The Attention Auctions: Why You See The Ads You See

My girlfriend was curious: Why it is so bad that companies have our data? Specifically, she told me a story:

I was looking for a bag for work, something to carry lunch and a laptop in. I would look up different bags online, and then when I would use Instagram, they would have work bags advertised to me. I compare them, trying to find one that fits my needs and–equally as important–matches my style. The ads helped by showing me more options than I knew about. Why is it so bad that companies have our data?

The bag she ended up getting, for the curious.

So What’s The Big Deal?

Meta, the owner of Instagram, earned $313,000,000 per day on average from advertising in 2021. That’s about $218,000 per minute, every minute, for the entire year.

To be honest, that’s pretty surprising. Those ads you scroll past on your feeds fuel +95% of the revenue for a company worth over $500 billion dollars.

Google also makes almost all (~92%) of its money from advertising. At $209 billion per year, Google makes $572,000,000 per day from advertising. Almost $6,600 per second… holy smokes!

Where Does That Money Come From?

Here is a list of a few companies that immediately came to mind that generate 80% or more of their revenue from advertising:

A Dove advertisement on Instagram.

Why Do They Make All of Their Money From Ads?

These aforementioned advertisements are all targeted and tailored to you. While you may believe these apps and websites are made for you, in reality they are not. Facebook, Instagram, Reddit, Twitter, and Google all exist for advertisers, as advertisers are the ones paying them hundreds of billions of dollars per year. Remember, these companies are businesses. If it weren’t for the advertisers paying for these platforms to run, they would not exist.

Advertisers are the intended audience. Social media companies and other organizations like Google exist for advertisers, not for you. Your attention is the product being sold, by social media companies (and Google) to paying advertisers. Advertisers are the buyers, the internet companies are the sellers, and the product they are selling your attention.

The Attention Auction: Why You See The Ads You See

Ads are selected and displayed as a result of an auction. Google describes this process in the following way:


“Google Ads determines which ads should show with a lightning-fast ad auction, which takes place every time someone searches on Google or visits a site that shows ads.

There are 3 main factors in the ad auction that determine which ads appear, and in what order:

  • Your bid – When you set your bid, you’re telling Google Ads the maximum amount you’re willing to pay for a click on your ad.
  • The quality of your ads – Google Ads also looks at how relevant and useful your ad and the website it links to are to the person who’ll see it.
  • The expected impact from your ad extensions and other ad formats

Together, these 3 factors determine when and if your ad will appear to potential customers.”

Source: Google


Right before you see an ad, whether by clicking on a website or scrolling through your Twitter feed, a lightning-fast auction takes place.

Everything this company knows about you is compared against a huge array of advertisers who are trying to buy your attention. All of the purse sellers who have products that match what you are interested have placed bids highlighting how much they are willing to pay for you to see their product.

This auction takes place on the servers and as soon as it is over, the ad is shown on your device.

That is what the advertisers are buying. Facebook, Twitter, Instagram, YouTube are selling your attention as best as they can. In fact, they are competing both in how much you use their services and how well they know you (in order to sell ads).

Just a couple of decades ago, effective advertising was thought of as the ability to get a great ad in front of massive numbers of people. These days, effective advertising is more likely to be thought of as the ability to get the right ad in front of the right individual consumer. 

One of the best things about Facebook’s advertising platform is your ability to customize and target your messaging. With their lookalike audiences feature, Facebook allows you to tap into your list of existing customers and identify other prospects with similar attributes. You can direct your advertising at these specific individuals, who are a lot more likely to be interested in your brand. 

Plus, with a variety of ad types, you can create social ads designed to meet consumers anywhere along their journey. You can build a brand awareness campaign that’s targeted at consumers who haven’t heard of your brand before. Then you can design carousel ads with a variety of relevant products, which you choose to target at existing customers who’ve made similar purchases in the past.

– Media Sales Corporation LOCALiQ

You can see exactly what topics of ads Instagram is auctioning off for you. “The process is pretty simple and will only take a few seconds. First, go to your Instagram settings. Tap the “security” button then the “access data” section. There at the bottom, you’ll find a part that says “ads”. Tap that and the “ads interests” button that appears afterwards” (Bustle).

Conclusion

Even though you may believe you are getting ads that serve your needs, it is actually the advertisers that are having their needs met. Anytime you say “Wow! That’s a great product!” the social media company gives a high five to the advertising client, and gets paid.

Unfortunately, good and bad are too simple for this case. Most things are both good and bad–including advertising. It’s good insofar as you may see relevant products/services, but it’s bad because your attention is being auctioned off to people who do not have your best interests in mind.

I wrote this article to provide some insight as to how the advertising process works. I am hopeful that being informed will help empower your decision around social media usage.

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