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Comment by mnemonicsloth | Hacker News Reader

http://cdixon.org/2010/03/25/stickiness-is-bad-for-business/

Chris Dixon posted on this recently:

Facebook is like a Starbucks where everyone hangs out for hours but almost never buys anything.

...

The vast majority of money spent on intent-generating advertising — brand advertising — still happens offline. Eventually this money will have to go where people spend time, which is increasingly online, at sites like Facebook. Somehow Coke, Tide, Nike, Budweiser etc. will have to convince the next generation to buy their mostly commodity products. Expect the online Starbucks of the future to have a lot more – and more effective – ads.

The problem, of course, is that nobody knows how, but we expect someone to figure it out eventually.

So here's a fun question to overcome your status quo bias. What if brand advertising is an artifact of one-to-many communications tech, and can't work in a many-to-many environment?

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I suspect online advertising is undervalued precisely because it can be measured. I further suspect that "brand advertising" is a scam for all but the largest advertisers.

"Half the money I spend on advertising is wasted; the trouble is I don't know which half."

– John Wanamaker

The largest advertisers became the largest because they spend a lot on brand advertising. So perhaps it's true that you have to spend a lot to make brand advertising effective, but it's not a "scam" in any conventional sense of the word. It is what it is.

If we're going to sling arrows at online advertising, I think we have to start with the fact that there are a lot more publishers than there were back in the day, and virtually all of them have an undifferentiated audience of "eyeballs". It's still possible to get high CPM rates, as long as you've got a targeted audience and a sales team.

The largest advertisers became the largest because they spend a lot on brand advertising.

[citation needed]

A famous quotation about the effectiveness of advertising, by a business person "considered by some to be the father of modern advertising."

http://en.wikipedia.org/wiki/John_Wanamaker

"Half the money I spend on advertising is wasted; the trouble is I don't know which half."

That (sort of) substantiates the parent post's claim. If only 50% of your advertising money is effective, then spending more will still be more effective, no?

If half is surely wasted, it still remains to be shown that the other half provides a good return on investment.

You're making an assumption of corporate stupidity that I find to be highly unlikely. Large companies do not become large companies by tossing hundreds of millions of dollars down dark wells without analysis.

I'm making the assumption that Coke and Nike, et al. are smart enough to have at least rudimentary knowledge of the effectiveness of their brand advertising. Is this an assumption? Yes. Is it a more reasonable assumption, a priori, than the alternative? I think so.

Exactly correct.

My recollection is that Max Levchin presented his vision for Slide under these exact terms about two years ago. Interestingly enough, Lance Tokuda, who had launched RockYou with an analog vision, publicly buried the potential for brand advertisement last summer (in comparison with virtual goods). I imagine it's a reflection of the time it takes to ramp up sales accounts with large consumer products corporations.

There also was some great data on the wide disconnect between attention market share and ad spend market share of the net in the last Meeker report: http://www.readwriteweb.com/archives/mary_meekers_internet_t...

Still, I wouldn't mind to be in Starbucks or Facebook's shoes, financially.

You're aware Starbucks have shut down a lot of their operations recently?

Heard something, but I don't think their problem is customers hanging out at the store and not buying anything. They simply built too many branches, would be my guess. Also not sure how much it hurts Starbucks if a branch shuts down.

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