When if at all will the social media business model collapse?

Submitted ⁨⁨1⁩ ⁨year⁩ ago⁩ by ⁨jantin@lemmy.world⁩ to ⁨[deleted]⁩

As far as I understand how things like facebook or reddit work they:

offer an unpaid service to mass consumer
harvest data of the people who use the service
offer paid advertisement space to companies
companies buy advertising because the vast data promise precise targeting
precisely targeted ads convert into sales for companies
the ROI (profit gained to cost of ads) when buying social media ads is greater than ROI on tv or whatever other ads
social media expand on the profits gained from ad space sold to companies
social media corp announces a brand new feature and we return to point 1)

Which step is the closest to breaking? Where are limits of growth and who hits them first? Is there a cap on marketing budgets beyond which companies won’t afford social media ads and tech corps won’t afford expansion and maintenance? A cap on how much data (=how precise ads) can you harvest? A lower threshold of general wealth below which ads won’t convert into more profit because people are too poor? A breaking point of enshittification at which user count (=ad visibility) plummets?

The recent apeshit of tech companies after the raised interest rates made me feel that the entire thing is quite fragile and ripe for falling… But I’m not a financial advice so maybe I’m completely clueless.

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Astroturfed@lemmy.world ⁨1⁩ ⁨year⁩ ago
I really don’t understand the massive ad spend from most companies. I’m a bit of a minimalist. I have like the Ron Swanson “people who buy things are suckers” mentality. I buy wood, material, tools and occasionally computer parts. Outside of shoes most of my clothes are 5+ years old and most of my shoes are too.

All that to say, I guess I’m an outlier. I haven’t clocked on and bought anything from an ad that I can ever remember and I’ve been living a life very lacking in consumer disposable goods that they push for going on a decade ago this point.

I don’t understand anyone who doesn’t do extensive research and buy the best product in their price range on any purchase these days. If I do need to buy something I probably average an hour of research on any product I spent over $100 on and far more on anything over $1,000. Astroturfing YouTube reviews and forums would be more effective than ads on my purchase decisions. Which they do too, but they’re normally pretty easy to spot.

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- killeronthecorner@lemmy.world ⁨1⁩ ⁨year⁩ ago
  
  I don’t understand anyone who doesn’t do extensive research and buy the best product in their price range on any purchase these days
  
  While I subscribe to your worldview significantly, a lot of people buy for personal prestige, and a lot of what is being advertised on social media consists of vanity and luxury products.
  
  Virtually no one is buying Air Jordans primarily because of their comfort and durability, however durable and comfortable they might be.
  
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- Steeve@lemmy.ca ⁨1⁩ ⁨year⁩ ago
  Easiest answer is you aren’t their target market, but the return on ad spend in targeted advertising is huge so the target market is out there.
  
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- ryathal@sh.itjust.works ⁨1⁩ ⁨year⁩ ago
  Advertising and marketing is about creating a story. Coke will spend a billion on the story that a coke add in your feed, and one during the game, will get you to buy a coke at the gas station on your road trip or something.
  
  Social media, and the internet in general, also provided better targeting and reports than ever before. They get tons of advertising money because they can make a report that the ad was seen X times and clicked Y times, that makes their advertisers happy.
  
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bernieecclestoned@sh.itjust.works ⁨1⁩ ⁨year⁩ ago
It’s just a newer form of publishing. A quick Google, which is just a yellow pages with search, says 1488

en.wikipedia.org/wiki/Schwabe_(publisher)

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- originalfrozenbanana@lemm.ee ⁨1⁩ ⁨year⁩ ago
  You’re really minimizing “with search” there but search has revolutionized society
  
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  - bernieecclestoned@sh.itjust.works ⁨1⁩ ⁨year⁩ ago
    True. But their business model is auctioning ads to the highest bidder when we search for relevant things, they just nailed search when people were still using Yahoo and AltaVista.
    
    I remember using metacrawler.com a lot before Google came along
    
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j4k3@lemmy.world ⁨1⁩ ⁨year⁩ ago
[deleted]
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- linearchaos@lemmy.world ⁨1⁩ ⁨year⁩ ago
  We had a politician when who made statements like I could stand in the middle of 5th avenue and shoot somebody dead and no one would do anything about it.
  
  There are a reasonable number of people out there who would follow a politician to their death who said Don’t mind those stalkers it’s fine.
  
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Peruvian_Skies@kbin.social ⁨1⁩ ⁨year⁩ ago
Outdoor advertising still works. TV ads still work. Social media advertising won't collapse. It may become less effective if legislation moves towards greater privacy protection but it'll still be effective.

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Ghostalmedia@lemmy.world ⁨1⁩ ⁨year⁩ ago
Closest thing to breaking the business model is the data harvesting that makes targeted ads so profitable.

We’ve already seen Apple’s tracking restrictions hurt meta a lot. As governments, and companies that don’t have big ad businesses, continue to restrict tracking, that limits the growth of ad businesses.

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Gingerlegs@lemmy.world ⁨1⁩ ⁨year⁩ ago
Newspapers, radio, television, internet, ???

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- ivanafterall@kbin.social ⁨1⁩ ⁨year⁩ ago
  
  ???
  
  The answer may surprise you: fax machines
  
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originalfrozenbanana@lemm.ee ⁨1⁩ ⁨year⁩ ago
Step 4 is most likely from a markets perspective and step 2 from a regulatory perspective.

The regulatory landscape is slowly shifting against limitless surveillance as the cost of using the free internet. Free platforms like Reddit and Facebook will struggle if they can’t collect limitlessly. More interestingly for me, portability and interoperability regulations could lead to exoduses from those platforms as people are no longer locked in - there is no reason why you can’t message someone on Signal using Messenger other than Facebook doesn’t want you to. Taking your personalization data from Spotify to Apple Music would mean you didn’t have to start from scratch if you didn’t want to keep paying Spotify. It’s an existential threat to companies that depend on a “data moat.”

From a markets perspective programmatic advertising is (as Cory Doctorow says) a bezzle. It’s a scam. ROI and attribution rely on faithful and accurate data on audiences and reach, in addition to engagement. The major ad platforms have regularly been caught lying about these. To be clear paying for ads on these platforms largely works - that’s not up for dispute and is why the bezzle is successful. The issue is that these platforms are selling targeted ads (I.e. show ads to people we believe want a pair of Nikes) that work BETTER than contextual ads (I.e. show ads to people searching for shoes) and that’s not clear.

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- ZodiacSF1969@sh.itjust.works ⁨1⁩ ⁨year⁩ ago
  I think messaging is more likely to see progress made on this front. I don’t see regulations forcing Spotify to allow for their personalization mechanisms to be transferable and that doesn’t really make sense why they should have to, while messaging I can see happen even if only due to popular demand.
  
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  - originalfrozenbanana@lemm.ee ⁨1⁩ ⁨year⁩ ago
    It’s a more nuanced argument to be sure. The premise is that your music preferences are traits and knowledge about you that Spotify learns when you use their platform, just like how Google learns you like chips and Facebook learns you went to school with Mike. It’s not really fundamentally different to learn about music preferences than it is to learn about shoe preferences, it’s only different in how they’re used.
    
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detalferous@lemm.ee ⁨1⁩ ⁨year⁩ ago
When AI gets good enough that all of the accounts are fake, and real people either can’t compete, or look fake if they do.

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