgets of the big companies that are supposed to provide the dollars to back up all the monster valuations being nabbed by ad-tech startups these days. Ask any company collecting reams of consumer data and they will tell you that advertisers are going to pay a premium for the ability to laser target users and that the spending on the digital side is rapidly accelerating. Webb tumbles his dissent:

“Every time I talk to a Valley person about this they go on about how marketers want more data and they’ll pay for it, and they want to know everything about a person and oh man do you know how much advertisers would pay for this data? Well, yes, I do. But I guarantee you, YOU DO NOT KNOW. They have fixed budgets. I could tell you EXACTLY how much they will spend, because I spend that money. It is not bottomless. The endless quest for advertisers to know everything about their customers may never end, but its budgets will not increase forever.  We will pick the best 3-10 data sources and stick with them. And in the meantime, the VCs will have effectively funded a massive R&D effort to radically improve those sources (THANK YOU) but in the end, we’ll still be paying about the same amount a year for the same 3-10.”

Webb calls out what he sees as a number of bogus trends; a mass erosion in television viewership, mass migration of senior citizens to the web. It’s not that there aren’t real changes underway, but they aren’t occurring in a way that ca keep pace with the bubble surrounding the startups aimed at these markets. More importantly, he points out what newspapers learned a long time ago about the web, which is that the rich detail available about users online actually makes it harder to leverage large corporate budgets.

“IF (big if) Silicon Valley ever actually delivers on the snake oil dreams of perfect information and perfect targeting that they promise the ad world (and, by the way, for the record, I doubt I’m alone in advertising when I say I don’t want it, and I don’t need it, but that is totally a different article), why would I need to buy a bunch of ads on the 1,000 or so new ad-funded startups to reach my audience? The very efficacy of the products the Valley is building will utterly disrupt the economics they are purporting to claim will sustain them.”

In some ways of course, Webb’s argument does not contradict the strategies of investors like Yuri Milner, who are putting the money into reams of new companies. They do expect most to fail. The few that hit it big, the thinking goes, will more than compensate for the rest. But peeking out from behind the curtain, Webb does have a perspective on the growing gap between the industry and expectations.

 

 

 

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Tags: Ad-Tech