The new dot com bubble is here: it’s called online advertising (2019)
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There are essentially 4 rules for effective advertising:
1) ignore all metrics from online platforms (especially the ones that sell ads)
2) ignore all metrics from ad agencies
3) run tests that make sense*
4) measure in dollars
The hard part is convincing the founder/owner to stop messing with stuff long enough that you can actually measure the results. Also, companies tend to way overspend on ads and data scientists while underspending on skilled advertisers. (They can be forgiven for the latter, there are too few skilled advertisers, and lousy advertisers usually sell themselves as experts.)
*Example: your job is to advertise a business with 20 locations in 2 cities. You want to know if radio ads are better than search ads. So you do the obvious thing: buy radio ads in city A and search ads in city B, then compare sales. If the difference in sales is big enough that managers get defensive and start pointing out why the test wasn't valid, you may have a winner. Run it in both cities and see if it still works.
(Rule of thumb: if nobody is upset with the outcome, the variations were too similar. Run bigger tests.)
In fact, probably the most expensive campaigns are used to consolidate market shares, brand positioning and notoriety.
People just seem to forget that advertising existed before the internet, and it worked without the bloat of metrics.
All winning campaigns reflect in dollars. The question is when. That's why it's imperative to separate markets entirely.
Radio ads for a "branding/awareness" strategy. Search ads for a direct response strategy. The majority of people viewing/hearing one should never hear/view the other.
If it takes 6 months to properly test a branding campaign, decide ahead of time whether your organization has the patience to wait. If not, just stick with direct response.
Also, Scientific Advertising was written in 1923.
There's no space for brand positioning campaigns, or brand awareness, or anything that it's not tracked into a direct sale/lead.
Like you said, branding takes time, with huge investments - and usually it's almost a leap of faith because of the sheer amount of budget and pressure it requires, namely in terms of GRPs.
That's why testing used to be done in focus groups, and other forms of market research, to support a brand strategy.
Maybe branding is a "luxury" SMEs can't afford, but the thing they don't get is: it's a long term investment.
Brand advertising has a much higher ROAS when done well. The challenge is doing it well, and knowing if you did. My experience has been that SMEs rarely have the appreciation for art necessary to do branding well, and without strong branding, brand campaigns are a waste of money.
And it's not just a lack money. They'd rather spend the money on ads than on people. In some industries, that's a better strategy, but for most they would benefit greatly from recognizing that all customers, both B2B and B2C, are in fact humans.
Founders have an advantage here, because they can operate on a longer time scale.
(Side note, GM spent $3140000000 on ads in 2018.)
The engineering bounties would be for open source hardware, software, and tooling challenges, with a heavy focus on optimizing robots and social computer vision problems.
The races each weekend would alternate between full size trucks in a strong man style competition, manned quadcopters doing search and rescue challenges, and autonomous cars in an urban race series.
I would spend the remaining $10,000,000 from the week's budget on vocational scholarships and micro-loans for low income single parents.
If anyone from GM is reading this, let's talk.
Metrics did exist, though more rudimentary. X subscribers, X viewers, etc.
Most people consider the latter, because it’s hard to accept that the spend needs to compete with every other way of spending that money, not with other ad media.
Analysis paralysis.
If so, what does it mean for all of those dollars to be more effective?
Does that mean that today's average net user is now subscribing to three different car insurance plans, because of how effectively they've been advertised to?
For the majority of businesses, the opportunity cost of properly testing all available options is higher than any potential gains.
It's like asking a developer if their code really "worked", even though they didn't write it and run tests in every popular and obscure programming language.
Should more thought be given to alternative ad options? Probably.
Does that mean that the ads didn't work? No.
Outside of the VC backed world, people play with real money and the market decided what works and what doesn't.
Unfortunately, VC money distorts the market for everyone.
The questions you pose, though completely valid - and should be asked - are done in different levels.
If you set a marketing budget, it's because there was a decision to achieve some goal that is bound to marketing. The same goes for R&D, Acquisitions, Human Resources, etc.
That's why, in a classical corporate sense, at the beginning of the fiscal year, each department fights for a cut of the big budget to be invested.
Within a marketing budget you then have to split it again, and again, and by this time you should be at the advertising level. Within this level you have Advertising (the creative part, copy and art) & Media Buying. Etc.
But getting back to your question: being ROI positive can be quite deceiving, because you can have negative ROI yet get positive long term results. Example:
You, as a manager, decided that Amazon is a viable channel for sales and distribution. You evaluate the competition and you realize that for you to have some relevance on organic results, you need to improve your ranking through Amazon PPC and external traffic. You factor in Price Promotion, to present a competitive offer and to help your product being established.
You run that campaign at loss (negative ROI), for 2 months, but you manage to get yourself to the Top 10 listings for organic results.
Question - assuming it's a healthy market: is this a bad campaign?
(The obvious answer is: it depends. But assuming the short term, ROI negative, campaign can set you up to generate more sales in the future, it's a good campaign. Then arguably you could present other solutions, at lower cost, to produce the same outcomes.)
Also, some people measure their self worth on the size of their company's ad budget. And those same people tend to have stupid amounts of money compared to their childhood peer groups.
So buying ads is like adding a set of metal balls to a truck hitch. Revenue was never the point.
Also, a lot of entrepreneurs have short attention spans and constantly change things out of fear, taking it from easy to do well to impossible to know.
Whenever I tried to talk about them there's always someone who asks that question. It's a BS question though, because it presupposes that humans somehow always instantly adopt the great new thing, but history shows that we just don't.
(E.g. Marconi was called before US Congress to testify because they thought radio might be a scam.)
We have all kinds of awesome stuff that gets ignored. Or even simple obvious things that no one notices (Why do refrigerators have doors instead of drawers?)
Sorry for picking on you. Nothing personal. :-)
Oddly, up to that point I was senior enough to daily manage the budget, but not senior enough that my opinion on what to do was taken seriously. We're talking > 50% wastage, so I just didn't do my job in the end and stopped providing the creative for the wastage part, saved money, made no difference to the end result.
Never underestimate how so much of bad advertising is because of clueless people in the chain of command.
Hello fellow person with in-house advertising experience.
Good freaking lord you hit the nail on the head here about most of marketing career!
Then you get in trouble because your boss's boss wants better ROI and blames YOU for an overextended budget because you manage the money, but you just have to sit there and take the blame because your immediate boss won't budge on the strategy.
Thankfully I've moved up, but I feel that pain so bad.
This seems counter intuitive at first, but the more I think about it, it does seem quite insightful.
Of course, this is because we live in crazy-land, where the ad companies can never be held accountable for anything. So if they say you got 100 clicks, you're paying for them no matter what.
TV had "viewers", but how many were changing the channel during commercials?
Newspapers had "circulation", but how many were sitting in hotel hallways or mulching on driveways?
Direct mail had "addresses", but how many of those were left on the side of the road or tossed straight into the trash?
Radio had "listeners", but nobody believed those numbers anyway.
Etc.
Speaking of, by far the most popular "videos" on YouTube are music videos. How many of their so-called watch time metrics are actually people listening to music while they work? For me that's several hours a day.
So yeah, the crazy thing to me is how poor of a job our society has done at teaching people how to think for themselves.
INCENTIVES MATTER!
There's always going to be some portion of advertising that is ineffective. Not everyone is going to see every commercial or read every piece of junk mail (junk mail being the bottom end of traditional effectiveness, I think, but they have these coupon envelopes that have local small businesses and I'm pretty sure those are quite effective).
As far as TV/Radio, they have lead in and lead out commercials. Those commercials closest to the content are most valuable.
> Speaking of, by far the most popular "videos" on YouTube are music videos.
Totally agree here. I've never tried to advertise on YouTube (or most media, for that matter, not my industry), but smaller niche channels seem to be good at picking up their own sponsors and advertisers. Similar to how some radio shows do live reads of advertising material. The "My Pillow Guy" buys a lot of these, same with Sherri's Berries.
I was not meaning to say that any of those mediums are ineffective, simply that inflated numbers aren't a new problem.
YouTube ads are actually one of the best values right now, because 1) a lot of advertisers are scared of video ads and 2) you get access to search audiences.
That being said, I don't care how great Google tells me my YouTube campaigns were. I care about dollars spent and leads that became paying customers (with a recognition that direct attribution undercounts, so break even is positive).
Campaign manager to sales team: we did two experiments in cities A and B. We won't tell you what we did. Go look at the sales numbers, and tell us if you see improvements in sales in those cities. Then we can share what we actually did.
As a career marketer, most people in marketing and pretty much every leader outside of it, want intense analytics. They don’t matter in the long run unless you have a big budget to make rapid iterative changes.
Total Revenue & Total Ad Spend ROI are the best metrics. Customer Acquisition Cost is second. Website visits and anecdotal brand measurements are third.
Analytics is the unit testing of the marketing world, but for some reason it's become the main event.
More copywriting audience building and creative, less analyzing.
Every penny spent on analytics is wasted if it doesn't improve the copy, targeting, or creative.
Sigh.
Say you just made an instagram ad - how do you improve it? Well, you need to have 3 different images, 3 different sets of copy, 3 different targets.
That's 27(!!!) different scenarios to determine the most optimal option. For. An. Instagram. Post.
Then you repeat that EVERY SINGLE TIME because nothing ever has a fixed rate of return in advertising. Plus, you have to educate all the stakeholders as to why you're doing that and why you're knowingly spending money on 26 out of 27 things that are proven to not be the best way to spend money.
Unless you've got a stupid size budget, at some point you have to call it quits on analytics and just set a benchmark for both revenue and customer acquisition-costs you feel emotionally comfortable with and only use analytics to make gains from obviously underutilized resources.
The issue isn't whether search ads are better than radio ads. The issue (as illustrated in the article) is how many of those customers would have been customers anyway.
You might be counting your dollars and missing out on the fact that those would have been your dollars without advertising.
"Would have bought anyway" only applies to household brands, retail distribution, and earned traffic.
If your average search position for an important query is 36 and you're not running any other ads, it's pretty easy to track sales.
Where mistakes pile up is when companies want to try everything, all at once.
The original sin, as pmarca put it, is advertising.
All you need to know to realize that this is a bubble is to look at how Youtube keeps asking you to subscribe for their ads-free plan.
Google know it, but it’s too late for them...switching users from “products:through selling their data” to “subscribers:who pay for services” is going to be hard to sustain.
Hard because google is now competing with others for a reputation, which they already know they have a serious problem with.
Paul Graham tweet from last month “When I bought extra space for GMail, I got logged into a "google account" that I'm logged into even when I do searches. Searches are much slower logged in. And I'm not sure if I can log out without logging out of GMail
Solution: Use duckduckgo.com for search.” https://twitter.com/paulg/status/1248207051542745089?s=21
Jack tweet from last year “I love @DuckDuckGo. My default search engine for a while now. The app is even better!” https://twitter.com/jack/status/1199783221162053633?s=21
And this comment on hacker news that was doing astroturfing for Google two months ago https://news.ycombinator.com/item?id=22383746
Internet has gone mainstream, globally. No one can live without an email or a social network!
Customers are now ready to pay for all the services they used to enjoy for free.
I wish App.net was still alive.
The best money doesnt come from google, but instead advertising products off the back of your own credibility inside the video and building exposure to other businesses you run.
Youtube's ad free plan has been bought by people who want to watch music videos on their phone without draining all the battery. The plan and app makes youtube videos keep playing when you close your smartphone display. Making money off content has always been about controlling the platform like cable companies and music companies have done for decades. Eventually youtube will be both, better premium content is starting to converge behind paywalls and the free stuff is advertising in itself for its own channel. I dont think youtube will have sustainability problems in the long run.
Do you want the free stuff? Apart from low overhead tech services, most of it was crap. Tv quality channels on every obscure topic I could want have sprung up because of the money making potential. Most creators listen to their audience and react or die off when customers dont get what they want. What more do you want for the youtube dollar?
Except that the mod reply also links to other astroturfers doing the exact same thing. Astroturfing is everywhere it seems.
I find it very hard to believe this. Do you have any sources to back this?
The metrics from Google and FB are essential to understanding what's going on, the key, like everything, is to really understand them.
"run tests that make sense" - as opposed to one's that dont?
"Measuring in dollars" yes, but there's a lot of indirection in ads, there are other metrics that are useful.
Don't make buying decisions based on metrics provided by vendors.
For even better results, optimize systemically and ignore their metrics.
Example: click comes in with tracking code in url. Lead submitted with tracking code. Purchase made.
How much did you spend on those ads? How much did they spend on your products? Was it worth it to you?
That's more analysis than many ad accounts currently do, because vendors provide wonderful sounding things like CTR and CPC and Impressions and Reach to keep you focused on optimizing within their platform instead of between platforms.
Reliably someone comes along every few months to question digital ads. I always come back to analyses of incrementality as the real proof.
Take an audience of X people. Divide them in two. Show ads to your test group, don't show to control. Watch your business grow and gauge the lift between the two audiences.
The companies that know how to advertise at scale do this constantly and can gauge the real effect of their ad dollars. Facebook, Google and others make these tests possible in their platforms, while other software suites such as Impact Altitude and VisualIQ allow you to do this kind of analysis and testing as well.
In the end, most of it proves out to be incremental. There are notable exceptions of course, but when are there not?
The market is overhyped
To some extent I’ve learned to stop worrying and love the tracking, and I will with some regularity tap through to story ads I see with genuine interest in the product (generally outdoorsy things). I’ve not bought anything yet because the websites have failed to convince me the product isn’t junk, but that’s their problem — Facebook has successfully completed their side of the deal (get eyes on the website).
I like my personal devices to Just Work (tm), and configuring dns/setting up raspberry pi’s/etc is the antithesis of that.
If I have free time I’ll spend it in the shop, kitchen, or outside — absolutely not fussing with technology.
True. Advertiser education is a big challenge for platforms, agencies and marketing employees. Every time I go to a new company I have to educate people on the nuts and bolts so they understand how it works. By and large, they get it and the value gets proven in no uncertain terms.
> Facebook and their ilk encourage you to believe their numbers even though they are mostly phony
The tests I refer to get around that. If you spend $X on ads to one group and they come in the door and spend more money, how is that phony? And where are there actual ads stats on a campaign a company has purchased that are phony by FB? They've had issues around their marketing of ad statistics externally, but after well into the mid nine figures spent there in my career I've never seen a single phony ad stat, only mistakes we made ourselves that inflated/compressed our numbers.
> I mean how many people do you know that haven't block ads that actually click on them without them making their ui so confusing that you do it by accident?
You're thinking of content ads on low quality publisher that are trying to stuff as many ways to monetize on their site at the cost of customer experience. Those are total crap most of the time and, yes, often are not incremental.
And of course, there's a population of people with ad blockers. But they still search, they still click affiliate links and they are still affected by larger brand advertising in the end. It is pervasive.
> The market is overhyped
Definitely not going to disagree there!
There was a period of time when I was seeing a lot of ads for Bonobos pants. If I bought the pants as a result, I'd be shocked if my record as "Bonobo pants buyer" was not linked to my record as "Bonobo ads viewer".
This is one of the purposes of all the tracking.
How are you measuring the group you don't show ads to?
This is exactly the sort of experiment that the economists in this article (both independent and from Facebook) did, and measured substantial selection effects.
The fact that there are businesses built on businesses built on businesses that are, essentially, allowing people to compete for tiny ad space on specific keywords demonstrates that there is too much hype and obscurity in the space.
1. Do 1st party -> 3rd party data matching with a partner like LiveRamp or Oracle (formerly DataLogix), where you effectively take consumer data you have gathered and then match it against a targeting set. Then you select one group as test and one as control. Depending on the size and characteristics of your dataset, you often will work to randomize that audience across different traits (age, gender, HHI, etc) to ensure that you get two groups that are effectively the same. Your primary purpose here is retargeting/upsales or using data you have purchased to drive new customer acquisition.
2. Do a 1st party data -> 3rd party lookalike with a partner like Facebook or Google, which is then randomized into two groups for test and control through their own system. Pretty straightforward and great for acquisition.
Then you run ads to your test group and none to control. Or maybe control sees your current message, and you test a new one with the test group. Or maybe you have more than one test group to gauge the lift on your business. Lots of options.
Now, you gauge your results by looking at the fundamental shift in consumer behavior that occurs in your test group vs. control. You're really trying to say "hey, we showed X ads at $Y cost to this group of Z people. Our control group saw 2% become customers, but the test group saw 6% become customers. Thus our incremental lift is the amount over the baseline of control."
This is a totally oversimplified way of doing it because the reality is vastly more complex, but that is the gist of it. Many advertisers and agencies are savvy to this methodology, but an even larger number are not. Those that test and iterate this way are the ones who are effective at driving growth.
Now, to your second point:
> The fact that there are businesses built on businesses built on businesses that are, essentially, allowing people to compete for tiny ad space on specific keywords demonstrates that there is too much hype and obscurity in the space.
Don't conflate bottom of funnel high-intent search ads with your general digital ads. In the case of Google, you are bidding on intent at that moment, probably one of the most valuable things you can advertise against. This is why Google prints so much money - that search, such as "used 2020 MacBook Pro for sale" is about the highest indicator of someone who intends to buy you can get outside of them banging on your door saying "take my money!!"
This is about the most incremental advertising you can ever get for 99% of companies that are not Amazon. Amazon doesn't care because most of the time people go search on Amazon first, but they're still willing to advertise for the 0.001% of their customers who aren't starting with them.
Very seldom does the funnel work like: 'Target sees and ad, buys the product or not'.
All ads ultimately have a lingering buy effect, and all ads are essentially also a form of brand advertising.
When they see your 'test ad' the first time, it makes them more or less likely to buy your product at some future date, the next time they are in-store or whatever.
For some kinds of things what you describe works, but for other kinds of things, and for bigger companies, not so much, or rather, it's harder to do.
It would be fun to measure. Buy the cheapest add to get your brand seen by as many people as possible in a market, and then spend on the highest intent keywords.
See what it does to total ROI.
That works for the simplest of advertiser campaigns, but doesn't scale.
How do you break down your audience across platforms? I.e., how do you divide your audience in half across your ads buys on Google & Facebook, to make sure someone excluded from your ads on Google is excluded on Facebook?
And that's not even the hard problem of how you do it across digital, television, billboards, magazines & so on.
Even if you could get that data, if your campaign is flighted, you don't have enough time to act. If you have a big movie opening or product launch, you can't wait to see the initial response & then optimize.
These approaches can work for someone taking advantage of the latest Instagram Dropship scam, but they're going to work for where the bulk of advertising dollars are (big brands, movies, cars, consumables, etc.)
Actually, the examples I'm referring to are at pretty massive scale (>$100mm in spend) all the way down to <$100k. It works across a pretty massive range.
>. How do you break down your audience across platforms? I.e., how do you divide your audience in half across your ads buys on Google & Facebook, to make sure someone excluded from your ads on Google is excluded on Facebook?
This is a challenge for sure and it depends on how you do it, and its also where vendors like LiveRamp and Oracle do so well. As they have very high quality data sets that work across platforms they can do these sorts of tests and exclusions.
However! That isn't actually necessary. Typically when you do a test, you will isolate the test to certain ranges and hold other campaigns constant. As long as you have enough data to create a solid predictive model you can pretty easily isolate your effects between different channels.
> And that's not even the hard problem of how you do it across digital, television, billboards, magazines & so on.
See my above answer :)
> Even if you could get that data, if your campaign is flighted, you don't have enough time to act. If you have a big movie opening or product launch, you can't wait to see the initial response & then optimize.
Now this is a challenge for sure. For big launches, its much harder to create this kind of testing during the campaign. This is why testing ahead of time is important and for big launches media buyers are running off what they already know about a channel vs. testing during.
> These approaches can work for someone taking advantage of the latest Instagram Dropship scam, but they're going to work for where the bulk of advertising dollars are (big brands, movies, cars, consumables, etc.)
Completely disagree.
If anything, this doesn't work at all for small scale advertisers unless they spend real $'s on their campaigns (>$30k/month at least). Technically you could do a test like this at small scale, but unless your CPA is super low or you get a metric ton of clicks and impressions, you won't be able to get a key learning from it.
Newspapers had their yellow journalism days and have always been adverting supported, but it's never been this bad. The internet solved the information availability problem, now we have a huge trustworthiness / curation problem. My hope is a marked return to subscriptions, the way the NYT has done. I just loathe any hybrid where you subscribe and _still_ get ads. I want to leave that crappy model way behind.
I would argue that the true low point of American news media was during the WWI wartime period where good reporting was illegal, and as a result impossible to find even if you sifted through all of the chaff.
What this makes me realise is that so many of these updates are complete unnecessary, blown-up and exaggerated "news" (even when legit) and often just clickbait. What you say is rather depressing when I think about it.
The ability to participate à la carte would certainly help paying customers like me.
For an example, consider the Boston Globe's reporting of the child abuse cases in the Catholic Church [1]. There are many who violently disagree with the premise, so much so that they actively refuse to read or inform themselves about it. And you're expecting them to pay for it?
I'm also curious if there are any lessons learned from iTunes / Apple when they first started making individual songs in an album available for sale. Why buy an album of 12-15 songs for 10.99 when you can buy just those two good songs for 99c each? Do those artists still receive more sales? Is the overall effect more income for the music industry, or less?
[1]: http://archive.boston.com/globe/spotlight/abuse/betrayal/for...
Of course the newspapers have been in need of reform for a long time now on many levels. Not helping is Associated Press recycling of stories across many different papers which leads to trying to compete as distributors instead of content providers. Consolidation of conglomerates seem to have only doubled down on lack of quality.
My friend worked in online gaming, similar to Zynga. Their strength wasn't in the games itself, because they mostly ripped off other games. It was in their advertising channel. They had around 10M active users and whenever they had a new game out, they would advertise it to their existing customers, and they would get instant users for their new games. Not 100% conversion, but enough to get traction.
By having their own home-grown advertising network, they didn't have to spend money on Google or Facebook ads, the could just milk their existing channel. I think things like this are pretty effective once you have things up and running, because it's free.
Improving your product also requires money, probably, but in addition it would require good planning, a realistic vision, organizational competence, and a lot of other things that are harder to deliver than just buying ads.
Executive buy ads because it's easy to do, compared to making a better product (or service or etc.). So your ad company doesn't have to deliver better sales, it just has to be at least as good as other people's ad services. Because most executives are not going to promote the guy who says, "there is no easy way to spend money to get higher sales, you're going to have to do it the hard way".
But chances are most of the programmatic ads are a waste.
I wonder if there is some theory on clickthrough rate on ads you have seen versus never seen versus companies you know or don't know.
The ROI on these seems to be pretty high, so the bid prices are higher than a lot of other ads you might see. Especially for larger dollar items (if you look at cars, you're going to see way more car ads than normal for about 3-6 months, regardless of if you bought a car or just stopped looking ... the ad networks don't know if you converted).
Compare that to where I bought my wife’s engagement ring, who still advertises to me 6 years later. Statistically the chance of me becoming a repeat wedding jewelry buyer is low based on my demographics, while the bids on wedding jewelry ads are very high. I suspect they’re throwing a lot of their money away on those ads.
If customers don't know about a product they need, they can intentionally find out about it in many ways. Using search engines, magazines, reviews, ratings, or directly asking in an online community. Or they can stumble upon it by chance, in real life, in a video or in a news feed.
I believe it is much more respectful of human dignity to let people ask about what they need instead of manipulating them with ads.
Rory Sutherland's "Alchemy: The Dark Art and Curious Science of Creating Magic in Brands, Business, and Life" convinced me that advertising has not changed at all, no matter how much Silicon Valley wants it to. Their delusions WILL come home to roost eventually.
Only ~10% of advertising $ is spent on direct response.
~90% of advertising is brand advertising, with no immediate conversion as a goal. It's about slowly nurturing the creation of a STORY inside the heads of prospective customers.
All of my experiences with Nike are it's either overpriced garbage, or very expensively priced good stuff, but not good enough that it makes it worth the marginal cost over what's at Costco.
Sweatpants, screw that - I’ll quote Macklemore here, “$50 for a t-shirt, that’s just some fucking ignorant shit,” - go buy them from freaking Wal-Mart - who is going to see you in them anyways but your partner - but Nike’s core business is shoes, and my God, they do it exceptionally well.
That turns me off from buying Nike, as I want to reward brands that are consistent quality at whatever price, but Nike is betting they can get more revenue by using price discrimination to target different customers with the same brand.
It depends on the product.
Lately I've seen a lot of items on brand stores lately that are cheaper than in any online marketplace, with the added benefit of being 100% guaranteed to not get something that's fake/used/Amazon/knockoff.
The first place was a Nike store and not a retailer that you had purchased your last pair from?
I suppose it depends on how much importance you place on having a varied wardrobe. For me, past the age of 25 I could no longer care about spending hours in a mall trying on different brands, comparison shopping, and figuring out the fit.
If Brand A is of suitable quality, price and fit, I'm buying Brand A for as long as they keep making that article of clothing.
The effect is obvious and obviously wasteful for brand name searches, but it must extend to other searches as well. I search for "levi's" and your ad isn't going to make me materially more likely to buy jeans, but it will make me more likely to buy them from Levi's. Or, and here's the point, if I just search "jeans," your ad isn't going to make me materially more likely to buy jeans. But you have to bid or else I won't buy your jeans. It strikes me as just as wasteful as Levi's having to bid on the "levi's" search term. The money that was going to go towards the jeans industry still goes there, except that now Google and Facebook get a cut and the jeans industry's margin shrinks a little.
This article does a brilliant job convincing me that most ads aren't incremental for a firm because of selection effects, which convinces me that most ads that are incremental for the firm aren't incremental to the market. It seems so wasteful.
Advertising isn't alone in this. It seems like parasitic industries take up a large and growing part of our economic output.
Do you ever search for something, click a result, and find you have to skip down fifteen paragraphs to get what you wanted?
It's a real problem on the Web these days. Pages with incredibly low information density, on purpose.
Even the simplest piece of information may be buried way, way down a page with no actual content above it, just inane rambling.
This is a real problem for search results on all kinds of topics. You may have seen it yourself, these garbage pages with high search rankings.
How bad a problem is it? Often the entire first page of results is nothing but pages that waste your time on purpose.
(but seriously, imagine the sheer count of person-hours wasted writing and reading this useless fucking crap, making the Web worse on purpose, and it's been going on long enough that I guess... Google just thinks that's fine? Ugh. I swear it's like they just gave up on good search results around '08 or '09 and settled for whatever as long as the pages serve ads and get clicks)
Nevermind that, how about when you go to a result and the _quoted_ "keyword" isn't even in the page?
That was probably the straw that broke me and sent me to DDG, I don't think it's better, but I'm over being sent results for whatever their reason is rather than because they are what I'm trying to find.
https://money.cnn.com/2000/11/09/technology/overview/
The year 2000 - how is this a new bubble?
In any scenario where
Churn > Referral -> Ads are a trap.
If
Churn < Referral -> Ads are a halfway decent accelerator.
Challenge is you can not really determine if Churn < Referral as long as you run ads.
I wrote about it here if someone is interested https://medium.com/@franz.enzenhofer/ads-are-a-trap-80df01d2... (free to read medium link, will migrate away from medium soon)
Now I expect it will if only due to economic activity, but outside that I personally suspect online advertising continues to be used generally because folks don't see a lot of alternatives. What are they going to do? Radio ads?
The system might suck, but the internet is where folks are, anyone advertising likely needs to go there / try.
95% of your money is wasted, but if you do it right, that last 5% makes up for it.
It's not SAAS, but e-commerce.
Elon Musk has conversations at scale on Twitter, no ads needed.
If you know who would use your product, find them and have conversations. Talking to real people is the first step to great ads anyway.
If you don't want to have conversations with your users, or don't know who they would be, maybe you would be better off building something else.
But this isn't good journalism.
"Is online advertising working? We simply don’t know"
In study 5 (e-commerce) the answer was clear, and yet ignored.
Is there a bubble? Yes. Are ads magic? No. Do they work? For the right products, yes. Extremely well.
Man... one of these days I'll poke my eyes out if a read this Don Draper quote again on a online article about advertising...
It's not the quote itself, it's the lack of context when/how/whom behind that quote.
At best that quote can be used in the context: "The shit advertisers say to try to hook a whale (big account)".
Yet journalists use it like it was the wet dream motivates advertisers, that are so delusional and naive to believe it...
I think you would? You'd just have to write rules that are specific to each publisher instead of each advertising network.
https://htbimporter.files.wordpress.com/2011/02/wow_customer...
Some of those clicks are for products and services with short buying/lead gen cycles. Once they've clicked, many are only going back if they don't like what they find.
The value of search ads is being the link they clicked. You can buy that click. You can literally insert your website into a demand/supply match. If you don't mess it up after they click, those clicks become transactions. In dollars.
Oil changes are a great example. Some of the people who type "oil change near me" in maps don't really care about the brand. They click the top result, schedule an appointment, and get their oil changed.
If the click was $3 and it took 10 people/bots clicking to set one appointment, that's $30. Now let's say the oil change is $39 so profit is ($39 - oil $7, - filter $3, - labor $5, - ads $30) = -$6 before the cost of skilled advertiser.
Are those ads profitable? It depends. If you can upsell 1/10 on replacing a cabin air filter for 10x cost, then yes.
Every other upsell becomes profit.
Also, at a car dealership you can sell 3-5% a car while they're there for a nice $1700-$3200 profit, which nicely covers the cost of the skilled advertiser.
My point was that the value of an ad is to displace other ads, in other words the measurement you look for isn't how many people click through to your site for an oil change but how many do so instead of the next guy.
There is no bubble, as that time passed sometime before 2016.
It would be interesting to know the conclusion for small companies and or startup products. Being on top of a search is so hard, maybe impossible (except if someone knows exactly what it searches, like the company or product name).
Marketing is a 'grey game' of course it's going to full of bad spending.
But far from being 'a bubble' - the growth is just beginning.
Online ads are relevant overall and they're only going to grow and grow.
Online advertising revenue goes up -> companies that plan to sell online ads get more investment and some of it is spent on online advertising -> online advertising revenue goes up.
despite that we all know it took a nosedive, along most other revenues, in 2020 ;)
> Picture this. Luigi’s Pizzeria hires three teenagers to hand out coupons to passersby. After a few weeks of flyering, one of the three turns out to be a marketing genius. Customers keep showing up with coupons distributed by this particular kid. The other two can’t make any sense of it: how does he do it? When they ask him, he explains: "I stand in the waiting area of the pizzeria." It’s plain to see that junior’s no marketing whiz.
Alas, the incentives everywhere are stacked in favor of wasting money:
> Within the marketing department, TV, print and digital compete with each other to show who’s more important, a dynamic that hardly promotes honest reporting. The fact that management often has no idea how to interpret the numbers is not helpful either. The highest numbers win.
> "Bad methodology makes everyone happy,” said David Reiley, who used to head Yahoo’s economics team and is now working for streaming service Pandora. "It will make the publisher happy. It will make the person who bought the media happy. It will make the boss of the person who bought the media happy. It will make the ad agency happy. Everybody can brag that they had a very successful campaign."
Moreover, the online advertising complex has evolved mechanisms for 'manufacturing' more demand for online advertising, for example, by relying on zero-sum games like "crowding out" in which no one wins except the online advertising complex:
> If, for example, BestBuy was the only buyer for "BestBuy" search ads, brand name advertising would only lead to a mere 2% to 3% additional clicks. More than nothing, but it is hardly enough to warrant the investment. But there was one group of advertisers with a valid reason to purchase own brand name ads. Not that they were any more effective for this group, but because their competitors were "crowding them out" by buying ads that targeted the brand owner's name (so you search for "Bestbuy" but a sponsored ad for "Walmart" tops the list). This can enable Walmart to steal 20% of Bestbuy's organic search traffic.
In the aggregate, all this wasteful advertising feeds a quarter-trillion-dollar "industry" that seems to add little or no value to anyone, and may in fact subtract significant value from everyone's quality of life. Is it a "bubble?" I don't know. Is it a net negative for everyone else? In my personal experience, the answer is a big YES.