I believe we (mostly the internet, mostly Google) are in an advertising bubble. (For anyone not familiar with overused financial metaphors, that means advertising is grossly overvalued, but we don't know it, and sooner or later, the bubble will burst, and revenue for people selling ads is going to come crashing down.)
I am no expert on this matter; I have no hard scientific evidence to back up this claim, nor have I even researched what the economists and financial experts have to say about it (but as we now know, they are terrible, terrible predictors of bubbles anyway). I'm simply going with my gut on this one.
I just cannot see how a company that is as massive and spendy as Google can possibly be sustained by producers trying to get gullible consumers to buy their products. Right now, it may seem to be a sustainable model. There are literally millions, probably billions of companies starting up on the internet, trying everything they can to gain a foothold in their respective markets. I don't know whether the bulk of internet ad revenue comes from these guys (the "long tail", millions of people paying ten bucks each) or large corporations (tens of people paying a million bucks each).
There are a few ways this bubble could burst. Here are the three I can imagine:
- The little guys bail. The vast number of internet startups could dwindle as greedy, risky entrepreneurs realize that only a tiny fraction of sites will win big like Facebook and YouTube did (though this already happened in the "dot-com bubble"). Or, the modest entrepreneurs just trying to make a living on their niche hobby could give up when their ads just don't draw enough customers to turn a profit.
- The big guys bail. Big corporations are scrambling right now to try to take advantage of the internet in any way they can. They are trying all kinds of new ways to advertise. It's a blitz, and I think they will eventually find one strategy that works and give up on the rest, or give up on all of them in favor of something else entirely.
- The consumers get wise. If advertisers actually are making money from consumers who are enticed by their ads – and I'm not at all convinced that this is the case – then consumers are the most gullible group of people that I've ever seen. They could learn to ignore the omnipresent ads and only buy what they really want, not what someone tells them they want. Frankly, though, if they haven't already learned this, they probably never will. (I say "they" because I can't remember the last time I clicked on an internet ad, much less bought something because of one.)
