Social Media 1.0 Collapse Underway - Advertisers in Revolt
Over the weekend I wrote an article that was rejected by the Seeking Alpha editors for not being 'actionable enough' about how politics was going to begin destroying tech giants like Apple and Google.
In it I described the fight between Google and upstart Twitter replacement, Gab, and how that would open up Google to all manner of restraint-of-trade class action lawsuits.
I also went into great detail about Steemit as a model for where Gab was going with its network, per Gab's one-year anniversary post over on Medium.
I reworked it, added more flavor and political commentary and gave it to my subscribers over at Stocks, Shocks & Rocks. Don't worry, I have plans for this article as a special report for my Patrons at Patreon as well as y'all here.
But, this article from Zerohedge confirms everything that is coming for the tech giants in the coming months.
Global Advertising giant WPP just reported apocalyptic earnings.
In the earnings report they blamed everyone else on the situation -- politicians, fake news, populist politics, etc -- on the lack of advertising.
All of that blame comes down to the same thing... the world is going broke, and GDP statistics - a measure of total spending, not quality of spending -- are worth less and less in places where central bank largesse has boosted those numbers.
Ad sales dropping like a rock in the two most lucrative environments, internet and media, tells you a couple of things.
The advertising rate of return sucks. Procter & Gamble told us this earlier in the earnings season.
Spending may be rising but it is on everyday survival things, recurring purchases that are NOT subject to advertising. Habitual buys are ad-proof.
Companies themselves are in survival mode
So, where is the growth in mobile advertising for Apple and Google going to come from in this environment?
No, it doesn't. What it does is hasten the development of alternatives to their platforms that become immune to them while opening their shareholders up to massive class-action lawsuits.
It's one thing to see these things occurring and make predictions. It's another to see confirmation of it in the marketplace. The following image from Zerohedge's article on Facebook yesterday makes it clear that we've likely reached the peak of that platform's popularity.
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If you're looking for an excuse for an eventual equity market crash it will likely coincide with an anti-trust verdict against Google in the next couple of years.
The political climate in Washington is in Google's favor right now, but that could change radically at the mid-terms. And as platforms like Steemit, Gab and others mature and grab new users, the exodus from these services will grow rapidly. When people realize they can reverse the flow of capital and time from us to them, it will change everything about how we view the internet.
Each time they try to stomp out our ability to communicate, mung it up by filling our bandwidth (which we pay for) with their unwanted shout-based crap, acting like feudal kings and communist tyrants, the more we figure out how to end-run them. The whole situation is so obnoxious that when you take ten seconds to analyze it it makes you want to scream.
Rent-seeking is the bane of human existence. It is the one behavior that only the free and voluntary market can minimize the effects of. The mixed economy only shifts power from one group to another as technology changes the profit-maximization point, while the government itself is further empowered.
We're reaching the point of peak Orwell in this society. Companies like WPP can complain all they want, but they have built their businesses on the back of a rent-seeking class not the public which they ultimately serve.
And blaming 'populist politics' on the problem only identifies them as part of the problem and not the solution.
My understanding of 'rent-seeking' classes is that beyond people who have property that they rent, are people who's job essentially doesn't produce anything. i.e.
Now we probably need some level of lawyers, HR, bankers, gov (something for defense, and a justice system) but as it is now everyone of these function to justify their own job.
Rent-seekers are ones who use force to enforce a monopoly price on their service by creating an artificial demand for it or a restricted supply of it. In effect it is a form of theft.
Everything beyond that is shades of it. If someone outbids someone else for the use of capital through honest acquisition is simply commerce. Those with more capital can outbid others who have less... supply and demand. That pricing signal tells producers they can sell their goods for higher prices, driving up supply and price down..
If the government comes in and legislates a price floor, however, the difference between the equilibrium price and the price floor is considered "RENT."
Rent seeking. When I walk around in a mall, I always wonder why prices are the same for everybody. So much value lost in the process. Some would be willing to pay more, some less, for the same products. Is that the price we pay for the convenience of having grocery stores and the like? My understanding is that grocery stores were a war-time invention to help people get food. It was never meant to be a commercial enterprise. Now we can hardly imagine bartering or buying things from actual people as opposed to companies.
Interesting points... to clarify 'rent-seeking' in this context is the process of seeking 'unearned wealth' through the manipulation of market conditions and monopoly use of force.
We humans all want to be rentiers, it is the free-market that drives the profit on that behavior to zero.
The rent-seeking class as opposed to the public. I never heard that term before and your explanation is that rent-seeking is seeking 'unearned wealth ....etc. Two images come to mind, first the idea of a temporary occupant like a renter as opposed to homeowners who have a vested interest in long term goals; and after I read your clarification, I thought of the mob taking from local businesses but I'm not quite sure if either is correct.
Thanks for sharing this article by Zerohedge, it shows how much the world is changing. And how fast. If people knew how modern advertising came about. The forces of greed and the desire for control over others have allowed some pretty evil stuff to go on in this world. Here is a short video about Edward Bernays, nephew of Freud, who is called the Father of Propaganda.
Source: YouTube Channel twclark66
"rent-seeking" in this context is a term used by economists in to describe behavior I outlined. Purely a technical term, but very appropos.
I love it.
Good point. What I'm thinking about, not sure if it is related to your point directly. But lets take an average grocery store that sells one gallon of milk for ten dollars. Many rich people would be willing to pay twenty if that was the price. Because it is worth that much, or a lot more, to them, given their hourly earnings. Their rich person cells need the nutrition in order for them to be productive and earn money. Because of the system and the way our economy is set up, each teaspoon of milk into the rich man's body has a higher return in terms of earnings from productive work than that which goes into the poor person's body.
Now a poor person can only lets say pay 5 dollars for it. That is how much it is worth to him/her. So if the rich person paid 20, that would make it possible for the store to sell the same milk to two poor people who are each only willing to pay five dollars. And the grocery store would still be making the same profit. And everyone is happy! Now what happens, is the two poor people can't afford milk, and the rich guy pays half price.
So the rich get richer and the poor get poorer. Can you explain your last sentence, not sure I get it: "We humans all want to be rentiers, it is the free-market that drives the profit on that behavior to zero."
I get what you are saying in the first paragraph. I watched the first part of this documentary called "Browser Wars" last Thursday. It was about how how when the Internet started Microsoft was this big giant and tried to take over the Internet browsing market and force everyone to use their browser in addition to their operating system.
Then came Netscape Navigator, and Microsoft bullied them out of the market with tactics that I think you can describe as bullying tactics akin to what you refer to here as "manipulation of market conditions" and "monopoly use of force".
For instance at this one infamous meeting, Microsoft offered Netscape one million dollars for all their technology. They said they were going to take over the market anyway so it would be a good deal for Netscape. That was Netscape's version of how the meeting went.
Microsoft, on the other hand, said it was a pleasant meeting and they talked about how they could work together. One of the weirdest or funniest things about that documentary (at least that first part) for me was how Microsoft made this huge press announcement on the same date as Pearl Harbour.
They did it on purpose, where they like outlined their strategy, or I think launched Internet Explorer, which was their response to Netscape Navigator. I still remember those days a little. I always preferred Netscape Navigator over Internet Explorer.
Another really cool thing was when they talked about Bill Gates one night wrote this legendary email to all his employees basically saying, OK, from this very moment, we are targeting Netscape. Everyone was focused on that one particular objective.
Later in the show they also said a lot about how Microsoft was sued for manipulation of the market or something, I can't remember exactly, or forcing people to buy their product.
And how he really did not know what to say in the hearings and did not come across as very convincing. It was after that that he gave the reigns of the company over to his 2IC Steve Balmer. And then he went into philanthropy as we all know. With his wife.
See my post below. You miss the fundamental problem of price paid means the signal for higher profits for producers to come in and create more supply.
Prices are information. They transmit and coordinate the structure of production moving capital to where it is most needed by the application of profit.
We all want to be rentiers... charge more for our services than our services are worth in an open market. Who wouldn't want that for themselves. The free market grinds that arbitrage between the monopoly-enforced price and the cost of production to zero.... empowering consumers while producers have to work to stay ahead of this process through the reinvestment of capital.
In your above example, Bill Gates cannot consume more milk than he needs. The law of diminishing marginal utility is always in effect.
I see what you are saying. I think discriminatory may solve that exact problem though. Because the deadweight loss in the supply and demand graph transactions are reduced to zero. Of course this already happens with most large transactions. But would be cool if this could happen in grocery stores and everything else too.
They already do it to some extent with senior citizen discounts, or discounts when you buy at certain times of the day. When you do business nowadays, it is usually with organizations or entities, and not people. So I guess what I'm saying is that prices are generally a terrible way of transmitting information, especially when it comes to items that are mass produced, because they do not fully take into account how much people are willing to pay.
Bill Gates may not be able to drink more milk, but he could substitute his milk for soya milk. Or stop drinking milk. Or only buy special milk produced by Himalayan goats at $3000 per gallon.
Plus, what about marketing? You can produce a million gallons of milk, but how do you get it to the people who need it and can pay for it. And what is the most efficient way of remunerating those people?
I think you may be referring to the bullwhip effect when you talk about prices signalling production volumes. It makes intuitive sense to our analytical minds because higher prices usually signal higher sales and demand too, otherwise how would the stores be able to raise their prices if no one wants to buy the stuff. But it is very flawed.
And then the efficient market hypothesis which says it is impossible to beat the market. Because for one thing it always allocates capital to the right projects in the right amounts at the right time. It assumes that people are rational (I doubt that) and furthermore that they make rational economic decisions. I doubt that even more.
While I am certainly not socialist, I am not really a capitalist either. I think they both have major flaws, one of which is the fact that they try to impose a certain model on all aspects of the economy. They may also not take into account these days the extent to which entire industries, and the economy as a whole possible, has become financialized.
Money itself is no longer merely a medium of exchange. It hasn't been for a long time. The only real money right now is arguably something like Etherium because it is actually backed by something fairly tangible.
USD I would say is also money, also bitcoin, just because they are considered the gold standard. But you still can't exchange them for anything if your counterparty does not believe they will be able to use it next time they want to buy something.
The main problem I have with most capitalist economic theories, which I would say is epitomized by people like Martin Feldstein and whoever was probably in charge during the Reagan administration, is that they assume people are rational. Robots may be said to be rational but not people. I think part of what makes us human is that we are often if not most of the time irrational.
The system that has been in force over the last century or so for distributing goods and services had temporary positive effects, but right now I think we may feeling the unintended negative consequences thereof. And assuming bots can take over could be a major mistake. Did you see that post about the bot hotel in Japan? It is so funny.
As with diminishing marginal utility, I think the network effects due to widespread technology adoption, including in fact social media like Steemit, have the opposite effect these days, increasing marginal utility. If not in quantity, then in quality.
Interesting, I hadn't heard of GAB, although i do see some complaints it has been a bit racist. I think Facebook right now is hanging on for the family crowd, like people posting pics of their kids for the grandparents to see, but otherwise is starting to shrivel. I totally agree on rent-seeking and am a fan of Michael Hudson.
Gab was started when Twitter began cracking down on speech during the campaign. The 'racist' charge comes from their steadfastly refusing to control its users through 'terms of service' other than posting illegal activity. Beyond that... anything goes.
To the Left and the forces of control, that's 'racist' and a harbor for 'hate-speech' It may not be to everyone's taste, but it is what Twitter purported to be and most definitely is not.
That Gab is moving to a crypto-based tipping system a la steemit that means they are dead serious about their committment to the free flow of ideas no matter how distasteful.
Yeah, things like rice and beans.
and Obamacare.