good news, the internet as we know it may be doomed

the age of internet optimism is long over. it's almost hard to believe now that the quaint techno-utopians of the nineties who believed the internet would bring about a more decentralized and democratic societyadam curtis voice "but this was a fantasy" even existed, in the wake of the more-or-less complete corporate takeover of the internet. a good portion of the internet that didn't just devolve into spam is now devoted to people complaining about the internet. the media is constantly running articles about how social media is making teens depressed or turning everyone into an extremist or spreading "dangerous misinformation". self-help gurus are now writing books about how to quit social media and reclaim your life. but despite the apparent consensus, most people seem consigned to wallowing in their online misery forever, content with blowing off steam by making the occasional ironic comment about how the internet sucks and they're suffering but they are still "stuck here forever". the last thing anyone expects is for it all to just collapse one day. to borrow the phrasing from mark fisher, "it's easier to imagine the end of the world than the end of the internet".

enter maverick writer and perennial pessimist sam kriss, who just kicked off his new blog with a dramatic proclamation: "The internet is already over". beneath some of his more extravagant prose (you must forgive a prophet his theatrics), i found his fundamental arguments persuasive to some extent, although i'm not sure i would agree that the internet will vanish completely, only change form.

probably the most... errr... grounded argument kriss makes is from the business perspective. the corporatized internet, at least the parts that actually make money, is deeply reliant on a single golden goose: advertising. it's now a 500 billion dollar per year market, and "...provides 80% of Google's income and 99% of Facebook's". things are good for google and facebook because they're so dominant and the market is large, but what if something were to happen to online advertising... like companies finding out that it doesn't work.

online advertising's killer product has always been so-called "targeted ads", the thing internet companies greedily collect all your personal browsing data for, so they can beam you ultra-specific ads that you can't help but click, as if compelled by some hypnotic power. if it worked, it would be quite valuable indeed. but this was a fantasy.

on this topic, our old friend adam curtis from the sidenote above has this to say:

The truth is that people within the advertising and marketing industry are extremely suspicious about whether online advertising has any effect at all. The internet has been captured by four giant corporations who don't produce anything, contribute nothing to the wealth of the country, and hoard their billions of dollars in order to pounce on anything that appears to be a competitor and buy it out immediately. They will get you and me to do the work for them – which is putting the data in – then they send out what they con other people into believing are targeted ads. But actually, the problem with their advertising is that it is – like all geek stuff – literal. It has no imagination to it whatsoever. It sees that you bought a ticket to Budapest, so you're going to get more tickets to Budapest. It's a scam.

but you can't just trust what any old british guy with an authoritative voice says in an internet interview, which is why i decided to take a page from curtis' booknot literally, here's what curtis says later in the interview:
I know everyone says there's a massive amount of information on the internet but actually, if you analyse it, there is very little. It tends to be the same thing repeated over and over again. This is something to do with Google rankings; it's also something to do with the speed with which journalism must be done. So what you have to do is go and read books. Read really boring, old books.
and find a book on this topic. turns out there is one, titled Subprime Attention Crisis by tim hwang. the title of the book alludes to the subprime mortgage crisis that kicked off the global recession in 2008, because the hwang's main argument is that the same kind of process may sink online advertising as well.

the key issue in the subprime mortgage was that risky debt (in the form of huge mortgages that the borrowers were likely to default on) was packaged up and obfuscated under so many layers of financialization (using confusing new financial instruments with complicated names like CDO, "collateralized debt obligation") that big investors like banks bought tons of them without knowing how risky they actually were because it was hard to tell what the heck they were even buying at that point. meanwhile, hwang sees the same sort of financialization and obfuscation going on in the online advertising market, except a lot of it is driven by the usage of algorithms and automatic bids in lightning-fast ad auctions that also make it difficult to tell what's going on. on top of this is a similar problem with commodification, which requires standardization and classification of goods that may be difficult to standardize or classify, like mortgages or attention. how do you define a risky vs. a non-risky mortgage? even if you manage that, what if you run into malicious debt salesman gaming the system to get risky mortgages classified as non-risky ones? the same thing happens in online advertising, how do you measure attention? what is one unit of attention? is some attention more valuable than other attention? and of course, the fact that measurement of attention is particularly nebulous makes it easy to sell attention for more than it's worthsomewhat related: "One analyst noted that Facebook claimed to be able to reach 25 million more eighteen- to thirty-four-year-olds in the United States than should exist according to the U.S. census.".

despite the opacity of the market, studies have been run to try and determine the efficacy of online advertising since it's so important to many stakeholders. what the studies have found is far from reassuring, for advertisers at least. a selection from the book:

One data set drawn from Google's ad network suggests that the average click-through rate for a comparable display ad in 2018 was 0.46 comparison, the first banner ads in 1994 had a click-through rate of 44%. can you even imagine?
Once, the world was not as it has since become. Once it worked in a way different from the way it works now; its very flesh and bones, the physical laws that governed it, were ever so slightly different from the ones we know.
And now, overused by the greedy, the magic has left and online advertising no longer works.

On mobile devices, close to 50 percent of all click-throughs are not users signaling interest in an advertisement, but instead accidental "fat finger" clicks—users unintentionally clicking on content while using a touch-screen device.

In 2009, one study estimated that 8 percent of internet users were responsible for 85 percent of all advertisement click-throughs online.

In 2013, a controlled experiment on more than a million customers to evaluate the causal effect of online ads concluded that a customer "between ages 20 and 40 experienced little or no effect from the advertising." This was in spite of this demographic's proportionally heavier usage of the internet. In contrast, the study found that customers older than sixty-five, despite constituting only 5 percent of the experimental group, were responsible for 40 percent of the total effect observed as a result of the advertising.

In 2014, Google released a report suggesting that 56.1 percent of all ads displayed on the internet are never seen by a human.

One study by Deloitte from 2017 suggests that fully three-quarters of North Americans engage in "at least one form of regular ad blocking."

A study conducted by Adobe in 2018 concluded that about 28 percent of website traffic showed "non-human signals," indicating that it originated in automated scripts or in click farms.

In 2017, Forrester Research concluded that the previous year, as much as 56 percent of all ad dollars spent on display advertising were lost to fraudulent or otherwise unviewable inventory.

is this enough to make marketers "suspicious"? apparently so, because as it says in one of the articles kriss links to, some of your big corporate ad spenders (the kind that make you wonder why do they even bother advertising, everyone already knows who they are) tested the waters: "P&G turned off $200 million, Chase slashed ad reach by 99%, Uber turned off $120 million in ads for app installs". the result? "not one business noticed a change in outcomes."

facebook seems to have seen the writing on the wall. google is somewhat shielded by better diversification and dominance in the more robust "search ad" market, but as mentioned before, 99% of facebook's revenue is from digital ads, mostly targeted. hence, the recent desperate rebrand into "meta platforms inc." and the flailing forays into the "metaverse", which despite all their money and developers is still somehow barely distinguishable from a unity game made with free assets. meanwhile, amid a drop in users for the first time ever and warnings about advertisers cutting spending, investors are pulling out and facebook (excuse me, META) stock is down well over 50% this year so far.

the same in fact goes for google and many other companies, who were riding highs from covid lockdowns that ultimately ended up proving that even when people were shut in all day with nothing to do, they weren't engaging that much more with social media or digital ads. the issue is, if the internet/tech hype dies down, it could bring down a lot more than just your digital advertisers. the dirty little secret of the industry is that the tech companies that aren't making mountains of cash selling digital ads right now are... not making money at all. twitter has been kind of a big deal for a while now, and they've only turned a profit in the years 2018 and 2019. snapchat has never turned a profit. uber might be one of the worst, straight from wikipedia: "Uber has posted hundreds of millions or billions of dollars in losses each year since 2014 except for 2018". same goes for lyft, grubhub, and doordash. but these are only the companies whose finances we know about because they're publicly traded. who knows when it comes to the many that are subsidiaries (linkedin, twitch) or still privately held (reddit, discord).

how do these companies possibly stay in business when it seems half of what they do is just light piles of money on fire? the answer is that investors and financers keep giving them money to burn, in the form of venture capital and cheap debt. a lot of this is a consequence of the 2008 recession, which led to over a decade of low interest rates and thus favorable loans. low interest rates also meant, however, that investors with a lot of money had trouble finding worthwhile places to park it, since the yields on many investment classes like bonds and treasuries dropped as well as they are fundamentally just types of debt. you can't just leave money sitting around because it'll lose value due to inflation, so investors poured money into the one thing that still got good returns: buying stock (equity) in companies. this is where "venture capital" comes from, investors with lots of money going "unicorn hunting" in silicon valley, trying to find privately-held companies raising money by selling stakes in their companies before they go public. the hope is that down the line, the companies will become successful and the investors will make their money back and more, especially if they got in earlyinterestingly, a company doesn't ever have to become profitable for an investor to exit out with a tidy profit, as long as they find a bigger chump to sell their stock in it to for more than they paid. even though uber has never made profit, most of its early investors and founders/employees have done very well for themselves offloading uber stock on the stock exchanges after uber went public, since they got their shares for much less than what they are now selling for on the stock market..

as such, as long as unprofitable tech companies are able to keep up the charade that they will one day become profitable, the investment dollars will keep flowing. the most important metric is generally growth in the number of users, measured in a lot of ways like "daily active users". it doesn't matter how effective you are at actually extracting money from those users, as long as the number of users continues growing, investors will be happy to continue throwing money at you. so far, this has been easy for a lot of the big social media companies to keep up, thanks to network effects, the fact that there are a lot of people in the world, and of course almost all of them are free to use (sometimes they also just fudge the numbers by including bots as users, as we are now finding out with twitter). meanwhile, tech companies like uber and doordash are able to continue gaining users because they offer their services at a loss. this is why uber loses hundreds of millions of dollars every year, they do not charge the true cost of delivering their service, but as long as the cheap prices continue enticing new users to join, the venture capital money will keep coming in to cover the losses.

when the userbase stops growing, though, that's when the whole scheme collapses. the fact of the matter is, the current tech/internet/social media company business model may simply be long-term unviable because there's no way to effectively monetize it outside of digital advertising, and as we saw earlier, the digital advertising gravy train is probably not going to last forever. what happens when the userbases stop growing? the money from venture capitalists and investors will stop flowing. when facebook's "daily active users" fell for the first time ever in 2021, from 1.930 billion to 1.929 billion, its share price got pummelled, dropping 30% in a single day. if this is what happens to facebook, which measures its user counts in billions and is currently massively profitable, what will happen when the user count falls for one of the countless tech companies that's been hemorrhaging money? to make the situation even worse, interest rates are now going up as well, so there won't be any cheap loans to plug the gaps anymore.

the only option for those companies will be to try and become profitable before the money runs out, but the problem is that it may not even be possible. this essay started out by recognizing the massive negative vibe shift towards social media and the modern internet (the "gig economy" is also taking a lot of heat lately), however many people still feel trapped in it. perhaps all they need to quit is a little nudge, like some intolerable ads or fees or other changes that desperate companies make in the scramble to monetize their previously-heavily-subsidized services.

if you're young like me, i wouldn't blame you for thinking the current internet may last forever. after all, it's basically been heading the same direction towards corporatization and social media walled gardens for as long as you can remember. but in the grand scheme of things, all those companies and the internet itself are still quite young, younger than many people alive today. it still could easily be, as sam kriss proposes in his post, nothing but an extended fad. the rise was quick, but the collapse may be even quicker as the exodus begins and the dominoes cascade. the internet may feel like the world to many now, but even the world can change almost overnight: in 1989, everyone still thought the soviet union would last forever. the one thing you hope, though, is that it doesn't all get replaced with something worse.

coming soon eventually: an essay on the form of the future internet