Where Does All This Great Stuff Come From?
- Most web sites are free
- Most software is free or very cheap
- How does this work?
- One answer: cheap digital distribution
Create once, many people can use
Spreads the costs over lots of people
- But somebody needs to create those bytes...
Eyeballs and Monetization
- Interent econ speak
eyeballs and monetization
- eyeballs = internet term for people spending time/attention on a site
e.g. Facebook, nytimes.com
- "viewership" is perhaps an older term for the same thing
- Not just web sites:
- twitter, instagram, netflix, NBC
- have eyeballs
- There's a ton of competition to get eyeballs
- e.g. nytimes.com has articles, so we spend time on site reading them
- e.g. facebook has images/news tailored for us, so we spend time there
- e.g. twitter interesting content from the internet
- monetize - the site has eyeballs, convert that to money
internet insider/business word
Monetize with Advertisements
- Advertisements are a common way to monetize eyeballs
- The amount of money is very small
- Perhaps a fraction of a cent for an ad "impression"
- BUT the site has millions of users
- Ad ecosystem:
- user eyeball ($) TO advertiser ($) TO content producer (content) TO eyeball
- It's a cycle!
- 1. NBC tv, broadcast radio - ads mixed with content (demographic targeting)
- 2. Facebook - ads targeted based on social network (social network targeting)
- 3. web-search ads (search-term targeting )
Targeting and Ad Relevance
- Relevance - an ad is high relevance if the person is more likely to act on it
- Targeting - publishers want to optimizing/raise ad relevance
- Put the right ad in front of the right person = make more money
- 1. NBC tv, broadcast radio (old school version)
-demographic targeting: who watches what kind of show
-AXE body spray ads (gender + age)
-Medicare drug insurance ads (age)
-Gold coins (famous Glenn Beck, political-right media))
-Nobody needs financial advice from the CS dept, but
...IMHO gold is a terrible investment!
- 2. Facebook, twitter ads
- like the above, but better tuned to your age, interests
Web Search - Organic vs. Ad Results
- You will have many opportunities to think back on this discussion!
- Ad targeting based on what you just searched for
- This has proved to be very profitable niche - google etc.
- Thinking about buying something ... do a web search
- Web search results, a mixture
organic results- information we estimate the user is actually interested
non-organic (ad) results - ads which buy placement on the page (ideally visually distinct)
- Demo e.g. search for "monterey" "monterey vacation" "half moon bay vacation" "weather" "tire chains"
- We see a mixture of organic and non-organic results
- Similarly Facebook/Twitter try to mix relevant ads with the content
Web Search Business
- Advertisers bid in an auction for to be the ads on a page
- #1 in list costs more than #2, etc. etc.
- e.g. example page above with multiple ads
Advertisers there had to fight it out
- These ads are high relevance = worth $ to advertisers
- Web search advertising is very profitable (!)
- Google has lots of money to spend on all these other free things
- Microsoft (Bing), etc. also want to be in this business too
User vs. Advertiser - Key Business Lesson
- Advertisers want:
-lots of ads, very little organic (zero?)
-flashy animations, sounds
-make ads and organic results look the same
-yahoo.com did this in the 2000's
- Google strategy
Do what make users happy first
Advertisers will follow
Proved to be a great strategy!
- Google results: Ads are separate, graphics are restrained, lots of organic results
- yahoo.com used to have a very ad-heavy design - long term, drove users away
- Yahoo has since almost gone out of business
- Look at yahoo.com now -- same restrained strategy as google
- Dynamic: switching search engines is easy
- Therefore the search results have to be user-friendly
- A nice "good guys finish first" story
Web Search Default - Funding the Browsers
- Web browser is an expensive piece of software
- Yet there are many great free ones
- They even advertise to get you to use them
- How the heck does that work?
- When you install a browser, what is the default search engine?
- Answer: web search companies pay to be the default search engine on a browser
-Even though the user can just change it!
-Something like 90% of users just leave the default
- A tiny slice of that web-search money is sent back to the browser makers
- Sometimes malware will try to switch the search engine (perhaps for a payment)
Web Search vs. Privacy
- Having highly relevant/targeted ads can be creepy
- Amazon does this, for one example
- e.g. I search for a gas BBQ on amazon
- later pages on random sites show up with gas BBQ ads
- Relevant ads raise more money (funding content, below)
- But can seem creepy
Ads Metaphor - Bee and Flower Symbiosis
- "war" is a very common metaphor - A wins, so B loses
- sports fit this pattern
- hurting A helps B
- War is not the right metaphor for many economic schemes
- suppose you destroyed all the advertisers
- is a web utopia the result?
- the ads pay for the content
- Bee and Flower is a good metaphor, symbiosis
- each side contributes something, each side gets something
- flower "wins" by making the bee successful
- e.g. suppose a flower saves energy putting out water instead of nectar, all its bees die
- For whatever reason war is an easy metaphor to slip into, so think it through
- Disclosure: I don't use an ad blocker
- Ad blocker: browser software to block ads
- Makes your web experience nicer
- Pro ad blocker:
- Ads are irritating, use up bandwidth, screen size etc.
- Anti ad blocker:
- Bee and Flower!
- Without ads, no web, no facebook, etc.
- A lot of stuff you like is funded by ads
- BUT .. what is preventing ad overreach?
- Google Ad Blocker
- Google claims to block only most obnoxious ad practices
- Easy to imagine Google thought this was better
vs. annoyed users installing total-ad-blockers
- Easy to imagine a future where ads and ad-blockers are in some balance
Non-Ad model: Pay The Artist Directly
- Ads have been very important: radio, TV, newspapers
- Other model: user pays the content creators directly
- HBO, HULU, Netflix, printed books!
- Aggregators like Netflix seem to be the sweet spot
- This model is growing - no ads
- If you hate ads, you should try to support this model
- Hybrid: nytimes.com, WSJ - pay them AND you get ads too