The Digital Economy's Coming Subprime Crisis (And What You Can Learn From It)

Tue, 17 Nov 2009 00:00:00 -0800

harvardbusiness.org - By Umair Haque - Nov. 17 (Opinion) - Today's media players aren't investing in better ads. They're investing in more — and more toxic — ads. Uh oh: it's the economic equivalent of the subprime crisis. The parallels, to me, are too striking to ignore. Here are eight time-worn steps to crisis that Wall Street took yesterday, and media's taking today. Toxicity. Wall Street's subprime crisis was built on toxic financial instruments. The mediascape's subprime crisis is being built on toxic communications. Social gaming — Facebook's Farmville, for example — is the hot growth area for VCs, advertisers, and publishers alike. But last week, TechCrunch blew the lid off it: much revenue in this nascent market is derived from scams masquerading as "ads." To me, there are striking echoes of CDOs — a hot new growth market for Wall Street, later revealed to be a house of cards.

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The Digital Economy's Coming Subprime Crisis (And What You Can Learn From It)