Why didn't social media kill advertising?

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One of the more unfortunate things about the economic downturn's timing is that it has come just as the media industry is going though a radical transformation (some would say amputation) at the hands of digital technology. That means it's really hard to figure out where the damage is coming from. How much of global adspend's 0.2 per cent drop last year was economic hardship, and how much was structural change? And how can people in the business of making and selling media really make decisions until they know?

Behind these questions is a nagging, nasty little doubt: As consumers become smarter and more empowered, won't advertising become increasingly meaningless to them?

The hard truth behind much of digital advertising is that, when you can actually measure how many people click on your ad, you find out that a shockingly small number actually do.  If newspapers had to measure how many people actually read and absorbed their ads, they'd be doomed. Advertising -- answers to questions that nobody asked -- is noise, and the human brain is really good at filtering out noise.

People in the advertising industry know this of course, and fret about it a lot. But there is generally a belief within the industry, in my experience, that brands can override this noise filter by operating cleverly within the social media sphere.

But in Jaron Lanier's recent manifesto against our culture's increasing reverence for this sphere, You Are Not A Gadget, Lanier questions the assumptions that most of us make about the unstoppable march of all things cloud-ward. He begins by asking a question I've always wondered: Why didn't social media kill advertising? His answer, essentially, is that the crowd is not as wise as we have been trained to think:

The most tiresome claim of the reigning digital philosophy is that crowds working for free do a better job at some things than antediluvian paid experts. If that is so, why doesn't the principle dissolve the persistence of advertising as a business?

A functioning, honest crowd-wisdom system ought to trump paid persuasion. If the crowd is so wise, it should be directing each person optimally in choices related to home finance, the whitening of yellow teeth, and the search for a lover. Every penny Google earns suggests a failure of the crowd -- and Google is earning a lot of pennies.

If you want to know what's really going on in a society or ideology, follow the money. If money is flowing to advertising instead of to musicians, journalists and artists, then a society is more concerned with manipulations than with truth or beauty. If content is worthless, then people will start to become empty-headed and content-less. The combination of hive mind and advertising has resulted in a new kind of social contract. The basic idea of this contract is that authors, journalists, musicians and artists are encouraged to treat the fruits of their intellects and imaginations as fragments to be given without pay to the hive mind. Reciprocity takes the form of self-promotion. Culture is to become precisely nothing but advertising.