Is the second dotcom bubble already inflated?
The first dotcom bubble burst, because all business models turned out to be unviable, except for one - Internet advertising. And now, after a few years, there are signs that this industry is also reeling. Some experts ask : Do we really see signs of the impending collapse of the Internet economy?
TechCrunch recently reported that Lookery, a company that sells advertising on social networks, is experiencing serious financial difficulties, even though it sells 3 billion ad impressions a month. Recently, they were forced to reduce the price from 12.5 cents to 7.5 cents per million, which is why their financial situation deteriorated even more.
Of course, some may say that the problems of Lookery are related to the fixed cost of advertising. Like, the same Google allegedly determines the market itself prices. But everything is not so simple there. In fact, in the AdWords ad network, there is a minimum allowable value for keywords that are traded at an auction. For example, for the keyword “Flash”, the minimum cost is 10 cents, and now there are no ads for this word on Google’s website (although there is another reason why Google can remove ads from circulation: this is if the CTR is too small, but not relevant to this theory). Anyway, this advertising market can not be called open.
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In other words, a significant proportion of search advertising is sold at an artificial price, and Google sets a monopoly on the minimum level of this price. We do not know how much advertising is sold at an artificial price - maybe 50%, and maybe 70%. Thus, even Google is not immune from the general fall in advertising prices, as happened with Lookery. In fact, it turns out that the global online advertising market is now artificially inflated - and may burst at any time.
Naturally, Google sets the minimum price threshold for a reason. The fact is that in the search advertising market such a strange phenomenon is flourishing as speculation. Website owners buy AdWords keywords for cheap, and on the landing page they place contextual advertising from other ad networks for the same keywords, which are much more expensive: sometimes at times, and even dozens of times.
That is why Google has set a minimum price threshold: so that spammers do not buy up everything at 1 cent per click.
But what happens? This means that in other advertising networks the cost of advertising is even higher than on Google, that is, there the market is artificially inflated even more! This is another and clear evidence of an inefficient market that cannot be called open and therefore stable. In an efficient market, an advertiser would have bought ten times cheaper AdWords ads and there would be no room for speculators.
In such a situation, there is a real danger - what if the value of contextual advertising falls to its real level? If this real level is much lower than the current one (and we don’t know for sure), then this can mean only one thing - a sharp decrease in the turnovers on the contextual advertising market, a sharp drop in the prices of locomotive shares of the dotcom market of Google, Yahoo, and so on. and, as a result, the collapse of the Internet economy.
TechCrunch recently reported that Lookery, a company that sells advertising on social networks, is experiencing serious financial difficulties, even though it sells 3 billion ad impressions a month. Recently, they were forced to reduce the price from 12.5 cents to 7.5 cents per million, which is why their financial situation deteriorated even more.
Of course, some may say that the problems of Lookery are related to the fixed cost of advertising. Like, the same Google allegedly determines the market itself prices. But everything is not so simple there. In fact, in the AdWords ad network, there is a minimum allowable value for keywords that are traded at an auction. For example, for the keyword “Flash”, the minimum cost is 10 cents, and now there are no ads for this word on Google’s website (although there is another reason why Google can remove ads from circulation: this is if the CTR is too small, but not relevant to this theory). Anyway, this advertising market can not be called open.
')
In other words, a significant proportion of search advertising is sold at an artificial price, and Google sets a monopoly on the minimum level of this price. We do not know how much advertising is sold at an artificial price - maybe 50%, and maybe 70%. Thus, even Google is not immune from the general fall in advertising prices, as happened with Lookery. In fact, it turns out that the global online advertising market is now artificially inflated - and may burst at any time.
Naturally, Google sets the minimum price threshold for a reason. The fact is that in the search advertising market such a strange phenomenon is flourishing as speculation. Website owners buy AdWords keywords for cheap, and on the landing page they place contextual advertising from other ad networks for the same keywords, which are much more expensive: sometimes at times, and even dozens of times.
That is why Google has set a minimum price threshold: so that spammers do not buy up everything at 1 cent per click.
But what happens? This means that in other advertising networks the cost of advertising is even higher than on Google, that is, there the market is artificially inflated even more! This is another and clear evidence of an inefficient market that cannot be called open and therefore stable. In an efficient market, an advertiser would have bought ten times cheaper AdWords ads and there would be no room for speculators.
In such a situation, there is a real danger - what if the value of contextual advertising falls to its real level? If this real level is much lower than the current one (and we don’t know for sure), then this can mean only one thing - a sharp decrease in the turnovers on the contextual advertising market, a sharp drop in the prices of locomotive shares of the dotcom market of Google, Yahoo, and so on. and, as a result, the collapse of the Internet economy.
Source: https://habr.com/ru/post/30033/
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