The web will collapse unless we act, says a Harvard Business School Manager’s blog post by Umair Haque, Director of the Havas Media Lab, Thanks to Peter Milburn of Re:Direct for tweeting about this (although he thinks it’s oversimplified). See excerpts from the blog below. Full post at http://blogs.harvardbusiness.org/haque/2009/11/facebooks_scam_ads_and_the_loo.html
I want to know what do you think can save the internet economy?
“Are crises predictable? That’s what most economists are thinking about these days. The great Hyman Minsky spent a lifetime building a model of macroeconomic crisis, striving to do exactly that. … here, a tiny model of microeconomic crises: how industries crash and collapse….media just might be the new Wall Street.
Today’s media players aren’t investing in better ads. They’re investing in more — and more toxic — ads. Uh oh: it’s the economic equivalent of the subprime crisis. The parallels, to me, are too striking to ignore…
Toxicity. Wall Street’s subprime crisis was built on toxic financial instruments. The mediascape’s subprime crisis is being built on toxic communications. Social gaming — Facebook’s Farmville, for example — is the hot growth area for VCs, advertisers, and publishers alike. But last week, TechCrunch blew the lid off it: much revenue in this nascent market is derived from scams masquerading as “ads.” To me, there are striking echoes of CDOs — a hot new growth market for Wall Street, later revealed to be a house of cards.
Value Chain Expansion. The financial crisis happened in large part because of massive reintermediation. Once, banks held debt till maturity. The great unnovation was being able to sell it to the next guy, who sold it to the next guy, and on and on and on. What was once a simple, short value chain lengthened to the point of absurdity. Exactly the same value chain pattern is surfacing in media. Ads used to be bought and sold through a short value chain. Facebook ended up serving toxic ads because they were sold through lengthening chains of intermediaries — each of whom shifts the buck to the next guy.
Unnovation. The problems in the mediascape neither begin nor end with Facebook. The deeper issue is this: It’s an industry supported by ads, but no one’s improved ads. Advertising has seen only unnovation, not innovation. Negative quality ads — scams — are just one example. That giant drop-down flashing banner ad that invades my favourite newspaper? Dudes, that’s not innovative — it’s just transferring value to advertisers by imposing a steeper tax on consumers. In the final analysis, every industry that cannot strive to improve — only to unnovate — must reach the crisis point.
Posted by Kathy Sandler on Friday, November 13, 2009 at 12:01 AM