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0 pointsrwmj6y ago0 comments

When I worked in this field (and I must stress that this is 15 years out of date anecdata), my impression was that Google's profits came from a mix of a large influx of naive new users, and established companies with misaligned incentives.

By "misaligned incentives", I mean that we were rewarded with a % of ad spend. This is very common model in the old advertising industry, and AdWords was treated as adverts, not as a technology proposition. Of course this meant that we had very little financial incentive to reduce the ad spend.

A more aligned structure would have been to reward percentage of profits, but companies were reluctant to reveal their profit margins to a third party, and third parties couldn't trust their clients to report this data correctly anyway. Hence percentage of ad spend was what everyone used.

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hinkley6y ago

Percentage wouldn't necessarily be so bad, except that there's a certain base cost to setting up and running all of those systems. At some point getting someone to up their spending 10% has very little incremental cost. It would be far cheaper than trying to reduce overhead.

So now you have perverse incentives on perverse incentives.

And if you don't look at it too closely then you can feel good about all the money you're making helping people slowly self destruct. Your parasitism is perfectly justified by the mad stacks of cash you're making.

There's only two ways to get that much money. Do something really really good (at which point you probably will give a lot of that money away), or do something really really bad. If your company has to talk about 'evil', it's probably in the latter camp and always has been.

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0 pointsrwmj6y ago0 comments

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hinkley6y ago

So now you have perverse incentives on perverse incentives.

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