Category: Digital Disruption

From The Conversation.

Creativity and spectacle are becoming less important than the personal information used to target ads. The sponsored links on a Google search or in your Facebook feed are very effective, but for a completely different reason than your favourite television commercial.

When you think about advertising what comes to mind is probably the art. Memorable ads are often creative, clever or emotional. Something along the lines of a big, viral Australian beer ad, or maybe something from the Super Bowl.

These ads had a symbiotic and reciprocal relationship with the media they played alongside. Big sporting events or television shows draw a certain audience, and advertising agencies created a spectacle to match. This isn’t the game anymore.

Google and Facebook dominate digital advertising

According to Jason Kint, CEO of digital content industry group Digital Content Next, Google and Facebook captured all of the US$32.7 billion growth in digital advertising spending in the first half of last year. Everyone else’s share shrunk by 3%.

Kint’s estimate came after earlier predictions by Morgan Stanley analyst Brian Nowak that some 85% of new ad spend in 2016 would be split between these two companies.

Google and Facebook both make money by pairing user-generated content and personal information with advertising.

Google’s search engine serves sponsored results alongside other results in response to user search queries. Content posted by users on YouTube is often preceded by ads that mimic many of the traditions of television ads. Google-hosted display ads also appear on non-Google websites.

Facebook uses information users have given it, such as age, gender, relationship status and location. The site uses this to display ads from advertisers seeking to target people by specific characteristics.

Although they both use some of the same social signals, it is often a slightly different process: Facebook has monetised personal data, while Google has monetised activity.

‘The internet of you’

Unlike earlier forms of advertising that were targeted to generalised audience segments by broad demographic characteristics, the forms of advertising used by Google, Facebook and their competitors are more precise.

They use specific activity (such as searching for a term like “hotels”) or status information (changing a relationship status to “engaged”) to find people most likely to be interested in chosen ads.

More recently, data generated in a more passive way – from going about daily activities like travelling to work or cooking meals – are also added to our searches and what we post on Facebook. This information is collected through in-home and wearable devices like Google Home and mobile phones.

All of this data generation and collection leads to personalisation, or what wearable device maker Jawbone calls “internet of you” – “technology tailored to you, with your own data driving the experience”.

Ads are precision targeting

The personalisation and precision of these new ads are changing the nature of advertising. It’s no longer about entertaining, delighting or making a personal connection; it’s about precision targeting.

It is easy to imagine gyms seeking new clients by targeting those who have shown search interest in getting fitter, enabled by online tracking, but what about using step-counting devices to promote those shoes to someone who has actually started walking just a little more?

These are the kinds of data-supported advertisements of the “internet of you”.

Such strategies pose difficult ethical questions about privacy and personal information as users may have consented to the data use without actually reading or understanding long and complex terms-of-service documents.

These approaches also upend a common and understood – although widely criticised – approach to funding internet content with display ads. As the media theorist Douglas Rushkoff put it:

We are not the customers of Facebook, we are the product. Facebook is selling us to advertisers.

But on the “internet of you”, users may find they are both the customer who purchased a product and the target of a secondary customer (an advertiser) who bought their data.

What this means for advertising

With Facebook and Google dominating, many other web publishers are at a loss as to what to do. They find it difficult to find the “right solution to the big question of driving payment for quality content”, as the founder of the website Medium recently put it.

In an end-of-year update for marketers, Google highlighted the biggest issue in this new world – trust. Companies “must find ways to reassure consumers and position their brands as trustworthy”.

One way to create engaging and trustworthy advertising is by showing an interest in what customers already care about, which is helped by knowing as much about them as possible.

However, if users find precisely targeted ads creepy or feel unable to trust the devices in their homes and on their bodies, they may push back against marketers that deploy them. That would force ad makers to look once again to content that works alongside the media it funds.

Author: Travis Holland , Lecturer in Communication and Digital Media, Charles Sturt University

From The Conversation.

In investment terms, a safe haven is exactly what it sounds like: a place of relative safety when times are tough. Traditionally, safe haven assets have been physical, such as gold and silver, the US dollar and the Swiss Franc.

More recently, Bitcoin, and other intangible assets, have been entering this discussion. An example of the latter would be one of the many gold Exchange Traded Funds (ETF), which are shares of gold holdings listed on a stock exchange, a financial claim, or US and German government bonds.

But can these intangible assets really replace the tangible? What changes as our society becomes increasingly digital?

Let’s use gold as an example. Gold is a real and tangible asset, similar to currencies but unlike stocks, government bonds, virtual currencies and other financial claims. Gold is also durable with an effectively infinite longevity and thus completely different to any other asset.

These are the aspects that give gold its prominent position as a safe haven, and they are precisely what the likes of Bitcoin lack.

Real safety versus financial safety

Safe havens provide safety like a harbour does for boats against rough seas. The harbour does not protect the boats against all risks, but provides some protection against storms and big waves.

The question when it comes to intangible assets is whether this same kind of safety can be provided by something that is not real and tangible. In other words, could an insurance contract (a financial claim on an event) provide similar relative safety as gold? The answer is no.

An insurance contract can compensate for a loss, but it does not avoid the actual loss. The loss must be incurred and suffered first, and the compensation is only paid subsequently, with a delay. In other words, whilst the loss is immediate, the compensation is not.

A real safe harbour, in contrast, provides immediate safety and avoids a loss in the first place, i.e. the boat is not destroyed and lost in the rough seas of the ocean but it is protected by the harbour. This loss-avoiding feature may be particularly important if the asset also has some intangible features that can neither be valued accurately nor be fully compensated. Think of something like a unique painting.

Additionally, the insurance contract does not only fail to avoid the loss in the first place, it may also fail to pay any compensation if the issuing company is in financial trouble or bankrupt. This “counterparty risk” is always there but may be large in times of financial stress and uncertainty, and thus when the safe haven feature is needed the most.

Tangibility and durability

We know from behavioural finance that humans do not always act rationally in a strictly financial sense. Some of these decisions are linked to elementary desires, such as the want to possess something that is tangible and additionally signals status and wealth.

Gold has often been referred to as a relic. But from a behavioural perspective, this may also mean it is ingrained in our subconsciousness and related actions. Put differently, as long as humans remain tangible, it is likely that they maintain a desire to hold real and tangible assets.

Very few companies on the US stock exchange, for example, are older than 50 years. By comparison, gold has existed for thousands of years and any gold coin or gold bar will most likely outlive any company and their stocks and bonds. Put together, it is unlikely that a company that sells claims on gold, such as a gold ETF, will beat physical gold’s longevity.

So if you have the choice of physically holding gold coins and bars or buying a financial claim on gold, only the former is providing you with all the benefits of a safe haven.

There is another aspect to this physicality. While the stock market is a great invention, allowing investors to buy fractions of companies (buying a few shares rather than the entire company, for example), this was never a problem with gold. Gold is highly divisible, able to be manufactured and purchased from as little as a few grams right up to 12.5 kg gold bars. The main reason for not holding physical gold is the cost of storage, but this cost does not necessarily outweigh the counterparty risk alluded to earlier.

The horror scenario

Imagine there is a systemic shock that triggers global stock markets to fall by 15% within a couple of hours. You can’t access your online brokerage account immediately as the website is down. And by the time you can, the markets are in free fall and you would lose a third of your wealth if you sold some of your holdings.

It’s in this situation that tangible assets really come into their own. Your real and tangible assets – your gold coins and bars – will still be there and accessible. Trade in them can’t be halted by a company or an exchange, they can’t easily be seized or cancelled by a desperate government, and they don’t rely on a third party (such as an insurer) being able to pay.

Gold and silver will long outlast any of that. The tangible will provide you with some relief.

Author: Dirk Baur, Professor of Finance, University of Western Australia