Google Growing on Fumes: Something Is Rotten in the State of Online Advertising

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Google Growing on Fumes: Something Is Rotten in the State of Online Advertising
by Sarunas Barauskas • May 3, 2016


[font color="blue"]We’re living in the last months of the online advertising bubble.[/font]

By Sarunas Barauskas, co-founder at Kalkis Research:


A couple of months ago, I was going through Google’s newly released 10-K filing. The night before, we had had an argument with Philippe, the other co-founder of our start-up, about how ad dollars were fueling a new kind of economy. We realized we had no clue of who was making money, by what means, or how much. I just wanted to understand.

What mesmerized me were the sheer amounts of cash Google (ehm, Alphabet) was raking in: $75 billion dollars in revenue for 2015. For 2016, they’re set to generate as much as the GDPs of Lithuania, Latvia and Estonia put together. That’s six million people.

Another thing that was weird: how vague Google was about how they actually made all this money.

Their main metric, the cost per click (CPC), was a nonsensical aggregation of a wide array of user actions, from a click on an ad that could be worth as much as a few hundred dollars, to a video ad that wasn’t dismissed quick enough, an for which the advertising company would be charged a fraction of a penny.

Their SEC filings were full of statements about how Google was revolutionary and unique. They would go to extreme lengths to describe various non-essential parts of their business. But there was very little of actually useful information about the way online advertising worked. After all, it’s only the source of 90% of their revenue. .................(more)

http://wolfstreet.com/2016/05/03/google-grows-on-fumes-online-advertising-ad-exchanges-fraud-ineffective-ads/