by gws on 5/7/20, 11:41 AM with 152 comments
by itcrowd on 5/7/20, 3:24 PM
by jlbnjmn on 5/7/20, 2:41 PM
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.)
by kposehn on 5/7/20, 4:10 PM
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?
by toddmorey on 5/7/20, 2:38 PM
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.
by ping_pong on 5/7/20, 3:03 PM
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.
by rossdavidh on 5/7/20, 2:35 PM
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".
by jp555 on 5/7/20, 11:56 AM
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.
by 6gvONxR4sf7o on 5/7/20, 4:32 PM
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.
by nullsmack on 5/7/20, 3:21 PM
by 9wzYQbTYsAIc on 5/7/20, 3:02 PM
https://money.cnn.com/2000/11/09/technology/overview/
The year 2000 - how is this a new bubble?
by franze on 5/7/20, 3:42 PM
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)
by duxup on 5/7/20, 3:47 PM
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.
by jlbnjmn on 5/7/20, 2:54 PM
95% of your money is wasted, but if you do it right, that last 5% makes up for it.
by barbegal on 5/7/20, 2:22 PM
by libertine on 5/7/20, 4:13 PM
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...
by ngold on 5/7/20, 5:49 PM
by jjgreen on 5/7/20, 12:18 PM
by qppo on 5/7/20, 2:50 PM
by loeg on 5/7/20, 2:53 PM
by Supermancho on 5/7/20, 5:43 PM
There is no bubble, as that time passed sometime before 2016.
by melicerte on 5/7/20, 3:04 PM
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).
by grativo on 5/7/20, 3:17 PM
by jariel on 5/7/20, 4:52 PM
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.
by RivieraKid on 5/7/20, 4:01 PM
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.
by q92z8oeif on 5/7/20, 5:37 PM
despite that we all know it took a nosedive, along most other revenues, in 2020 ;)
by cs702 on 5/7/20, 3:58 PM
> 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.