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Comment by rm999 | Hacker News Reader

I used to work in the ad industry and deeply analyzed this stuff. There's a lot of unspoken secrets in the industry:

1. The majority of clicks go to flashy, annoying ads. 2. People who click on these ads rarely convert, i.e. sign up for a newsletter or purchase a product. These are probably accidental clicks. 3. The ROI on advertising is often negative. 4. No one cares about any of this because click through rates are still the gold standard. Advertisers aren't savvy enough to know better, and ad agencies don't get paid either way.

It's a terribly inefficient industry, made worse by the fact that attribution is very difficult ("did this costumer buy this product because of an ad?"). This all has led to a fall in ad rates, which is just leading to more annoying ads. It's a vicious cycle that makes clean, honest text ads even less likely.

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Fascinating. Inefficiency, to me, is opportunity (even if it can't always be leveraged.) A fundamentally different ad network is an idea I've been kicking around for a while. Perhaps I should get more serious. Do you know any resources, or any technical information about how people get started in this space?

@ROFISH: Absolutely a hustle business, but the more experienced I get the more I think that applies to 99.99% of businesses.

I think this is something that has already started playing out with designer and developer oriented networks like The Deck and Fusion Ads. Better design, standardized rules targeted towards specific groups.

All you need is a niche market and your first advertiser. Then start contacting the publishers in that space. You'll need somebody to help the publishers embed the ad codes. A decent developer could track everything or you could just use Google Analytics or some other commercial tool. Most publishers are willing to try something new, but consider the ad inventory is worth much more to Google (Adsense) because they have a ton more advertisers bidding on the inventory and they're tracking people's interests and so forth.

On the one hand, Google completely ignores 99% of its publishers. On the other hand, the bigger publishers receive advertising proposals all day long every day. So yes the advertiser can contact the publisher directly, they don't really need you, which (last I checked) is against the Adsense/Adwords TOS.

The opportunity is more in the network than the tech. For something like this to work, you have to convince both site owners and advertisers to use your network. (Not that it's a bad idea, but it's like 97% hussle and 3% tech problem.)

I think the "easy" way to shove yourself into the market would be to tackle a niche, so you can specifically target both the advertisers and the publishers that have an audience that would engage with those advertisers. So if you decide to choose, say, online tackle shops on the advertiser side, you'd target fishing blogs on the publisher side. That way you're pretty focused on a niche and don't have to solve difficult ad matchup/inventory problems early on.

The bonus is that if you figure out how to make publishers and advertisers money, you're going to make a lot as well :)

The only real way I'd get on board with a network is if they had access to relevant advertisers in my particular industry that I didn't already have.

I've chosen to direct sell advertisements to companies in my site's industry which takes a lot more work than handing the reins over to a network or dropping in a widget, but the results are definitely worth it.

I've concluded that Gresham's Law is among the universals in economics. It joins a very few others, including the Law of Diminishing Returns and the Jevons Paradox.

What's the relevance of Gresham's Law here? Not criticizing, just genuinely curious.

The viscous cycle element.

Grisham's Law, generally, is a "bad foo drives out good foo", more specifically, when the costs of distinguishing good foo from bad foo are high, or when the market doesn't recognize a distinction between the two.

It was coined (so to speak) as an observation that "bad" (e.g., debased) currency drives out "good" (high-specie) currency. It shows up in Akerloff's "The Market for Lemons" and many other places. I've made something of a hobby of collecting references.

For more: https://www.reddit.com/r/dredmorbius/comments/2h63fp/is_gres...

>...when the costs of distinguishing good foo from bad foo are high...

Ah, there's the part I was missing. I didn't think of it beyond government regulation. Interesting insight.

It seems to arise out of several possible factors.

In the case of money, it's the statutory definition of value. Since specie has value independent of the nominal value (though usually below nominal, hence, seigniorage), where there's a positive, valuable metals are hoarded.

In most of the other instances noted, value determination is by other means, some set by market, some by difficulty in full value assessment.

But in all cases there's an informational asymmetry, where the party who's aware of the true value of a good (or service) may choose to act in ways which maximize benefits (or minimize losses) that are both 1) not fully captured in market value and 2) aren't accessible to the counterparty.

What about, I dunno, supply and demand, or "people respond to incentives"?

From what I know from people who buy AdWords ads, they manage to get a lower price-per-click and a bigger return by optimizing their campaigns

This has nothing to do with flashy ads, quite the contrary, so it's not only "inefficient ads that nobody clicks"

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