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Comment by benologist | Hacker News Reader

Their whole ad empire is desperate for a massive audit. Google had to be sued to deliver a $400,000 refund they owed but later claimed couldn't be delivered, claiming 3rd parties had been paid the funds when it was their own platforms. It turned out Google had accidentally kept $75 million.

https://marketingland.com/class-action-lawsuit-accuses-googl...

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As someone who has adblocked everything since my teenage years, the whole ad industry seems to be making orders of magnitude more money than it should. I just don't understand how anyone comes to buy things shown in ads.

Are ads really effective? I don't buy advertised products.

Do we really trust ad tech accounting? They've been caught inflating numbers over and over again.

The whole house of cards seems like it could fall over if actually investigated. Google, Facebook, Twitter - every single one of them.

Influencer and direct social referral advertising seem much more "legitimate" than injected ad impressions.

How can we get the thing to implode? Google has destroyed the web to prop up its ad business. I'd be happy if they couldn't cause any more trouble.

I think most marketers are aware that a lot (maybe half) of clicks are bots/fraud.

At the end of the day, if your ROAS is good, you don't care that much.

If Google’s ad business dries up, what do you think they will pivot to? It scares me to think about what a desperate company with that much data would do.

They have lots of cash but a pretty high burn rate too. Google has lots and lots of fat they could cut. Guess it would really matter how quickly the advertising business died as to whether or not they'd survive long enough to do something monumentally evil.

Maybe they're going to blackmail everyone. $10 a month or all your past Google searches get published.

Google has been trying to diversify from just adtech for over a decade - unsuccessfully.

Still 90% of their profit comes from ads. They are much less diversified than Apple, Microsoft, and Amazon.

Yes. As an advertiser, who traces each ad, I can say that advertising has demonstrably made me thousands upon thousands of dollars.

However, 80% of ads are trash peddled by blind men leading blind men.

There are very specific advertising techniques that work consistently, but most "marketing types" optimize for flashy artistic ads that have literally ZERO selling power.

In fact, in some studies, ads actually REDUCE sales -- by, for example -- accidentally highlighting something that is an unexpected turn off to customers.

But, the problem is, most companies don't trace their ads. And that's why overwhelmingly a lot of advertising money is wasted.

But this state of affairs has been going on since the 60's.

So I wouldn't underestimate the number of gullible humans to keep paying for advertising.

As long as you have eyeballs you'll probably always have an excess of ad spend.

just out of curiosity, what are some specific advertising techniques that work consistently?

Brand awareness ads. Pretty much it’s irrelevant what you say about brand ‘X’ as long as you bombard gullible observer with ‘X’. Then buying ‘X’ would be more familiar choice for millions than buying ‘Y’ or ‘Z’.

I'm not saying you are wrong but brand awareness ads are, if I'm reading correctly, exactly the kind of wasted ad money the parent was talking about. They are the cluster bombs of the advertising world.

I think the Parent was actually advocating surgical PPC management of the style patio11 has written about extensively.

Branding is a moat. There's a reason Coke and Pepsi spend hundreds of millions on branding ads and I am sure they know there is a ROI there.

Brand campaigns are good if you use vast multichannel campaign to make people remember your product. I dont need to say it is extremely expensive but works.

Other reason to use it is when you dont want to be screwed by fake clicks, and are 100% sure people will find your product anyways and buy it.

And that was half of this post, the blog was as much about using their new product to track this problem as it was about finding the problem. Kudo's to solving a problem you find while making the product.

No specific tactic works forever. There is no "1 weird trick." You need to set up your advertising and sales funnels to track as prospects become customers, and continually experiment on the message and the channels. This is where most startups start and a lot of them get it wrong. If you have boatloads of VC money, you can run a lot of bad experiments until you hopefully hit paydirt. Paydirt is +ROI ad campaigns on a large targeted demographic. Then you treat this audience like a goldmine. At first it's easy to mine and pick up gold nuggets in river beds. As the easy pickings disappear, you'll find yourself investing in increasingly more expensive machinery and infrastructure to continue mining operations. As you've extracted most the gold, look for byproduct like copper, silver, etc (in startup terms, introduce ancillary products and services). As you hit one gold mine, keep prospecting other areas (distribution channels like display ads, native ads, social media, etc).

If you end up a multi billion dollar unicorn with tens of millions in ad budget, targeted direct ads no longer move the needle like they did when you were a startup. Now for the Director of Marketing to justify increasingly larger compensation, he needs to increase his ad spend and starts whispering about spending money on ads that have no direct correlation to the bottom line. This is called brand advertising. Hint: If an early stage startup spends more budget on brand advertising than direct marketing, run.

Effective advertising is matching the product/service with some problem, on a specific channel of eyeballs, with a specific message. There are tons of new channels popping up every few years (think google, facebook, instagram, youtube, twitch, pinterest, wechat, stackexchange, hn, reddit, etc). There are millions of permutations but you have a finite ad budget. The magic is deciding how to show what to who.

For the "how" and the "what", in the future, I bet ads platforms will ask you to write an long essay about what you sell, and they will automatically generate many different ads with GPT-2 (probably in real-time, to mix some content of whatever the viewer is browsing at the same time), and everything will be automatically A/B tested, segmented, adjusted, etc with reinforcement learning.

Even better, no need to write an essay about your services or products, Google already know everything about it by scraping your website, so just point to the URL, and done

So, there are no techniques that work consistently.

Correct, because everything is dynamic, including the search terms, eyeballs, and competition for keywords. It's pretty simple economics - once I find a way to spend $50 to make $100, it's only a matter of time before other people discover something close enough to make me spend $75 to earn $100. Then $90. Then (conjecture), winners curse takes account and people are spending $110 to make $100 (once Neil Patel's audience hears about it).

With the tactics being gobbled up by the Red Queen effect, you have to move to strategies to win. The OP writes about a pretty good one.

So... using voluum?

Are they impulse buyers, or highly specialized? From time to time I see a cool thing that seems targeted to me, do click it, see the outrageous price, then do research and find the best price/quality ratio on Amazon. I assumed most people did the same really. An example from years back: I thought the Little Giant ladder was an awesome idea, but ridiculously priced. I bought a gorilla knockoff type ladder instead.

I'm not sure, but my girlfriend clicks on ads on instagram and buys things directly from there on a regular basis. I think the people who go on HN might be in a little bit of a bubble about the efficacy of advertisements.

HN is a bubble.

I've been running PPC ads for highly targeted keywords for the last 5 years which have generated a ridiculous return. In general ppc is steady and reliable once you have you're keywords and ads running for a while and are well optimized.

On the other hand, I've recently been trying dropshipping, advertising the product on Facebook.

I did a small test for a unique product, I sourced it from China for around 5 usd and sold them for 25 usd.

People actually bought them on site even though Amazon has them at a much lower price.

Facebook literally knows people who are high spenders / frequent purchasers and will put your ads in front of them. It's actually stupidly powerful.

Why haven’t you scaled out the dropshipping concept further? It sounds pretty solid.

Basically you just rattled off everything I, as someone who never worked in that industry, assumed was going on.

There's just a shit ton of money to be made pretending it's 1955. I went into the wrong business.

I'm not in the industry so please forgive my ignorance, but what is ad tracing? Is it the same as ad tracking, if it is then I really don't understand as there seems to be a huge amount of tracking going on!

Yeah, it's funny to see a bunch of people complaining about both ads being ineffective AND conversion tracking being pervasive. But the reality is that unless there's perfect conversion tracking, garbage ads will be inevitable. This is why I have a (very unpopular) opinion of putting precise conversion tracking into the web standard (No, not the garbage one that Apple recently proposed).

It's well known in business that ads are generally dubious at best and likely mostly a fraud. Unfortunately, there isn't an alternative than doing all the work in-house. And, if you're good enough to do it in-house to make it a business, you'll easily figure out that you can cheat other people. IMHO, ads should be treated as a national resource with open accounting and a non-profit goal. This would instantly force companies to have to charge for services, pushing things back into competition.

Honestly, everything after your first sentence is completely incoherent. I'll stick to the first sentence.

>It's well known in business that ads are generally dubious at best and likely mostly a fraud.

You're using the phrase "it's well known" in an attempt to support a consensus that you completely fabricated. I spend over $100,000 every year on digital advertising, and I can assure you there is a very measurable return. Colleagues who manage much larger (and some smaller) marketing campaigns are also making measurable returns. You clearly have no experience in what you're talking about. So why talk about it?

There are lots of unsophisticated business owners and marketing "professionals" who think they can just throw money at digital and it will magically return. These same people don't understand how to effectively measure, so they may not even realize they're burning money. Like any failed venture, that is THEIR fault. In no way does that make advertising "generally dubious at best and likely mostly a fraud".

I have worked for a company that spent a multiple of your amount in a single day on a PPC advertising.

The fact that it works for you doesn’t mean that if that industry wasn’t as monopolised and unregulated you wouldn’t pay 1/10th of what you paid for the same.

Are ads effective? Yes. Are highly personalized and targeted ads more effective than, say, location+context? Dubious

To my surprise yes ads are very effective. Without getting too specific, my close relatives run their own business as home improvement contractors. In the early days, before they had their reputation built, I setup a google adwords campaign for them — having never run an ad campaign before.

It was a simple PPC campaign that included keywords in google search results and geofenced it to the SFBay. Here are some numbers and findings:

- PPC costs were about $1-2.50/click with a ~$15/day max spend

- Selected cities by hand to fit the service area

- We did in fact get clicks outside of the zones we selected. Many if them were B2B trying to sell their services.

- Customer acquisition costs specifically for the google ads campaign was ~$70 (clicks/conversion)

$70/customer sounds like a lot except these home improvement contracts were typically thousands of dollars, so the campaign was a fantastic ROI. Furthermore, we dialed down ad spend as the reputation was built, and now most leads come via referrals and review sites.

In the end all that mattered was that customers were signing contracts so even if there was some funny business going on it was still worth it for our particular case.

That's not exactly a shining endorsement...

"Yeah, Google was robbing us blind and kind of scamming us with their geofencing shenanigans, but we were making enough money that it wasn't worth fighting, and eventually we figured out how to stop buying ads from them."

I don't think it was supposed to be an endorsement.

If I could pay just 70$ per customer bringing in 1000+$, I would spend all I could and borrow heavily to run those ads. From a business perspective, it's a great endorsement.

In this case they were selling skilled labor though so at some point their capacity would be reached. I'd guess that's why they only spent $15 a day.

But in order to run a business you have to get customers from somewhere. And referrals aren't an option until you already have customers.

And I think that's exactly how adtech works, both internally and externally. Everyone is scamming everyone else with fudged and pretty opaque statistics, but there's enough ROI at the bottom that the whole thing hasn't collapsed yet.

So what you are saying is that all that is needed is for a newcomer to come and do things a little bit better and it will eat everybody's lunch. Just like google did to search engines when they started.

Sounds like a great business opportunity.

The core innovation that would be needed here is providing such good transparency and attribution that such newcomer could turn around and prove that all their competitors are scamming their customers. Without that, fudging numbers will prevail simply because it can make money without having to do as much work.

This is how almost any business deal works. If you get more money out than you put in you do it.

Sure, the partner may be hard to work with, but so is almost any big tech platform provider (... Apple ...) and it can be quite profitable to put up with.

It only works if you sell a hugely priced item/service.

If you want to sell everyday consumption or end consumers items, this scheme will eat all your income/benefit.

After reading about all the flaws in automatic online advertising through clicks on this thread, it looks like a big scam prospering more or less in favor of opacity, lack of fine tuning or targeting and fraud.

Referral systems and social influencers seems to be a better option, as long as your product is good and would not shame the ones endorsing it. Betting on viral marketing and endorsement seems to be more natural and a better bet, but require maybe more work and preparation than blind automatic system.

First, yes they are effective for effective marketing professionals. Digital advertising is a vehicle. The marketing creative is still the payload that does the work, and it has to be carefully and strategically created to maximize return. You can easily lose money if you don't know what you're doing.

Second, any marketing professional worth their salary is measuring with a number of tools to verify that the information they're getting from Google/Facebook/etc. is accurate. There are many metrics that only they can provide, but there are enough independently measured data points that fraud would be obvious.

Finally, you're blaming Google, but the advertising industry's current state is a product of extreme corporate greed (on the part of advertisers). It doesn't matter whether Google goes away, greed will continue to corrupt in other ways. Look what happened with the rise of ad blockers - native advertising, which is just a nice word for the paid corruption of editorial space, has become so prominent that you can't trust most of the articles you read on sites that were once considered reputable. The "influencer" marketing you mentioned is a perfect example. People with social presence and influence are being paid to lie about a product. You think this is somehow better or more "legitimate"? I would love to hear more about that. At least with Google, I can clearly see where the ads are.

So you can try to implode Google or any other facilitator of digital advertising, but money will find a way. It always does. You're trying to change human nature.

The old saw was that 50% of advertising is useless, it's just that nobody knows which 50%.

I guess that's why people are so excited about click tracking, analytics, etc, etc.

I think it's more like 99%.

When I was running advertising for a small business we put vouchers in to track advertising. The only people who brought in vouchers were people who were already customers who said they were already coming. So, we spent money to reduce our revenue. (I do the same, hunt for vouchers after making a buying/visiting decision.)

I was on national TV and national radio (UK) - none of that blipped our visitors/revenue.

Only thing that ever definitely worked was handing out flyers and chatting to people in the street (and being top of Google SERPs).

What were you selling?

Funny you should mention vouchers - it reminded me of the article discussed here[1], which likened advertising with Google to handing out coupons to people who are already in your store

[1]https://news.ycombinator.com/item?id=21465873

Ads are massively effective.

My friends and I launched a physical product over the weekend last week. I put together a basic landing page and bought some Instagram ads. We spent about INR 250 (around $4) before I stopped the ads to do some optimization.

That $4 in spending brought us 1 customer who placed 2 orders worth $35. He also referred 2 other customers who placed an additional order of $35. $70 in revenue for the simplest of funnels is wildly lucrative.

The problem starts when you want to scale actually

They are hugely effective.

Even if only a small percentage (e.g. <2%) click on the and, and then a similar small percentage actually buy anything after clicking, you are still making money so long as the cost-per-conversion (i.e. per sale) comes out low enough that you still make a profit. Spending $3-5 to make a sale in say a pair of shoes that retails at $100 with a profit margin of $30-40 is good business.

People are making huge amounts of money/doing huge amounts of business directly as a result of the ads, and that is not just Google and Facebook, but everyone all the way down to little mom and pop businesses.

When you track things down to the level of sales it very often works (not always - depends on products/business models etc), and that is why people are using online ads. AdWords and Facebook ads would have fizzled out years ago if people were not benefiting from advertising their business

The problem with this kind of accounting is that it doesn't consider whether the ad was really necessary to make a sale in the first place.

With a lot of brand keyword advertising, companies are paying for people to click an ad when they were already looking for your website anyway. So spending $3 on that customer is not a $27 profit but rather a $3 loss....

While buying your product name (or your competitor) is sometimes the case, this isn't the main source of volume in your pipeline.

And it's still a $27 profit, even if it is possible you could have saved money.

Most of the time a well-optimised PPC pipe looks for specific (non-brand) keywords and buys them, not just the product name.

While I agree that ads often are very effective, no it is just a $3 cost in some cases. Your ads can cannibalize on tge revenue from other, possibly cheaper, channels.

Lets say it costs $3 to acquire a customer on average. And your margin is $30. That sounds good.

Now do an experiment. Stop your ads.

Do your sales go down 100%? In that cost the $3 cost was definitely justified.

Do your sales go down 50%? That means you actually paid $6 to acquire a customer, not $3. Still sounds like a reasonable deal since you still make $24 profit, but other channels might be more profitable.

Do your sales go down 10%? Then only one in 10 customers actually converted because of the ad, and you are paying $30 to acquire a customer and it would be better to stop the campaign. Google is just showing ads to people that would buy your stuff anyway. (Side note: I think this is a big problem with retargeting. You are paying to show ads to people that are already very likely to buy your stuff -- or even worse, who have bought it already. But conversion rates are really high!)

(To be fair, this is speculation and not based on experience with adwords. My only experience with adwords was a $100 campaign I made a few years back with promotional credit that resulted in no conversions)

> I just don't understand how anyone comes to buy things shown in ads.

What is so different about seeing something you are interested in from an ad or from a website you clicked through to yourself?

> Are ads really effective? I don't buy advertised products.

Do you buy many products online at all? If you don't, then they probably won't be useful as you aren't someone who spends much money online for anything. However, there are many people who do. For example, my girlfriend and many other women I know spend tons of money on clothes/shoes/jewelry online and a decent amount of the products they find out about and like come from advertisements.

To give you an example of the scale, I spent over $1,200 dollars online yesterday during black friday on clothes, shoes, and jewelry for her. While I don't know how many of those products got sourced from advertisements, I'm sure some of them were because most were from a doc she has been using to keep track of things she wants and she likely saw them first on an advertisement.

google is just taking advantage of the old "Half of my ad money is wasted". They sell pretty dashboards to advertisers so they can pretend they 're working , and have a huge network effect among agencies now. very tough for a newcomer to find a crack

without competition, it's only going to get worse

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