A copy of Scientific Advertising and some thinking are about all that's needed to do the job well.
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.)
> The problem is that the outcome of some campaigns doesn't reflect in dollars, and still you have a winning campaign.
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.
What I mean is that on today's standards for some SMEs, you either have a lead/sales generation campaign, or nothing.
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.
Ah, I see what you're saying. Yes, you're exactly right.
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.
I would launch a new $10,000,000 engineering bounty every Monday and a $30,000,000 race event every weekend.
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.
It might be pretty close to what Tesla is doing with its own marketing budget... beside, not open sourcing it or doing weekend races (although Nurburgring and other drag tests could count).
How do you define “worked”, though? Was each advertising dollar the most effective way for that company to spend that dollar? Or was it just ROI positive?
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.
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.
"Worked" depends on the goal. Effectiveness of each dollar depends on the goal.
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.)
Is the total amount being spent on online advertising more than the total amount that was being spent on advertising in general, in say the 90s?
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?
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.
The biggest issue with analytics is that it doesn't tell you what is right or wrong.
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.
Imagine how much a company could make if the guy at the top was a hard cutter that didn't put up with unscientific money wasting! They could clean out all of the people who anti-did their jobs (managers who pollute the information stream for personal interest reasons, consultants who give you advice that was worse than what you would do otherwise), and then they would clean out any market.
I spent three years "managing upwards" on that point. Was like a breath of fresh air when I got a manager who listened in that way - he needed some education, but soon came around and pushed our media agency to stop BS-ing us.
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.
> 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.
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.
Because cable advertising sales reps take you out to lunch, give you box seat tickets to NFL games, and create all of your reports for you. Which is even easier.
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.
Peer pressure and lack of confidence. It doesn’t really matter how obvious, in hindsight, or how wonderful some decision is. Moving against the tide or investing in something original scares the shit out of most people.
Look at all the biggest spenders in Advertising: most of them are all big brand advertisers where proving ROI is nearly impossible. In that type of environment, in the absence of a good ROI calculation, a lot of BS can prosper.
Sorry, it's not you, it's a pet peeve of mine. I used to collect ideas and there are so many things out there that no one seems to know about.
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?)
> There are essentially 4 rules for effective advertising
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
There's no secret about declining ad revenue on youtube. There was an 'adpocalypse' and most small yotubers at some point or another discuss their revenue.
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?
Double-blind methodology would work great on that scenario.
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.
Really ought to be three cities, else any natural differences between the two may be incorrectly attributed to the experiment. With three you can ask the reviewer to find the odd one out.
> 1) ignore all metrics from online platforms (especially the ones that sell ads)
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.
I like to think incentives matter, always have and always will.
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.
I'm not in the advertising industry, so my knowledge is quite limited. But TV adds do work. Are you in the US? "Better Ingredients, Better Pizza, Papa Johns." I even know what Papa John looks like. Then there's the surveys they send out to consumers like "Which of these brands have you heard of?" and that kind of stuff. They can loosely extrapolate advertising penetration with that information.
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.
All advertising viewed/heard by actual humans has potential to increase sales.
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).
>So you do the obvious thing: buy radio ads in city A and search ads in city B, then compare sales.
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.
I've thought this way for a while, but after seeing a few things go live without and with campaigns I think there's an underestimation of how indifferent people are unless they've been primed. Ideas of things to purchase just don't generate in people's heads very much outside of advertising. You could say without advertising we'd all be a lot more satisfied and I'd believe you (see: quarentine), but if you're a business trying to sell more things to more people I no longer think advertising isn't a valid way to put your idea in front of people.
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 thing is I am not sure a large percentage of advertisers are aware of such things and adjust their expectations. Facebook and their ilk encourage you to believe their numbers even though they are mostly phony - 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?
I block ads on desktop, but on things like mobile Instagram, there’s not much you can do.
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).
You don't have to actually click on the ad anymore.
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".
> The thing is I am not sure a large percentage of advertisers are aware of such things and adjust their expectations.
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.
>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.
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.
In this case, you create a test and control of two audiences using a variety of techniques:
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.
The fundamental problem here is that very few sales are 'cold and direct'.
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.
The lingering impact of awareness is fascinating and underappreciated. It takes advantage of the familiarity effect.
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.
> Take an audience of X people. Divide them in two. Show ads to your test group, don't show to control.
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.)
> That works for the simplest of advertiser campaigns, but doesn't scale.
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.
Been realizing how the global pandemic is exposing what a complete and utter disaster advertising supported journalism has become on the web. It's really now a race to the bottom--even the largest media brands basically exist to make you click fake articles. (It's bad even without considering astroturfing comments, entirely fake news sites, etc.)
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.
Right, the time when the political parties literally owned the newspapers. Now its just the media companies which want favors from the political parties.
Of course, bringing a healthy online-subscription model back into the mainstream is definitely ideal for journalism. Even more than that, I do wish there was a quick/easy/safe way to purchase individual articles (or even whole issues could work if needed) for a few bucks. Back in the old days, if you were curious about a hot running story, you just went to the news-stand and bought a copy, not a whole year's subscription then and there.
The ability to participate à la carte would certainly help paying customers like me.
The problem with a story-by-story payment model is that it incentivizes publishers to focus on the headlines. It's also a bit tricky because people will only click on things that reflect what they want to hear. So even if an article is really well done, if it says something the majority of the population does not want to hear, good journalism will still die.
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?
One thing which could also help would be a "Netflix for news" given the pain points for payment and economies of scale. The tech scale mixing is beautiful in that way in that big providers and small can both be provided to the end user and revenue apportioned based on usage.
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.
After I read your comment, I checked my Feedly because I have a folder there that contains about 80 active news sources, mostly journalism and news sites covering a broad range of politics and perspectives. The amazing thing about this particular folder is that it seems like every time I open Feedly to check the news, the counter is maxed out at well above 1000 new updates. It takes very little time for stories to accumulate at that level.
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.
I agree, though sites like CNN do work really hard to make the ads look just like their other articles. It's similar to how advertising on search has become so much less distinct from organic results (if you even get any on the page now).
They can still have control but it makes them less money. Ironically the ones with more control tend to be less trustworthy in many cases as their sponsor often brings in more bias or effective astroturf.
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.
I would call this upselling rather than advertising. You can only do that if you have already established a distribution channel to your clients and I would guess a large part of advertising is intended to create such a first channel.
This example is more crossselling than upselling. Upselling is when you come for one thing and leave with the bigger thing. Crossselling is more about you having one thing and using that relationship to sell you something else.
What were the demographics for the game's audience? If they skewed towards younger users, as many games do, then a high conversion rate would be par for the course, as kids aren't as discriminating on what they'll click on.
Which is how you should do it. A hammer seller should buy ad space on contractor or tradesmen forums, and not waste money on targeted advertising that is far more dubious and generally disdained by the population.
I've come to the tentative conclusion that advertising is, in most cases, kind of like money spent on good luck charms. The company wants to spend money on convincing people to buy their product (or service or etc.). Telling them, "there is no good way to do that, you'll have to just make a better product", is never going to be believed. They want to think that they can just spend money, and get money back.
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".
> if customers don’t know about your product it genuinely doesn’t matter how good it is
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.
My anecdotal 2 cents: I haven't learned about a single product by targeted advertising in a long long time, if ever. Vast majority, if not all, of targeted ads I've seen are about things I've seen already: I check some product out, maybe even buy it, and the thing follows me the entire internet for days.
This happened to me after I replaced my home's air conditioner. Which means, really, I am the LEAST likely person to sell an air conditioner to. Same thing after I bought a car. Nowadays I am always ad-blocking, but from what my wife tells me it's not gotten any better.
That's the problem... I'm currently doing a Brother hackathon and have started noticing brother ads as I browse into and out of their developer documentation.
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.
Retargetting is the name for what you're seeing. The idea is that you were looking at their products, but didn't buy, and a reminder might help close the sale.
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).
Cars are slightly different. The purpose of car advertising is to build a brand loyalty that affects your next purchasing decision. This is super important since cars are something most people will buy repeatedly over their lifetime.
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.
Especially all the ads for a product that I've just bought. Amazon is the worst for this with their 'based on your interests.' I buy one 1 off bike tool and will never buy another bike tool in my life, yet they must think I'm a bike shop.
I've been thinking more and more that when it comes to advertising, trying to squeeze irrational behaviour into a logical system just isnt going to work long term.
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.
At the start of covid lockdown I realized I needed a new pair of sweatpants. Where was the first place my brain thought to look? The nike store. Why was that? What specific ad or celebrity sponsorship can you trace that back to? Probably something to do with basketball but I honestly do not know. Regardless, I ended up buying a pair from nike.
I would have thought to go to Costco. Because of decades of quality experiences and knowing their business model. Or Uniqlo, also based on experiences and knowing they are moderately priced. I've never seen an ad for Uniqlo though.
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.
I just bought Adidas socks at Costco too, but I would have bought whatever brand they had. I know the Adidas (and Nike) brand products of varying quality for various price points at Walmart versus Costco versus their outlet stores versus their Soho stores in manhattan.
My feet and overall posture have thanked me relentlessly from my choice to spend $50-100 more on footwear every year or so since I have started buying Nike shoes. I mean, the difference is literally night and day from when I used to just grab a cheap or even ‘reasonably’ cheap ($50-70?) pair of shoes.
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.
Not for me. When there are low-advertisement brands available, I tend to pick those because less of the revenue I give them goes into advertising. I potentially get a higher value product, and I make the world a better place by voting with my money to discourage aggressive advertising. Nike fosters fanaticism around its products and has long been on the unofficial boycotts list for me.
I would assume a Nike product purchased at full price on their official website is better quality than a Nike product sold at a lower price at a discount store.
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.
You bought a branded article from their official store? That pretty much guaranteed paying the maximum price.
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.
> Where was the first place my brain thought to look? The nike store. Why was that?
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.
I wonder how close ad markets are to zero sum. In the limited cases where ads are good for an individual firm, being close to zero sum would make ads a drain on the industry. In the article, they talk about how in most experiments, the most of the people who click your ad would have clicked your link anyways without the ad. In a really important footnote they talk about how this is crazy with a hugely important exception: if you don't bid, your competitor will. Like amazon bidding on searches for "walmart."
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.
It's even more wasteful if you look at it at a societal level. There's an incredible amount of economic output that's devoted to advertising, so much so that there are large secondary industries (broadcast television, radio, social media, etc.) built around being advertisement delivery vehicles. Yet all of this economic activity is going towards something that's a net negative to society - an enormous amount of distracting material meant to manipulate a persons actions so that they're more beneficial for a company, and often less beneficial for themselves.
Advertising isn't alone in this. It seems like parasitic industries take up a large and growing part of our economic output.
I suspect that a rather large percentage of Google's revenue is this kind of protection money: bid on your own brand or even your organic link might not even fit "above the fold". The fact that ads are more and more similar to organic results helps this effect.
Getting so sick of the ads and such online. And every website has an adblocker detector now. You can't just look something up any more and end up on a website where someone wants to help you. You always end up on a website where someone is trying to make bank off of you.
The kind of copy Google encourages is at least as big a problem, I'd say.
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)
>Do you ever search for something, click a result, and find you have to skip down fifteen paragraphs [...] //
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.
I agree with this wholeheartedly. I think theres a hole in the market forming for another mega-information sorter and searcher now that google is losing its edge. Quite possibly a new format for organising information on web platforms.
> Web-based retailers and Web sites supported by advertising revenue have proven to be the two most failure-prone types of Internet business, and there are lessons to be learned from each segment.
I feel like for a long time there has been talk about online advertising collapsing because it is bad or not useful or something else.
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.
This makes me very sad because I fear it's true. I want to play around building successful side projects, but to get traction I need to play around with ads. To buy ads with my own money and knowing 95% of it will be wasted is too much of a blocker.
I’m a fan of using ads to accelerate growth, but you don’t have to. I bet most profitable side projects got there without ads. And you probably shouldn’t spend money on ads in the early days, for a bunch of reasons. In general, I’d focus on organic growth channels to start with and only switch to ads when you have that working, you have revenue that’s growing, churn isn’t too high, etc.
I know I don't have to, but I don't know how to get to these organic channels. Tried Instagram audience building, but got bored with it, zero sales. I also can't hire a marketer since they will probably just want to spend $ on ads and the circle closes.
It's a good connection, unfortunately I don't have a massive audience to talk to. In communities on FB/Reddit I could find some of these people, but I'm afraid it would be considered just spam. I also tried to build following on Instagram, but didn't really work sales wise.
You can get traction on projects without running ads. Show your product off to relevant communities of people asking for feedback, etc. If people start buying, start considering ads.
>For more than a century, advertising was an art, not a science. Hard data didn’t exist. An advertising guru of the Don Draper type proclaimed: "What you call love was invented by guys like me to sell nylons" – and advertisers could only hope it was true.
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...
In house advertising is essentially non existent. Any newspaper would have in house ads printed next to the article. All have given up their autonomy to 3rd party vendors. You wouldn't be able to block in house advertising, but you sure can block all 3rd party skeezy advertising that want nothing but analytics. That largely do nothing better than an ad printed next to an article.
That’s my favorite part, too. I deal with a bunch of OR people at work so I couldn’t resist to bring this similar question up next time. Let see what they have to say!
I wonder if the only tangible value in advertisement isn't to increase your revenue by convincing consumers to buy your product, but to decrease your competitors' by convincing consumers they don't exist.
A lot of people use Google to find things. A lot of those people click the first search result that matches what they're looking for (low cost, certain feature, prestige, there's no right answer, just right answer for them).
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.
A huge point of the article is that valuing search ads like that is highly susceptible to selection bias.
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.
That's the case for a lot of FMCG marketing - the aim isn't to drive immediate conversion, but to be so pervasive you take up all of the possible mental capacity a user has for (example) a "cola brand".
Advertising spending is already recognized as sort of a prisoner's dilemma so even if not literally true the effect are similar. Barring existing infamy or a backfire that makes them worse than generic like say Evony a sole advertising party would be priveledged in name recognition but if everyone does it is just an expense boost to enter in the red queen's race.
Online Advertising margins have been gutted year over year. Demand (people willing to pay for advertising) , today, has fallen to so few players (the largest brands and programmatic) anymore. Users have become so ineffectual to interacting with ads (and effective at blocking them) that measurement has become a black art of approximation, at best.
There is no bubble, as that time passed sometime before 2016.
The post is interesting. The only thing that bugs me is that it only covers companies with well established names and/or products.
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).
I guess conditioning over time has enabled consumers to develop resistance to ads, companies have to change things up otherwise they will see no value in online advertising. I will say that it's ironic that often companies buy in to the marketing produced by advertising agencies.
It might be a Ponzi-like bubble to a (probably small) extent, there is this feedback cycle:
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.
As this excellent article points out, lots of research shows that most online advertising is a waste of money, due to phenomena such as targeting people who are already looking for the advertised product or service:
> 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.
https://news.ycombinator.com/item?id=21465873