I have talked a few times about how I think there are many tech stocks out there that arent worth anything near the valuations they are given, especially companies showing little to no revenue. The big bet is that these companies will be able to make money either marketing with advertisements towards their user bases or sell their data to bigger firms that plan on doing the same. I believe in the long term this is a bad strategy and an even worse bet if you choose to invest in these companies.
I think we need to establish a baseline so I want to use internet advertising over the years with banner ads, popups ect. There is a very real decline in the long run for what companies are willing to actually pay for advertisements online. Many companies lost faith in online advertisements as a form of brand awareness and ultimately stopped entirely. Even now with companies like Unilever, we see them threatening to pull from platforms like Youtube entirely because they think its not worth it. In the beginning these same people that are now pulling out were willing to pay a lot, I believe we will see the same thing happen with user data.
With so many companies now relying on selling user data to make money, the amount of data collected is ultimately going to be worth less. If there is so much on the market, companies arent going to pay top dollar for it. So other companies who make a living solely by collecting user data to sell are going to see big drops in revenue. There will always be a market, but I believe it will be a much smaller one. You could argue that the companies you are investing in are tech companies so the bet is they will do something else, but many of them dont even have the cash to buy out other profitable companies to add to their portfolio.
In addition you also have to think about the customer whose data you are actually selling. There is a real cost to selling data because in a way you trade the trust of your customer for financial gain. Do this too much and you could eventually have a mass exodus from your platform. I see many people my age leaving Facebook because they no longer feel safe having profiles on there. They don't trust the company and they don't trust how their data is being handled. Facebook in particular has seen the registration of users slow in recent years and this may be a contributing factor.
Companies like Snapchat and Twitter might be able to pay the bills now selling data and ads, but for how much longer will that be the case if those markets drop significantly? I dont think Twitter will go away because when it comes down to it they will ultimately just have to pay for server costs and a small team, but in my opinion believing they will becoming this massive company is a bad bet. For many of these companies doing the same thing I think that the only reason they are publically traded is because the original investors wanted to drop the bag on someone else. I dont think selling data is going to continue to be super profitable in the long run and we are already seeing effects of that now.
-Calaber24p
That's completely false. They are threatening to pull from Youtube/Facebook because of the amount of fake news they allow. The Chief Marketing Officer put it this way:
“Unilever will not invest in platforms or environments that do not protect our children or which create division in society, and promote anger or hate,” - https://www.wsj.com/articles/unilever-threatens-to-reduce-ad-spending-on-tech-platforms-that-dont-combat-divisive-content-1518398578
It has nothing to do with the effectiveness of advertising on those platforms.
I doubt selling data is really going to go away, it's simply too useful. Even for the small startup I was working on last year there was data we wanted to buy at some point. There's all kinds of useful demographic information out there and while Facebook usage is dropping it would be hard to attribute that to data collection. Just look at how popular Android and iPhones remain despite their collecting even more sensitive data!
Plus how many people are leaving Steemit when everything we post is completely public? It's exactly what Facebook does except companies don't need to pay for the info we posted!
I really appreciate your thoughts on this. Advertising declining first, then data collecting. I think the world is ripe for new models of content distribution and sharing - Steem and SMT comes to mind! The only question is, once it catches on, how long before we're marching headlong into the next bubble?
Also, I hope we can see more people getting uncomfortable with the breach of trust that data collecting implies. A few people may be dropping Facebook, but on the whole I see more and more people who just don't care in the next generation, who are going straight to even more invasive apps.
Hopefully tomorrow will be better, thank you for sharing
I believe companies only need a way to make ads statistic more reliable. I think when stuff like BAT ads start running we will see companies coming back to online ads because they can be certain that users are actually watching them and not just using bots, etc...
There are many new ICOs based on ads revenue that plan to reward or give free services to users in exchange for watching ads. I reckon companies need advertisment, they just can't live without it.
As for data, most of the ads are based on what data they collected from you so that's not going anywhere too!
We'll have to wait and see, but I think this is just a short term slow down of the industry.
It seems like we we both have the same opinion on overall economy including stock market especially when it comes to valuation. That’s why I have never invested in companies like Twitter or Facebook. I think companies like facewhat are valuated so high based on investors hope. In other word it’s all just a bubble and it will work only until free money is available.
Totally agree! I remember working as tech journalist covering VC investment a couple of years ago and seeing hundreds of millions of dollars a month going into companies with no business model beyond, "eventually we'll sell user data." Unsurprisingly I haven't heard from any of those startups in quite a while.
Hopefully, this also means we're pushing through the creepy-data era of online advertising to a better future.