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 ESPN.com 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 CNN.com, 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?