Ads and Big Tech
https://medium.com/@profgalloway/elephants-in-the-room-31e072ea75ae
In class, we learned about how companies like Google make money through Ads. We discussed the market based around the information seeking behavior of millions of people making their way through the Web, and the system of clicks that generates profit. Digital ads made Big Tech companies like Meta and Google into what they are today. Most recently, however, these companies that we have discussed and use these methods to generate profit have been struggling. According to the article, “Google is down 40% this year, Amazon 45%, and Snap 80%”. But why are these companies not making the revenue from ads that they used to?
A lot of big tech companies blame these issues on “uncertain and volatile macroeconomic landscape”, however this article by Scott Galloway explains that this is not the case. Instead, Galloway argues that this decline is due to Apple’s iOS upgrade which forced apps to ask users for permission to track their data. When this prompt appears, only 16% of users agree to their data being tracked. Without this data, companies can no longer track consumers and their interests as efficiently, unable to show the right ads at the right time therefore getting fewer clicks, and decreasing overall revenue.
Interestingly, TikTok is not affected by the iOS update the same way that other companies are. Instead, TikTok’s global ad revenue will triple this year to $12 billion. Many buyers turned to TikTok when other companies’ ads became less effective. According to research, TikTok is more protected against privacy changes because it can find a way around the code audits and track user activity regardless. TikTok is also different in the way that it does not rely solely on active behavior and user networks. TikTok uses an information cascade in which it predicts how much a user will enjoy a video based on how much others enjoyed the video. As a result, masses of people watch the same videos regardless of whether or not they align with their personal interests. Many companies take advantage of these cascades by advertising through TikTok, and having the most popular people advertise their products, convincing viewers that those people know something that they don’t.