Friday, 21 October 2016

The Downfall of the Ad-Supported Internet

The Internet has been an amazing tool these past twenty years since it came into the public eye. The rise of various web services, including free e-mail, search engines, social networking, gaming, and other tools has been extraordinary. However, these have historically been supported by advertising revenue. Google is a multi-billion dollar company, and the vast majority of that comes from advertising. So how does that happen? How do they make all of that money?

Well, advertising revenue is nothing new. If you want to see how it worked before the Internet, the Yellow Pages are a great example of an ad-supported product. They provide free listings of phone numbers in the local area, and allow businesses to pay for larger entries, or large ads in a given section. Another example is the newspaper, or flyer delivery. Obviously, the newspaper costs something to have delivered, but it would cost a lot more if it was not supported by the advertisements. Newspapers have a lot of costs to cover though, from content production, to printing costs, to delivery costs. Public transit also typically relies on advertising revenue to help offset costs.

However, in the modern era of the free Internet, ads became more common. You may remember from the early days of the Internet when you might expect a banner ad at the top of the page at most. In fact, they became so common, that we began to train ourselves to ignore them. This resulted in more aggressive advertising, including sidebar ads, pop-up and pop-under ads, mid-text ads, and even text-link ads. You also, occasionally, find sponsored content, where an advertiser pays a journalist to review a product, or insert a product into content. This can be as bad as an article commissioned to review a product as superior to the competition.

The effect of all of this, unfortunately, is that more and more companies are more and more desperate to get advertising space, but it is less effective and not worth as much as it used to be. At some point, this is going to result in a situation where either the advertisers will stop buying ads, and the revenue won't cover the costs, or a site will be almost entirely ads, with very limited content to justify the existence of the page. At some point, we're going to have to face the fact that the freedom of the Internet is either going to decrease, or we will need to create a different means of monetizing it.

This is going to be a huge problem for companies like Google and Facebook, that draw most or all of their revenue from advertising. This is also going to be a problem for the rest of us and especially the ISPs, because these companies are what make the Internet valuable. Content makes the Internet important, and without content, access doesn't matter. That is why some of the net neutrality arguments are so ridiculous. Internet providers are complaining that people are using too much data? If there wasn't so much data, people wouldn't be willing to pay for access to the Internet. Comcast can't handle the Netflix traffic? That's why Comcast exists! Almost, the ISPs should be sharing their revenue to the content producers, because that is the source of their livelihood. Comcast should be paying Netflix to stay on its network. Verizon should be paying Facebook to keep people interested in the online. AT&T should pay Google to make sure there is something for its customers to go online and start from. Of course, they are unlikely to see it that way, and almost certainly will not be willing to pay for the Internet to exist for now.

So what is the solution going to be? I have some ideas, but it isn't going to be a quick fix. The Internet needs a new method of monetizing content. That problem will not be solved overnight. The Internet is going to experience some growing pains as we switch from the advertising revenue model to find something new. Of course, advertising will probably continue, but hopefully we can scale it back down a bit to what it should be, back when the Internet began.

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