This situation is nothing new, its very similar to what happened during the dotcom bubble in the late '90s: back then small startups used a sizable chunk of their funding to run banner ads on popular portals like Yahoo. Some times they received that funding after gaining some notoriety after running some small ads, which prompted them to run even more ads. Because the business plans of most of these startups was a joke there were no revenues and soon they ran out of money. As it turns out it was all a closed-loop, the major dotcom companies like Yahoo received far more money from these startups' ads than from other companies/products, so as soon as the startups died the revenue of major portals took a nosedive and the markets went crazy.
Today there's a huge number of social media companies, some founded by ex-ad industry guys and others by wantrepreneurs, and they make a lot of money "creating" viral videos for their customers. This is very similar to the dotcom scenario: company A pays social media startup B to make a series of viral videos. Because the results of this campaign are measured mostly in terms of views B uses part of the money to inflate the number of views.
The problem as I been saying some colleagues at marketing for years, is that corporate clients are realizing this for the simple fact that viral numbers don't translate in sales or user engagement/loyalty, case in point only 1% of FB users who "Like" a company's page return at some point in the future.
Now that this little fact has made its way to the mainstream media it's only a matter of time until the idea that viral marketing its completely useless becomes ingrained in the public's mind.
This is incredibly true. If I was some type of marketing consultant or whatever, and lets say I was trying to market a band that was paying me (as if bands have money these days), if I could get them 60,000 views in a few days this would seem absolutely huge to the average smaller band. Their assumptions would be that they are getting huge in comparison to their local competition.
It doesn't matter that the views are worthless. Even if they know you 'did something' to make that happen, they'd be happy because other people looking at it would think they are more legitimate for it. Its all about perception. I remember people running various bots and scripts to blow up their MySpace music play counts. "Wow this band has 300k plays? They must be good!". Same could be said for Twitter follower count, etc...
It can all be gamed. The question is how many people realize its been gamed?
Right now it seems that number it's on the rise, so I guess is a matter of how long this line of business will last considering cash-strapped businesses wont spend a dime on something that's widely considered to be useless/ineffective.
You'd think that it would stop working right? Yet, it doesn't seem to. It just moves.
Overall there's a trend toward the value (ROI) of advertising almost always dropping as better data on the ROI becomes widely available. Advertisers try their hardest to show the ad buyers that the ads are being massively effective, and try to hide any statistics that speak to the contrary.
Most advertising isn't effective. Period. Of course, it isn't just the form that's bad, but the message as well so it can't all be blamed on the medium.
New forms of advertising like to pretend that new money is actually being spent by consumers. Surely, there is shift in consumer spending, but it rarely coincides with the growth of a new broadcast media. Just because there's Youtube|Twitter|MySpace doesn't mean more people are buying cars|music|clothing. Yet, brands want to throw money there in hopes that there will be.
Slowly there is a realization that those $10CPM ads were only returning $3CPM of investment. When enough people realize this (it takes a while) the value drops for everyone.
Sometimes it's hard to value the investment for ROI, especially in terms of perception as you mentioned above. The fact is though, social proof is an element of popularity and so people will continue to game social elements like that.
That's just the thing: just like it doesn't really matters if a product IS "the best" but if it's perceived by the population at large as "the best", advertising it's also subject to this kind of rationalization, and if social and viral ads become increasingly perceived as ineffective, a waste of money or worst, a scam, then it's over, since even if certain techniques are put forward to improve it and solve the inherent problems in the system, these ads will still be considered by many higher-ups to be useless.
This is allowed to happen precisely because advertisers have been conditioned on 30-odd years of broadcast TV advertising, back when that was the only mass-media game in town. The strategy on broadcast TV, whether in its heyday or even now, was essentially the shotgun approach: fire a shotgun into a crowded area, and hope to hit a small percentage of your targets (metaphorically speaking, of course!).
Web-based advertising can, potentially, allow for a much more sophisticated and surgical approach. But advertisers aren't used to thinking surgically. They still want their shotgun. (They call the shotgun "reach," or use terms like "GRPs" to attempt to quantify reach). That's why broad, sloppy metrics like total video views, or total pageviews, or total clicks, still appeal to advertisers. They're still working from the mental model that you need to fire a big spray of shot, and that you apply some sort of fractional discount to the total number of people you fired at, and that fraction is who you managed to get. It's a dumb, top-down, unsophisticated approach to advertising -- but it persists, and so long as it does, there will remain a healthy market for "viral" services.
Today there's a huge number of social media companies, some founded by ex-ad industry guys and others by wantrepreneurs, and they make a lot of money "creating" viral videos for their customers. This is very similar to the dotcom scenario: company A pays social media startup B to make a series of viral videos. Because the results of this campaign are measured mostly in terms of views B uses part of the money to inflate the number of views.
The problem as I been saying some colleagues at marketing for years, is that corporate clients are realizing this for the simple fact that viral numbers don't translate in sales or user engagement/loyalty, case in point only 1% of FB users who "Like" a company's page return at some point in the future.
Now that this little fact has made its way to the mainstream media it's only a matter of time until the idea that viral marketing its completely useless becomes ingrained in the public's mind.
Once that happens there's no way back.