At the most recent SXSW, Aaron Shapiro, CEO of Huge, a Brooklyn, N.Y.-based digital marketing agency, talked about the current transition from the Attention Economy (b. 2005) to the Efficiency Economy.
“A lot of it is driven by machine learning and data taking over so much of digital, which is changing how the Internet has worked,” Shapiro said, in a follow-up interview with PC Mag. “For 20 years, it has all been based on attention; we get all this free stuff like publications from the media and e-mail from Google and in return those services sell our attention to advertisers and that’s how it’s monetized. That’s worked pretty well, but we’re starting to see the excesses of that with things like fake news and reports of addiction. The emerging model is what I call the Efficiency Model, we’re people are paying for what they use.”
Part of this transformation is being driven by information overload; people are seeing an average of 3,000 advertisements a day, according to Shapiro. “If you’re an advertiser trying to be one of the 3,000 that people are going to pay attention to… that’s a very tough battle,” he said. “You have banner blindness; people are so used to tuning out the ad, they don’t even see the advertising. The average consumer looks at a Facebook ad for 1.9 seconds, which is basically how much time it takes to scroll past the ad down their feed.” He cited Proctor & Gamble’s recent decision to cut $200 million in digital spend, “because they saw that a lot of this stuff just didn’t work.”
Over 80 percent of digital ad spend is controlled by Facebook and Google. “If you’re not one of those two companies, then it’s hard to get attention and to monetize it,” Shapiro said. “Think about all the publishing companies that get so much of their traffic from Facebook and Google. So what happens when they just tweak their algorithm? You’re at their mercy; it has become a very tough situation.”
Then there is the other giant, Netflix, which the average consumer spends 1.5 hours per day watching, with no advertising. For 30-second long-form videos, there are fewer and fewer places to watch that ad, Shapiro said. “Ninety percent of people on YouTube click through that little interstitial that allows you to skip an ad after four or five seconds. So you’re an advertiser that has spent all this money on a 30-second ad and you’re lucky if they watch four seconds of it.”
So what’s next, Alexa? By 2020, it’s estimated that half of all searches are going to be voice-based, and one of the two product recommendations that comes up in a typical Alexa search is likely to be an Amazon private-label product, Shapiro said. “It’s part of the broader trend which is the virtualization of the Internet,” he added. “Everyone from Google to Facebook to Amazon and many smaller companies like Dollar Shave Club has concluded that the way to be viable long-term is to be direct-to-consumer and own the full vertical supply chain. Using the Dollar Shave Club example, instead of going to the store and buying that razor, where you have so many different decisions and people in the chain, now it’s a subscription model so you never think about it; you have full lock-in. And of course they were acquired by P&G so we’re going to see more and more of that.”
Closer to home, Shapiro argues that something will have to give with the $40-$50 billion casual gaming industry as well. “Only a small percentage of people pay for the service, but those who do pay, pay an average of $330 a month,” said Shapiro said, who claimed this behavior can only be explained by addiction. “If your only incentive as a company is to get more and more people’s attention, sensationalism is going to trump truth when you look at content, and you’re going to create services that are basically addictive. Too much of our Internet economy is based on those kinds of mechanisms.”
For all of that, Shapiro describes himself as a techno-optimist. “Society is course-correcting,” he said. “No one anticipated what happens to the extremes of attention. These are all unintended consequences. We’ve seen behavior on Facebook become more responsible; for the first time we’ve seen people use it less from one quarter to the next. From a business model standpoint, we’ve seen more and more companies decide that the way to make money on the Internet is to go back to basics. Technology has always existed to makes things easier, simpler and more efficient and, heaven forbid, you pay for that.”