The ad tech bubble is going to burst

Predicting the future is always a stupid thing. One of my Finance professors used to frequently say in a southern drawl:

“Is that a financial model that goes 5 years into the future?”

“Sounds like you should get out of the consulting business and into the crystal balll business”

But I’m going to try it once right now.

Actually I’ll make two predictions. The first is that eating meat will be like smoking in the next 10 years. Tons of people will still do it (I do it daily), but everyone else will look at them like…why? We’ll have all these healthier alternatives that don’t hurt animals and you’ll be seen as kind of disgusting.

But my second prediction is the ad tech industry is in a bubble that will burst in the next 5 years.

Everyone I know who works in Ad tech makes way too much money. At the same time every company I know is having diminishing returns on sales from ads.

It still works, mind you, it is not broken. BUT it is poised to pop.

1. Ad tech is an overhyped business model

Every rising startup believes it is one of the only scalable marketing strategies.

Let me punish you with this ad in order to watch something else you want. That is the current business model. This should not power the most valuable companies in the world 

2. Ad tech revenue is being propped up by Venture Capitalists

All it will take is a mini recession to completely decimate the main customers of ad tech. How did we get here?

Rich people fear one thing. Being poor. They fear it more than you or me. They can’t find anywhere to put their money so where do they go? Startups.

Not just any startups, they go late stage so it’s “less risk.” And those hundred million and billion dollar rounds go almost completely into marketing budgets.

The whole ecosystem is really just venture capitalists handing money to ad tech companies with more steps.

Once there is even a small decrease in global consumer spending, these startups will cut back or even fold. The rich will find another fad to put their money into and these ad tech companies will lose their main River of cash.

3. Sophisticated bots are destroying the value of ads

Once upon a time, sophisticated ad tracking brought a huge increase in value over commercials and banners because they could collect accurate data on you.

Who you are, what you just bought, where you just were. The data was so good, people even believe their phones are able to record and use that data 24/7. But they didn’t have to listen in on you to be that good.

Unfortunately, whenever something gets too valuable, people jump in to game the system. There’s been a huge increase in consumer bots. These bots are getting better and better at looking like a real person for Facebook to spy on.

Why? “I thought bots were our friends” you are probably saying.

Because these bots can drive up or down the value of a keyword by making it look high value traffic.