Subprime attention crisis

6 minutes estimated reading time

Subprime attention crisis is a short book, or a long essay depending on the way you want to look at it. It was written by Tim Hwang.

Sub Prime Attention Crisis

About Tim Hwang

Hwang is a lawyer working for email newsletter platform Substack. Prior to this he worked in a US think tank attached to Georgetown University: Center for Security and Emerging Technology and in public policy at Google focused on machine learning. So he brings a deep set of knowledge to writing Subprime attention crisis. One also has to bear in mind that his current employee Substack is based on the online media model moving from online advertising driven to subscription driven.

Timing is everything

I read this book over a couple of days at the beginning of this month. By this time, Meta and Alphabet has published quarterly results that were below what investors expected with falling sales. Add into the mix that the problems that Twitter and Snap have had (which are are bigger issues than just down to the dynamics of the online advertising market), all of which makes this book feel timely.

On the other hand, one could also argue that much of the crisis had already landed. Ad tech businesses like Rubicon Project have either gone under or merged with their peers creating a massive amount of consolidation. The latest wave of consolidation happened in 2020 – 2021.

Meta-specific issues

Even with Meta and Alphabet there are business specific issues. Meta has struggled to compete effectively with TikTok. The poisonous nature of debates on Facebook, together with an aging audience on the platform hasn’t helped. In fact it’s a wonder that the context collapse that the platform has suffered from for at least the past six years hadn’t dragged it down yet. WhatsApp has helped enrich Facebook data and provided a channel for business services. At the time Facebook bought the business partly because Zuckerberg needed a brain trust for the future. The brain trust is gone and Zuckerberg’s dive into the Metaverse looks very similar to Apple’s peak John Sculley moment with the Knowledge Navigator concept. You can see glimpses of the Knowledge Navigator in the smartphone, the iPad, the now abandoned WikiReader product or the use of contextual information and national language processing like Siri. Apple didn’t waste the kind of money that Meta has spent chasing an illusory vision of the future.

Alphabet-specific issues

I was surprised that Alphabet growth had lasted this long based on the following considerations:

With mobile, Google also pivoted a different type of search from product search to where is my nearest coffee shop with free wifi and has managed to sell search ads against them. This meant that Amazon and eBay managed to capture a lot of product searches, with consumers only hitting up Google afterwards and Amazon’s advertising has been eating Google’s lunch. Secondly a lot of the high street and neighbourhood shops have been eaten alive by food delivery services and this was then exasperated by the COVID which has changed at least some people’s consumer behaviour

Historically, Google has been too focused on looking for multi-billion dollar opportunities which haven’t panned out and closed down smaller services that were making money and bringing in attention. In essence, over the years they have thought Google Reader, the Google Search Appliance, Google Health, Boston Dynamics and several other projects were the big payday. They weren’t, but they were respectable business opportunities, just too small for Google to want to pursue. In its wake Google had destroyed entire sectors, or turned them into cottage industries such as enterprise search and knowledge management, RSS newsreaders autonomous robots

Web search in general has become less effective at doing deep research for consumer and B2B needs – no more support for boolean operators is a case in point. This has had some tech forward netizens wondering if the likes of Reddit fulfils the vision of knowledge search in place of Google and Alphabet being concerned about young people using TikTok as their local search box instead

“something like almost 40% of young people when they’re looking for a place for lunch, they don’t go to Google Maps or Search, they go to TikTok or Instagram.”

Google internal report quoted by Business Insider

YouTube seems to struggle getting brand building advertising dollars in the face of TikTok, Instagram and this explains why you saw a decline in sales over 2 percent. Instead you see a lot of D2C product ads a la day trading and drop shipping courses advertised. Part of this might be down to the product. YouTube has been screwing over creators and creators have made it clear that they’re not happy. You don’t need to go to YouTube if you get the directors cut of your favourite creators content on Patreon or Curiosity Stream. Censorship of political analysis content around China or Ukraine seems to be particularly bad. 

Back to Subprime attention crisis

Hwang in Subprime attention crisis points out many of the things that agency employees and owners have known for years:

  • Online advertising effectiveness has declined compared to its performance 25 years ago
  • Audiences don’t see a lot of the ads that are displayed. Different reports will give you different numbers on this
  • Online advertising is destroying the very media industry that its content is shown on
  • Online advertising fraud is a big problem
  • Online advertising business practices are an even bigger problem with up to 70 percent of of online programmatic advertising spend going to advertising technology intermediaries such as The Rubicon Project (now Magnite) and Xaxis
  • This has allowed businesses like Procter & Gamble and adidas to reduce advertising spend at no loss in effectiveness. In the case of P&G Subprime attention crisis highlights how they cut $200 million in online advertising spend, moved that spend on to offline media like radio and print AND managed to increase their reach by 10 percent.

More on adidas via its inhouse head of media Simon Peel

One of the most notable things for me was being introduced to the work of Australian based academic Nico Neumann who has done some great research on online advertising effectiveness related areas including Frontiers: How Effective Is Third-Party Consumer Profiling? Evidence from Field Studies.

So nothing surprising for insiders, but….

Hwang marshals his facts well. Which is what you would expect from a lawyer. He uses analogous examples from the US financial services sector including the 2008 financial crisis. The book itself is 141 pages in length and there is a substantial section detailing his sources. Subprime attention crisis is based exclusively on desk research.

More on the book here.