Shift of power from publishers to advertisers

I’m reading  Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley by Antonio Garcia Martinez and found this good explanation of how the Web world has changed:

Internet advertising has the same atavistic resemblance to the newspaper advertising that preceded it. The first such ads were run in La Presse a Parisian paper, in 1836. Advertisement was originally a scheme to lower the paper’s selling price and capture market share. A successful strategy, it was soon copied by all newspapers. The ads themselves were rectangular frames of advertiser-created content, placed either below or alongside regular content, and marked as distinct by their blocky frame and large, garish lettering.

By 2008, that had all changed, which is why a former Wall Street quant like me was at Adchemy. A company called Right Media was allowing advertisers to segment users into specific clusters based on their actions on a given site (e.g., putting something in a shopping cart). Originating the notion of real-time data synchronization between the online world and specific publishers, Right Media even let you tag users that came to your site (or anywhere else) and find them again later. Acquired by Yahoo in 2007, it had developed the first “programmatic” media-buying technology; “programmatic” meaning media controllable via computers talking to one another, rather than humans talking to one another via sales calls. Additionally, one could target advertisements based on user demographics like age, sex, and geography. Media buying was no longer about putting a square on the automobile or real estate section, but about finding specific users anywhere and anyhow.

In media, money is merely expendable ammunition; data is power. With this new programmatic technology that allowed each and every ad impression and user to be individually scrutinized and targeted, that power was shifting inexorably from the publisher, the owner of the eyeballs, to the advertiser, the person buying them. If my advertiser data about what you bought and browsed in the past was more important than publisher data like the fact that you were on Yahoo Autos right then, or that you were (supposedly) a thirty-five-year-old male in Ohio, then the power was mine as the advertiser to determine price and desirability of media, not the publisher’s. As it turned out (and as Facebook would painfully realize in 2011, forming the dramatic climax of this book), this “first-party” advertiser data—the data that companies like Amazon know about you—is more valuable than most any publisher data.

This was a seismic shift that would affect everything about how we consume media, leaving publishers essentially powerless and at the service of the various middlemen between them and advertiser dollars, all in the name of targeting and accountability. If the publisher wasn’t savvy enough to arm itself with sophisticated targeting and tracking before tangling with the media-buying world, then that world would come to them, in the form of countless arbitrageurs and data quacks peddling media snake oil.

Here’s something you may not know: every time you go to Facebook or or wherever, you’re unleashing a mad scramble of money, data, and pixels that involves undersea fiber-optic cables, the world’s best database technologies, and everything that is known about you by greedy strangers. Every. Single. Time. The magic of how this happens is called “real-time bidding” (RTB) exchanges, and we’ll get into the technical details before long. For now, imagine that every time you go to, it’s as though a new sell order for one share in your brain is transmitted to a stock exchange. Picture it: individual quanta of human attention sold, bit by bit, like so many million shares of General Motors stock, billions of times a day.

The author is a former Physics grad student who joined Goldman Sachs in 2005 and then got into Internet advertising as Wall Street collapsed (but not Goldman: “When the markets presented an apocalyptic Boschian landscape, every Goldman grunt, sergeant, and general would close ranks and form a Greek phalanx of greed. Unlike almost every other bank on the street, Goldman could actually calculate its risk across desks and asset classes out to five decimals. The partners, who had much of their net worth wrapped up in Goldman stock, held tense meetings and came up with a plan to save the foundering ship. Favors were called in. Clients squeezed. Risks very quickly hedged and positions unloaded. Despite the mayhem (and all the promises of drama in Liar’s Poker) I rarely saw anyone lose their cool for longer than two seconds. We bled, but others died, and you felt fortunate to have a front-row seat at the biggest financial show in a generation.”).

No punches will be pulled in this book it seems, e.g., “Goldman Sachs was unusual among Wall Street banks in that it had mostly kept a partnership management structure. Hence, every incoming employee was hired by a specific partner, and you were that partner’s boy. My feudal liege lord was a short, balding guy with an intense stare and oddly biblical name: Elisha Wiesel. Elisha was none other than the only son of Elie Wiesel, the famous Holocaust survivor whose horrifying Night is required reading for many American high schoolers. His father may have been a Holocaust luminary and a public intellectual, but his son was a vicious, greedy little prick.”

I wonder if there will be a further dramatic change in Internet advertising or if this will prove to be the steady-state (television advertising reached a steady state in the 1950s?). If so, this means that mass-market publications (celebrity news!) will increase their dominance over specialty publications? Or if the specialty publication (about yachting?) attracts super rich readers then it can still thrive by auctioning them?

Readers: Who else has read Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley?

9 thoughts on “Shift of power from publishers to advertisers

  1. I would like to be able to auction my own attention: Let me sell 10 slots/day in my e-mail box to the highest bidder. All other e-mail is required to be from verified contacts, and all ads will be blocked.

    Perhaps some young MIT engineer will latch onto my business model… Current leading platforms (Facebook, cough) are the proverbial frog in a pot of boiling water, as customers hate the ad oversaturation, but didn’t really have a choice as the platform was different in the beginning before it crowded out competition and changed terms.

  2. Sounds interesting. So I went looking for it in iBooks, and discovered that, alongside two editions of it – one 528 pages long presumably ePub; the other 320 pages, presumably fixed-page-size spread iBooksAuthor format (ePub3?) – there was also a €3, 41 page 3rd party edition “Summary and Analysis of Chaos Monkey” published by Instaread, and intended to be read in under 15 minutes.

    The funny thing about the latter is that it was published 3 months before the other two full electronic editions. Seemingly the rights-holding publisher hadn’t thought of catering to that niche market, in essence to first be selling a quickie “digested read” edition but with a coupon or equivalent towards the purchase of the proper one. I’ll get the ebook.

  3. I’ve read it, and found it to be a great insider’s tale of the start-up world in Silicon Valley. Can’t judge whether or not it’s representative, but lots of good stories, nevertheless. More entertaining than most Silicon Valley-based books I’ve read. The author certainly has a high opinion of himself. His last-minute ditching of his partners in the Twitter acqui-hire was worthy of Goldman Sach’s reputation for ruthlessness. Not a nice guy, but certainly lots of “dishing” on this sub-culture. Some interesting Facebook insight, as well, where he also worked. His solution to Bay Area real estate was brilliant—ship in a sailboat and live on it! Well played.

  4. While researching the title, I realized that the story “rang a bell,” so I must’ve read something of, or by Antonio García Martínez. It turned out to be this 16kB-long excerpt from “Chaos Monkeys,” posted by AMG, who also characterizes ‘self as “unsavory character of ill repute.” I.e. as double-dealing an asshole as Steve Jobs was in his early stock-dividing Apple times, and PROUD OF IT. Judging by Göögle news feed, this excerpt may well represent what in the movie context is called “the money shot.” So, without further ado (12 min read):

    How I Sold My Company to Twitter, Went to Facebook, and Screwed My Co-Founders The fate of AdGrok, as told by the CEO who pulled off one of Silicon Valley’s most amazing outcomes

    OR @

  5. I found the entire book to be well worth my time. Very funny, sharp turns of phrase, well-positioned to have first hand opinions on key moments in tech.

    He explained the economics of both ads and acqui-hires with sufficient clarity to show me the extent of my ignorance. Ads are literally the gold in these Silivalley hills. Acquihiring is probably the most likely exit that counts as successful. So I greatly appreciated his lucid exposition on both topics.

    He apparently tried to make himself sound as bad as the others he savages so well. I don’t think this was quite successful.

    On twitter, he rebuts neg reviews by pointing out that most dislike is for SV culture, rather than for his book

  6. Speaking of the devil… the subject of invasive ad-tracking, which together with browser- and device fingerprinting makes any one of us into a uniquely and recurrently identifiable sales prospect online, has been mentioned here once before. I went back to the source, and extracted this (graphically embellished by me) topical part from it:

    [Maciej Ceglowski] “[…] I’ve come across these diagrams of the “adtech ecosystem”, which I love. They communicate the sordidness of advertising in the way simple numbers never could.”

    So I’ve tried to express these his numbers for this ASCII-graphic medium. The adtech ecosystem from 2011 to 2015. Each vertical bar “|” represents 10 companies, quite like that AdGrok of Antonio García Martínez’s:

    2011 |||||||| (100)
    2012 ||||||||||||||||||||||||||||| (350)
    2014 ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| (947)
    2015 ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| (1876)

    Continues Ceglowski “They are all competing for the same little slice of your online spending.

    This booming industry is very complex—I believe intentionally so.” [much more at the source below]

    October 29, 2015 | Maciej Ceglowski
    Idle Words > Talks > Website Obesity [44kB] @ Web Directions conference in Sydney, Australia

    53m video of the same talk

  7. Jack: If you want to start picking apart the sentences word by word you’ll have to read the book! The reference is to paragraphs above the quoted passage.

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