These linkages go beyond the media. One of the perverse developments of online advertising is that its outsize profitability has allowed it to float enterprises that might otherwise be insolvent. Like the banks during the subprime crisis, dense links between advertising-driven businesses and the rest of the economy mean that vulnerability in the attention marketplace may produce harm in other, less expected places. The sudden collapse of the profitability of online advertising in, say, Google Search might affect the availability of free services like Google Scholar or reduce overall investment in self-driving vehicle technology.
This is not to mention the impact on society at large. In a distressed situation where previously free services throw up paywalls and limit features to premium tiers of service, accessibility will turn on the ability to pay. Not everyone will be able to afford a subscriber-only version of the web, and such a transition could deny vulnerable segments of the population access to the critical services that they have come to rely on. Failing to address these issues in advance would be a cruel kind of irresponsibility.
Third, an uncontrolled popping of the bubble is less likely to lead to permanent change. In the absence of a clearly articulated, workable alternative, one might imagine a serious downturn after which the existing advertising ecosystem dusts itself off and resumes along the same path again. That would mean the return of the same markets with the same faults. Ensuring robust, sustained change in the structure of the web requires creating the space and opportunity for real alternatives to programmatic advertising to emerge.
Like in the demolition of a building, the safest approach might be to bring about a well-considered and structured implosion, rather than allow for an out-of-control collapse that might harm bystanders and create unintentional damage elsewhere. To that end, we may not want to simply wait for the crisis to arrive. Instead, it may be important for us to actually accelerate and bring about the collapse of the programmatic advertising bubble in ways that allow us to control the consequences.Starting a Manageable Crisis
Programmatic advertising is a bubble. The potent combination of opacity, perverse incentives, and ever-eroding value has produced this bubble. But ultimately, financial crises depend on a crisis of confidence: a spreading panic that a highly sought-after asset is perhaps worth far less than originally speculated. How might we provoke such a crisis of confidence in the online advertising economy, particularly when billions of dollars are steadfastly committed to ignoring these warning signs? Can we control that crisis in such a way that its consequences do not spin beyond our control?
We’re aided by one significant difference between the mortgage-backed securities market of 2007–2008 and the programmatic advertising market of today. In the subprime crisis, the mortgages at the root of a complex system failed. Loans were issued to home buyers who were unable to pay, resulting in defaults that upended the global economy. The panic over the viability of the assets being traded in the market was, in other words, built into the very structure of these marketplaces. Once this trip wire was triggered, the resulting cascade was impossible to manage.
In contrast, the troubles that plague the advertising economy are creeping threats. People pay less and less attention to advertisements online and steadily adopt ad blocking. Click fraud has proven to be pernicious, eroding the value of advertising inventory and resisting attempts to curtail it. Trust continues to decline between ad buyers and the wide array of players in the ecosystem with conflicting goals: the agencies, ad exchanges, online platforms, and publishers that facilitate the distribution of ads online. This slow, multifaceted creep of a range of structural problems means that the market can be stepped down in stages over time, with a series of targeted crises helping to slow and eventually reverse the flow of money into the ecosystem.
Such a calibrated takedown may be more plausible than it initially appears. The erosion in trust necessary to trigger changes in the behavior of a marketplace may be smaller than you imagine. The stock market can enter a recession without every company in an economy experiencing a downturn. The subprime mortgage crisis didn’t necessarily depend on every mortgage defaulting or every mortgage being subprime. Similarly, the online advertising economy can head toward a crisis without causing the collapse of advertising as a whole. The decision of a few key players to cast their lot outside the modern programmatic ecosystem could very well be sufficient to bring the various looming problems we’ve discussed to the fore as it has in previous market bubbles.9
So how do we burst this bubble? Two pillars of faith give programmatic advertising an aura of invulnerability: measurability and effectiveness. The core proposition of programmatic advertising is that it gives advertisers an unprecedented depth of accurate data about consumers, which is able to produce uniquely effective outcomes for advertisers. For supporters, this makes programmatic advertising superior to earlier, established channels for running ads like television and print. For critics, this makes programmatic advertising a particularly powerful and pernicious force in society.
Reducing confidence in the measurability and effectiveness of programmatic advertising will chip away at the willingness of ad buyers to pour money into the ecosystem. This provides a brake that we can tap in order to slow the flow of cash into the marketplace. If it turns out that the data collected by advertisers are not in fact accurate, or that the data are not in the end all that useful for shaping perceptions and behavior, then programmatic advertising is not “better” in any real sense.
Independent research may be a particularly powerful tool for shaping industry views of
