Or, as Hwang puts it: “The whole edifice of online advertising is, in short, bunk.”
These problems aren’t entirely new, of course. Hwang cites an adage attributed to the 19th-century businessman John Wanamaker: “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.” But Wanamaker was grappling only with the problem of attribution—figuring out whether the money he spent on a newspaper ad, say, drove sales that otherwise wouldn’t have happened. Today’s programmatic advertising has that issue in spades, plus the extensive problems of placement and fraud. At least Wanamaker could check that his ads had actually appeared in the newspaper.
Had the biggest ad agencies of the analog age—companies like Oglivy or WPP—gone belly-up in the 1980s, the fallout would have been limited to Madison Avenue. Now the central players are Facebook and Google, with Amazon racing to join them. Those three companies alone account for roughly 10 percent of the US stock market’s total value. Their destiny is bound up with that of the global economy.
What would it look like if the ad bubble burst? Hwang compares today’s units of online ad inventory with the toxic securities of 2007: Both derive their value from an overvalued, hidden asset. (For one, it’s a shaky home mortgage; for the other, a user’s putative attention.) It would be more apt, however, to compare those pre-recession financial instruments with the stocks of companies that make their money from digital advertising. The sale of a moment of an internet user’s attention is a one-time transaction. A financial bubble, however, requires an investment made at time A to prove worthless at time B. A mortgage-backed security is, well, a security: an investment backed by the future value of the underlying mortgages. A share of Facebook or