After our conversation for Bloggingheads the other day, I chatted with Michael Brendan Dougherty about the enormous increase in the values of baseball teams. The Los Angeles Dodgers were sold for a shocking $2 billion a couple of years ago. This value is reflected in the staggeringly high salaries teams can afford to pay to star players, like the $215 million dollars the Dodgers are giving to Clayton Kershaw. The ultimate source of that money, more than live gate or merchandising or licensing, is TV money. The Dodgers recently signed a $7 billion contract with Time Warner Cable. It’s an insane amount of money. And the contract was signed despite continued fretting over the future of the game, whether it appeals to the youth, and whether it will still matter 25 years from now.
All of this has got to seem a bit frustrating to the people in online media who scrape for clicks and pageviews and uniques, just to make enough to keep their enterprises afloat. I’m not trying to make any false comparisons here. Obviously, major league sports enjoy broader mass appeal than online media generally. Major League Baseball benefits from the artificial scarcity of their anti-trust exemption; online media, and online advertising, suffer from a problem of nearly limitless supply. Yet there’s a sense in which anyone who is trying to get attention online has a very legitimate gripe with older media like television: online media types are always looking for more ways to quantify reader attention, and developing newer and more effective (and more lucrative) ways to demonstrate value to advertisers. In contrast, television still relies on Nielson ratings, which tell you really very little about attention, and can’t account for people who are able to skip commercials with DVR technologies. Of course, that’s not quite as bad as print advertising, where advertisers are forced to rely on circulation, which means next to nothing when it comes to actually capturing attention.
My not-really-defensible feeling has been, for a long time, that in advertising, value actually comes from ignorance about real attention, rather than from information. Online ad revenues suffer because there’s so much supply, but they also suffer because there’s so much abundant information– information that suggests that online ads don’t work very well. Meanwhile, TV and print advertising may not work well either, but there’s much less ability for advertisers to find that out.
So you have a situation like this:
Which shows something like the trend that a lot of people expected on the middle left column but not the trend people expected at all on the middle right column. I dunno if the Peak Advertising argument is accurate or not, but it’s gotta be scary for content providers, both in management and “content creators.” Now you could say that the value of TV advertising is going up even while ratings go down precisely because so many online ad metrics are so discouraging; if you need to advertise, you need some way to reach eyeballs, and television ads are a traditional way to do that. And if you can’t know that people are watching and paying attention, you can at least be sure that an advertisement on a Dodgers game is getting broadcast to a huge television market.
So much about advertising seems weird to me right now. I have often been listening to a podcast or watching a Youtube video from a popular channel and seen the people making them say some version of “watch out, here comes an ad,” even to the point of telling people to turn off the player before an ad that runs at the very end. I’m always surprised by the ballsiness of this approach; don’t the advertisers hear them? But I guess if there was some threat, they wouldn’t do it. I dug this discussion on Gawker today; it’s the kind of transparency that you can’t really fake and that is a real credit to the culture there. It’s an odd subject: is buying traffic unethical? I’m not sure. I am sure that it’s odd to have an enterprise where you are really selling traffic (or potential traffic) to advertisers and then buying traffic from others. I suppose selling something for more than you paid for it is a time-honored business strategy, but it also might violate the spirit of what the advertiser expects, which is probably organic traffic. I’m also curious about the margins: how many clicks do you need to get through your traffic buying in order for it to make economic sense? It’s all a new, weird world.
I talk about baseball just because it’s a high-profile example where there is a huge amount of money being moved around and nobody is quite sure how effective the linchpin of it all is. But you can apply it to a whole number of fields. I wonder: if we had perfect information about the real value of advertising, would the whole thing collapse? Is it worth the millions of dollars advertisers pay? Or on the flipside, is advertising worth much more than its going rate? Such huge amounts of money, perched on the back of an unknown and unknowable foundation.