Subprime attention and the end of your free Gmail account

Tim Hwang’s new book Subprime Attention Crisis makes the case digital advertising is a lot like America’s 2008 subprime mortgage crisis.

The gist being in the lead-up to the mortgage crisis, sellers bundled up lots of mortgages into good batches and bad batches. The good ones were likely to pay out and the bad ones to default.

The problem was the people buying these investment portfolios couldn’t tell and didn’t know whether they were buying a good batch or a bad batch. Once the bad ones started to default, buyers lost confidence in the whole market, making even the good ones look bad by association.

The attention crisis, Hwang argues, is a lot like 2008’s subprime mortgage crisis. But instead of big investment banks, Facebook and Google have bundled up attention and metrics like clicks and likes, but they do a very good job of hiding which ones are good and which ones are bad. The comparisons stop there, when you consider digital advertising has ad blockers and people who just plain ignore the ads.

About halfway through the book is a big meaty section I almost want to copy entirely. But because it’s somewhat long for a blog post, a few excerpts will have to do:

When they launched in 1994, the first banner ads generated a remarkable click-through rate of 44 percent. …Today, banner ads, command far less attention. One data set drawn from Google’s ad network suggests that the average click-through rate for a comparable display in 2018 was .46 percent. For some industries, that number is as low as .39 percent. That’s about one in every two hundred people. Recent attempts to measure click-through rates on Facebook ads reveal similar rates of less than 1 percent.

…Even the sub-1-percent click-through rates may overstate the effectiveness of ads on some platforms. On mobile devices, close to fifty percent of all click-throughs are…accidental “fat finger” clicks.

(I hear from people a lot, “But we do so much better on phones!” No, you don’t.)

In 2009, one study estimated that eight percent of internet users were responsible for 85 percent of all advertisement click-throughs online.

Another “large-scale experimental study of online search ads in 2014 concluded that, “brand-keyword ads have no measurable short-term benefits.” And, “Ironically, ads generated engagement mostly among ‘loyal customers otherwise already informed about the company’s product.’ The ads, in other words, were an expensive way of attracting users who would have purchased anyway, leading to ‘average returns that are negative.’.”

He goes on to cite how internet users age 20-40 experience “little or no effect from the advertising”. And despite being just 5% of all Internet users, people age 65+ are responsible for 40 percent of the total effects observed.

All this is to say most online advertising is “vaporous”. The sort of confusing, opaque, problems we had in the mortgage failures but now in the “attention advertising market”.

Much of this is driven by poor ad placement (looking at you, Google Ad Network), putting the wrong things in the wrong places (like advertising for bananas or whatever on Facebook. Who cares?), and ad blocking that is highly prevalent in the United States and Europe and expanding fast in Asia.

And we haven’t even mentioned all that Hwang says about fraud, click-farms, bots, and other junk. He estimates enough money is wasted to fraud in all online advertising each year to equal the entire current value of Facebook. It’s as much as 20% of all online ad clicks.

I have said this a zillion times:

  • Online advertising is full of fraud.
  • If you are paying for ads on Google or Facebook, it had better be the right kind. For Facebook, that’s “awareness campaigns” (which are impossible to calculate value and lead to this vapors nature of things) and digital goods that can be handled on-device, like downloading an app. For Google, that’s narrowly defined buyer-intent searches like hiring a handyman.
  • Older people can’t discern the difference between an ad and something not an ad. On the upside for some advertisers, seniors hold just about all the world’s wealth, so it can be lucrative. If you have to advertise to teens, you’re better off with a billboard by the high school.

And now that I’ve read this book I think another thing is likely to happen: a complete collapse.

Hwang thinks we should do a “controlled demolition” so the bottom doesn’t fall out. But I think the bottom will fall out eventually as small businesses (which account for 80% of all of Facebook’s advertising revenue) wise up to the realization this doesn’t work. And it doesn’t work because most of the ads are dull, boring, and just plain bad with lousy copywriting and cheesy stock photos.

Already I tell clients they need ever-more money to have any chance. $300 a month doesn’t cut it anymore. To have any hope, you need $1500 a month for AdWords or Facebook, depending on your market. Godspeed if you’re advertising insurance, financial services, or attorneys. Or to anyone under the age of 35.

If advertising online completely fails, Hwang says (and I agree) that we’ll see a lot of publications completely vanish. Ad sales won’t be enough anymore because no one will trust any of the ads, despite static ads being no more or less more effective than programmatic, text-based, or targeted ones. Paywalls will abound. No more free Google Maps or Gmail, which rely entirely on Hoovering up data for advertisers. There could be pay-to-play placement in search results (as in, to be included at all, not just as the top in the ads).

Increasingly I think publications like The NY Times, Wall Street Journal, and others that have paywalls are playing it right. And companies like Apple and Amazon will be in a good position to continue delivering maps and other “free but not free” services to their customers who pay for physical things.

One obvious downside to this pay-to-play approach is low-income people are going to be left out of a lot. Right now, the web is largely equitable. Everyone can get at the same Google or Facebook or Maps or YouTube or Wikipedia or whatever. But not if everything requires a subscription first.

At best, this could result in a lot more creativity in advertising, something that’s desperately needed.

If you must advertise, anywhere, you need to inject some creativity in the ads that make people even remotely want to look at it. Which may be impossible given most people’s aversion to being anything but bland or corporate or boring.

Think more advertising akin to Cards Against Humanity digging a big hole and less of whatever your local hospital is putting out.

Same goes for the junk most people throw at their Facebook walls every day. An appalling amount of attention is paid by marketing people and social media managers about the importance of posting at least 3x a day and other wasteful nonsense. If one more organization asks me what my hashtag goals are, I’m going to poke my eyes with rusty spoons.

Regardless, people are already so allergic to ads and this boring junk even the interesting ones are getting thrown out. Hwang notes studies of Snapchat users that the average view-time of a video ad is 1 second. It’s no better on YouTube, where it’s “whatever the minimum time required is to watch an ad”.

In the meantime, buy a subscription directly to a journalist or publication. And expect the Internet to look a lot different in the next five years.

Monument Circle Opera House

200 years of Indianapolis

How could I not write about the bicentennial of my adopted home of Indianapolis? What a year for a 200th birthday. Indy, you don’t look a day over 190.

As much of a struggle this year has been, it’s hardly the worst thing Indianapolis has endured since 1820. The Civil War, 1918 and 1919 pandemics, the KKK, and the Great Depression all leap to mind.

To be sure, Indianapolis is one of America’s most promising cities. At this juncture of almost nothing, Indianapolis was established. No major roads, railways, or rivers existed at the founding of our city, not beyond the White River and the nub of Fall Creek. The National Road, Meridian Street, Michigan Road, rail lines, and airways were yet to be built. And so we did.

Indy’s proud position as the “Crossroads of America” gets derided by some as a “place you go through to get somewhere else”, but for much of our history, Indy moved more trains and more people than just about anywhere else outside Philadelphia and New York.

Once we were the gateway to the west. Among the first regiments to send troops by Lincoln’s side in the Civil War. We had the first plant to produce sliced bacon. Kurt Vonnegut. The first Union Station. Madame Walker. The Gatling gun. David Letterman. And of course, the 500-mile race.

Perhaps more than any other, Eli Lilly helped put Indianapolis on the map, and much of our city’s modern growth, arts, and culture is owed to the work of the Colonel.

Our first libraries, sewer systems and drains, universities like Butler, and public schools have given way to many changes. But their impacts from the 19th century are still felt today. We have all been enlarged by the decisions and work done by our forefathers and foremothers. Make no mistake: our futures are joined with theirs.

Cities are much more than just financial centers or where we work. Indianapolis is where Indiana comes to wine and dine and enjoy culture and the arts. Indianapolis is our government seat, our meeting place, our provenience of vital medical and educational centers, and our originator of ideas. Our whole way of life in Indiana depends on Indianapolis.

We wax nostalgic about small towns and build suburbs on top of suburbs. But the great source of American history and strength, culture, wealth, and opportunity, is in cities like Indianapolis.

We can not escape or ignore the troubles Indianapolis faces — or any city. We can not cling to mere hope problems will just go away or resolve themselves. What to do about violent crime, hunger and suffering, homelessness, the degradation of the poorest among us? To say nothing about the health and survival of us all amid COVID-19, financial calamity, and who knows what else.

For much of our history, cities led the way in America in how to solve the terrible problems of our humanity. Partnerships with universities, grants, and stark examinations of the issues as they are, not as we think they are, have paid dividends over the years. We’ve tamed past pandemics and illness by pursuing, at considerable cost, infrastructure and critical medical pursuits.

All of this begins with understanding our history. America would do well to understand that as a whole. Our plunge into Vietnam or Afghanistan without understanding its history has shown us that. Locally, what is our history with alcohol and drug addiction, community response to epidemics, or violent crime? Even Dillinger’s father thought Indianapolis was corrupting his son, prompting them to move to Mooresville.

More recently, the pursuit of highways and other destructive construction marches through parts of our city without much understanding for the history of a neighborhood because their importance is not understood. You have to know what people have been through to know what people want and what they don’t want. What people have been through is what we call history, and Indianapolis has 200 years of it.

The opportunities for Indianapolis are at once boundless and seemingly in peril. But the work this city has done for the advancements of innovation, science, medicine, law, and the arts has become so valuable.

Let’s do the kind of work now so people 200 years from now will think of us as kind, generous, and the right people at the right time. Let’s be sure they know we had the courage of convictions to do hard things. Our present was joined with those who came before us. The destiny of millions is joined with us today.

We must ensure that in 200 years, the residents of Indianapolis will look upon us in history and say, “It’s good that they were there, and despite the problems of their day, we’re all the better off for it.”

Police reforms and the problems they face

On Twitter a few days ago I wondered what some of the demands of protestors are. Thinking about successful protests in history, the ones that had specific policy, legislation, or actions as their end goal are the most successful. Whether that’s LGBT people and equal marriage rights through legislatures and courts, suffrage for women and blacks both culturally and legislatively, or a new country like in the Revolution.

I’m still mulling these thoughts over. But I’m starting to hear and learn about some of the demands of protesters that go beyond broad cultural issues.

Formal apologies from police departments for past abuse and transgressions

This is going to be a challenge for many departments, I think, because of the obvious notion that individual officers are likely to feel attacked for practices that go back to protecting the slave trade. But, it’s necessary and one that should come from everyone in every department.

Improved training to identify biases and weigh the use of force

Departments are heavy on training and continuing education. In the Academy, training no doubt focuses a lot on firearm skills, physical fitness, and defense. The rest, I gather from my recent ride-along with officers, is training that is often online and an annoyance.

Officers are tasked with taking ongoing training like many professions. And like many professional attorneys, insurance agents, etc., that training is less, uh, “deep and attentive” on the “academic” stuff. It’s more akin to how most of us felt about homework in elementary school: a thing to whisk through as quickly as possible to get it done.

For officers, this means online training that’s easy to click through or ignore. Much of it is likely to be a brief, boring video they let play while driving around responding to calls. To be fair, this isn’t just a problem for or about officers. Most professional continuing education is done like most people do most work most of the time: scatterbrained, multi-tasked, unfocused, and ‘a required thing someone makes me do’.

Training should be paid, offered in settings that are conducive to the subject matter, and rigorous.

Respond like fire and EMS

Credit to this idea to my friend Tim Maguire, who has long advocated for police responding to emergencies like police and fire departments: park at the station and go respond when called.

I’m sure it happens, but we know that most of the time officers are unlikely to stumble across a crime in progress. It probably wouldn’t impact response times much if we just dispatched officers from stations.

However, during my ride-along, it became apparent that most officers are always responding to a call. And when there isn’t a call, driving around knowing neighborhoods does have benefit. Seeing the same car door open for a couple of days in the row, an out of place car that never moves, and other “Hm, that’s odd” moments are the norm.

So I’m conflicted on this. There’s also the matter of traffic safety, something Indianapolis sorely lacks and without cops driving around no one would ever get caught.

Re-aligned funding

A surprising number of government units can raise fees to support themselves. Courts, police, the BMV, and many others have enough leeway or connection to raise a fee or fine that gets directed at itself without anyone noticing. For police that’s writing tickets that go back into their budgets. This should stop and instead be directed to general funds without circling back around to departments.

Also, police body cameras are a given. My ride-along experience with IMPD was an indication that officers want them. Because good officers who do their jobs with professionalism want the ability to show they acted appropriately. In Indianapolis, this is supposedly coming soon. But as we see in Louisville, police seem to find ways of disabling them.

Incredibly high standards

Indianapolis has some of the highest-paid officers in the country. Starting salaries around $40k that run up to $70k annually in just a few years. It’s dangerous work, and like their colleagues at IFD, I have no problem paying the individuals a healthy chunk of money for it. In Indianapolis, $70k goes a long way. Not every department is like that, however.

Ultimately, we should hold police officers to the standards we have for plane mechanics or pilots, elected leaders, doctors, and those running our public institutions like schools. You have to be truly excellent and of utmost character and standing.

There can’t be a time where you’re “Eh, I didn’t do so good on that surgery” or “That plane crashed a couple of times with that guy.” We have to be all in on clear, documented, standards of conduct, behavior, and professionalism. And when those standards aren’t met, like a doctor with too many malpractice issues, you have to be able to move on somewhere else.

Mitch Daniels Commencement Speech 2020

Mitch Daniels’ commencement speech: “Absent a little special effort, you will rarely make friends different from yourselves”

In an unlisted YouTube video published this weekend, Mitch Daniels gave his virtual commencement speech to Purdue grads. The 12 minute video is well worth a watch.

In it, Daniels talks about a hobby horse of mine: loneliness and disconnection despite seemingly endless ‘connection’. He notes “Absent a little special effort, you will rarely make friends different from yourselves.”

“I’m concerned you won’t make friends at all,” he says. This to an audience connected almost constantly by phones. His general advice is to turn off your phone, tune out video screens, and have more personal contact with people. The benefits of which can stave off depression, suicide, and as he notes — add years to your life. Prolonged loneliness can be as deadly as smoking a pack of cigarettes a day or heavy drinking.

The effort to make friends is hard. And Daniels says he’s not been a good role model. “I’ve not devoted the time I should have to deepen acquantancines into friendships. I’ve let the call of work get in the way. I’ve told myself that jobs of broad responsibility mean one can’t get too close to coworkers and colleagues. I’ve procrastinated and skipped too many chances to spend time with people I admire and love. I regret it and I’m worse for it.”

Admittedly, he notes he thought of this speech as early as December before COVID-19 entered the lexicon. Adding to the challenges of deeper connection with people is the cumbersome and expensive ways we’ve designed ourselves away from people, made worse by the pandemic. But even before the pandemic, cities and neighborhoods bifurcated by small highways, sprawl, and the rising cost of moving around has left teens and young people without an easy way to be around each other. More to the point, many people of all incomes have designed their lives around the notion that work is all their is because we need the money to maintain a lifestyle. For some that might be food and energy. For others, it might just be to maintain a pricey car or redo a deck or patio we’ll never use for much.

Social media is not a proxy for us to “live our best lives”. People’s lives are often tragic, sad, and void of the constant prettiness of people or place so often presented to us by others.

The feelings of connectedness can be mitigated, Daniels says, by faith and marriage. I don’t disagree with that, but if one or both are not your cup of tea, even just making time to cook dinner for others can be equally beneficial. That takes two people, however. I’ve invited people to a home-cooked dinner in the past and people look at me like I have three heads.

My long-time wish has been for people I care about to reach out with regularity. Write a letter. Make a FaceTime call. Invite people to dinner — without phones or other distractions. I imagine most of my messages and emails are like yours: a constant reminder of people reaching out only when they want or need something.

A person’s success in life depends on who a person knows, and more specifically, how well you know them. That goes for our careers and our health. We can’t truly know people through a Facebook or LinkedIn profile. But darned if people aren’t trying to make anti-social media into something it isn’t. The sooner people realize Facebook and their ilk exist for people like me to sell stuff to people like you, the better.

The sadness I feel about COVID-19

The unfortunate thing I feel about COVID-19 is how sad I feel for all the silver linings.

I’ve been able to attend more events with more people virtually than I have in-person. I’ve saved money on food. Not traveling to offices has saved me hours of time. Everything is more scheduled and regimented, meaning I get more focused time on specific projects. And social media is far less performative. I like those things. Many of these things are things we could have been doing all along. But I’m most saddened by the fact it took a global pandemic scare to get us here where millions of people have lost so much.

I don’t feel bad about having to do more virtually. It’s been good for me that I can take part in more events now that I can meet the same people online instead of off. I was never going to travel an hour this way or that, or book a flight and a hotel to attend your conference. But, now that it’s online, I can. And so can many other people. We always could have been doing that, and probably should have been. The lacking factor for many events is the experience and there’s value in that. But that value comes with a price tag.

Many people are saving money and perhaps their health because they’re not eating out for lunch every day. Again, that’s grim for restaurants and eateries, but no one can dispute it’s better to eat at home. It’s almost always cheaper, and it’s usually healthier. It’s hard to come up with something at home worse for you than McDonald’s or other fast food. And when your colleagues pressure you to go out, you go out. And it’s nearly impossible to find healthy places when you do. Do a search for “Healthy” on GrubHub and you get about 4 or 5 restaurants, one of which is probably Subway.

Office space is likely to see a lot of shifts after this is over. A lot of places are likely to stay on work-from-home protocols and reduce their office space. For many places that can’t do work from home, they’re likely to expand their office space in order to maintain more distance. That’s probably a net neutral, but it’s not bad if people have more options or reduce commuting by car.

Perhaps the biggest change is the ability to have more focus. Offices are not known for their productivity gains. Everyone’s best work comes from reducing distractions and implementing an optimal workspace. That might be using headphones, or it might be a speaker. It might be a podcast or classical music or something else. That might mean starting a little later or working a little earlier. It might be the comfort of knowing your kids are just downstairs, or the dog is happy and not in a crate or alone all day.

The equalization of networking and meetings is a big win for a lot of people. If you live on one side of town and have to travel to the other, you may have two hours of your day wrapped up in a car just moving around for what amounts to just hearing someone talk. That’s a huge savings for the people who can do so.

And one thing I’m not sad about at all: social media has become much less performative. I’d be interested if academic researchers are studying the mental health effects of social media right now. When you see all your friends living their “best lives” on the beach, with friends, out at pricey concerts and shows, you feel glum. We know this. Social media straight up increases depression almost universally. But now, no one can travel or fake it. All of the superficial detritus has been removed — no fashion, makeup, glitzy travel, FOMO, or the recognition someone you wanted to talk to is now out with a bunch of other people. I don’t know if the depression that comes from social media is shifting to just being depressed about the news and state of affairs of the world. Like office space, I suspect it’ll be a net-neutral effect.

These things are generally good. Sadly, it’s at the expense of so much in people’s livelihoods. And there’s a lot of variation here. Having the kids around all day can be a huge energy suck. But if you asked more people at the end of their lives if they would have wanted to spend more time with their kids, I suspect the answer would be yes.

That should be the quandary people who are largely unaffected beyond more time at home should feel. A lot of small things are legitimately better for a lot of people. And that’s sad.