
What do we really know about the effectiveness of digital advertising? - anielsen
https://thecorrespondent.com/100/the-new-dot-com-bubble-is-here-its-called-online-advertising/13228924500-22d5fd24
======
buboard
Great to see an article like this. This subject is almost suspiciously under-
researched by journalists. There 's definitely something rotten in the
promises that internet advertising has become somehow more effective. If that
were true, wouldn't businesses notice? Wouldn't they spend a bigger part of
their revenue on ads ? Wouldn't that return even bigger ROIs? Yet businesses
spend roughly the same for over a century in ads, and it's not like the
2000s-2010s were the period of massive growth in consumer spending.

We need more of this research, please, because advertising is a huge deal for
the health of the internet, despite its vilification. And it doesn't begin and
end with FB+Google

Also: It would be nice if people who comment here and work for Google or FB
declared their conflict of interest

~~~
Iv
> because advertising is a huge deal for the health of the internet, despite
> its vilification

[citation needed]

I am of the opinion that internet would be a much saner place if advertisement
was purely and simply banned.

~~~
rhlsthrm
Then how would we be able to browse for free?

~~~
belorn
The free internet can be split into two groups, websites operated for non-
commercial reasons and websites operated for commercial reasons.

The group that operate under commercial reasons can also be split into two
groups, those whose primary revenue is from advertisement and those whose
primary revenue is from non-advertisement sources. Hacker news for example
belong to the later and gain revenue from investing.

To answer the question on how would the internet exist without the subgroup of
people who operate website for the commercial reasons of advertisement is
difficult as each of those groups also compete with each other, but we can be
pretty sure that the other groups wound increase in size.

~~~
jefftk
HN has ads: startups advertising for employees. But I don't know how YC thinks
of the effect of HN.

~~~
JetSpiegel
It has ads, but those are not commercial. Only indirectly.

~~~
jefftk
What do you mean that the ads aren't commercial?

~~~
JetSpiegel
The companies don't pay for the ads (that's my understanding). It's not
dissimilar from an artist mentioning a patron. It's more an endorsement than
an ad, it's not exactly the same thing as AdWords.

------
SaberTail
From the article:

> Marketers are often most successful at marketing their own marketing.

I've seen this play out at places I've worked. After raising a funding round,
marketing sold the leadership on letting them burn the lion's share of it,
even though launching new marketing campaigns was never on the list of reasons
we initially went out to raise money.

~~~
bryanmgreen
I think that's a self-preservation tactic for many that often backfires.

Most non-marketing management people want _immediate_ and _huge_ results...
which are both hard to quantify and impossible to get without overspending or
having an insanely lucky idea that goes viral.

Naturally this leads to asking for a bigger budget and promising bigger
results, then KPIs aren't met for X, Y, Z reasons, then they're forced to
justify the spend, then they either get more budget or get fired and the cycle
repeats. Marketing has too many intangibles, so marketers always feel a need
to justify themselves out of fear of being an easy target.

~~~
onlyrealcuzzo
I'd be nervous to work for a company where one of the co-founders isn't a
marketer.

Marketing is usually one of the biggest line items for a business.

When your marketing team has little incentive to actually deliver, they're
likely to ask for a ton of money only to add impressive things to their
resumez, not really to deliver on their promises to the business.

If a founder is in charge of marketing, s/he's got a lot of reasons to
deliver: founder's equity.

~~~
sushid
> I'd be nervous to work for a company where one of the co-founders isn't a
> marketer.

I'd be nervous if there were a co-founder who is a marketer (unless it's
literally a marketing startup).

Take a look at some of the hottest tech companies right now (recent IPO,
FAANG, pre-IPO, YC darlings). Would you be really afraid to work for a FAANG,
or hot recent IPOed companies like Zoom or PagerDuty, or pre-IPO companies
like Stripe or Flexport because of the (co)founders' non-marketing background?

------
ngngngng
> a Super Bowl ad cost three million dollars. Why? Because that’s how much it
> cost. What does it yield? Who knows.

This article is awesome. In my free time I'm building an advertising platform
that topic matches ads off the content of the web pages. No tracking of users.

I'm hoping to allow people to host and run their own all inclusive self
contained advertising platform for just a licensing fee. I also have a way to
beat adblockers that I'm afraid of bringing to light since I only want it tied
to my own companies completely non tracking and ethical ads.

Hope it's not a bubble! Though first I have to finish the work and get a few
customers so it's not like I can't pivot if it is.

~~~
bostik
> _I also have a way to beat adblockers that I 'm afraid of bringing to light_

Proxying ads through as first-party content?

If you really are invested in making them work ethically, consider these
ground rules: [https://bostik.iki.fi/aivoituksia/random/no-
stalking.html](https://bostik.iki.fi/aivoituksia/random/no-stalking.html)

~~~
Normal_gaussian
I find, as a consumer, I disagree with the text only requirement.

Videos are certainly off limits as a nuisance. However images convey a lot of
information very quickly, and can be visually "skipped" in a way text cannot.

When presented an ad for protein powder alongside my workout diets article, I
want to see what it looks like. The presentation of the product is an
important factor in whether or not I pursue it.

It has to be remembered that advertising is a three way relationship, and all
three stand to gain (presuming no scam). This is more complex than financials
- displaying an advert leads to a bi-directional association in the consumers
mind between the entity being advertised and the entity advertising it. It is
beneficial to advertise products that have Brand values similar to yours (or
ones you want to appropriate).

In all cases it can benefit the user to be advertised to as a means of
discovery.

Many of us forget (or do not realise) that there are (and historically were a
lot more) "papers" proudly proclaiming themselves "advertisers". People
willingly read pages of adverts in order to discover products and services.

Anyway. Keep the image, it's worth 1000 words.

~~~
lsc
>This is more complex than financials - displaying an advert leads to a bi-
directional association in the consumers mind between the entity being
advertised and the entity advertising it. It is beneficial to advertise
products that have Brand values similar to yours (or ones you want to
appropriate).

I agree, and I think that's part of why I disagree so hard with you on the
primacy of images.

I mean, i'm not saying that a preference for text vs. a preference for
pictures is objectively right or wrong, it's just a really good example of
your aforementioned alignment of brand values between the content provider,
the brand doing the selling, and the consumer. pictures are a way of
associating your brand with values, but eschewing the (possibly extraneous)
extra data in that picture, you are also associating your brand with a set of
values.

I am also a consumer of protein powder... but you are _way_ better off
appealing to me with text. Ingredients, (tell me what the stuff is made of,
and don't add any sweeteners) purity (Test for heavy metals or the like!) and
then price are probably the attributes you want to bring forward, if you are
trying to sell me a protein powder, approximately in that order. If you
instead show a nice picture of the can or have a model preparing some in your
ad, I'm going to see that, at best, as an irrelevant distraction. (again, I'm
not saying those are the objectively most important attributes of a protein
powder, but if you want my protein powder budget, that's how you get it; At a
cultural level, the more I feel you focus on the things I care about and the
less you focus on things I see as irrelevancies, the more I feel you align
with my values.)

I mean, I'm not saying that pictures are good or bad in general, just that
advertising with pictures and advertising with text have _very different_
cultural connotations, and that advertising with text only can be a striking
alignment with a consumer's values.

~~~
pushrax
i.e. you want to see the facets you'd be looking for when choosing a product
to purchase.

For many products and people that will just be the visual appeal, and
advertisers target their widest audience.

This is a case where tracking can actually be seen in a positive light - I too
think I would be more likely to convert if I saw a datasheet as an ad, but
that's definitely not majority. At the same time, obviously fashion ads will
convert better as images, in almost everyone.

~~~
lsc
>For many products and people that will just be the visual appeal, and
advertisers target their widest audience.

I... think this is usually unwise. If you attempt to appeal to everyone, you
appeal to no one. I personally think one of my advantages when I ran prgmr.com
was a consistent brand? At the very least, it was very recognizable. (I don't
run it anymore, and I'm not claiming to have done a great job when I did. But
I can point out several mistakes I made where I would have gotten... big at
least by my standards if I had zigged rather than zagged. I think I did a
memorable, if not a good job at branding, and "just get my name right" is...
well, it's halfway there.)

Personally, I think that if you want to appeal to different markets, you
should use a different brand with a different customer-facing layer, even if
in the bowels, the product is produced on the same equipment.

>This is a case where tracking can actually be seen in a positive light

I'm not sure? I mean, I think that the connection between the advertiser/brand
values is important, and you destroy some of that if you tailor your
advertising to the consumer... if different people get different views of the
same brand, well, it's really different brands.

(Also, the decision to track/not track is a brand value decision in and of
itself- a rather big one, if you can credibly communicate that to your
customers.)

~~~
pushrax
Attempting to appeal to everyone by serving a different ad based on tracking
is precisely what I meant, but I'm thinking more from a platform standpoint
than as a brand. An ideal marketplace would prefer to sell a spot to brands
who advertise in a way that appeals to the buyer.

------
josephjrobison
A very easy way to break this argument is to not look at huge known companies
like eBay and Amazon, but brand new companies 1-2 years old that have grown
almost entirely by online ads. Eventually word of mouth kicks in, but there
are plenty of smart operators that built their entire brand and revenue off of
ads.

Works best in online direct to consumer brands.

~~~
kposehn
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?

~~~
viraptor
How do you separate "people who haven't seen an ad" into a group in Google
analytics? I don't believe "organic" source does that, because that means they
weren't targeted by the ad in the first place, creating a bias.

~~~
MichaelBurjack
Advertisers have many tools to measure "ghost ads" aka "people who haven't
seen an ad but would otherwise have qualified for all your target criteria".
See
[https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2620078](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2620078)
as an example.

~~~
viraptor
That's of course possible to measure in theory. I meant it as a response to
"Facebook, Google and others make these tests possible in their platforms"
since I haven't seen it exposed as an explicit option on either.

~~~
MichaelBurjack
Then you haven't been talking to the right ad sales teams. Google and Facebook
have entire product options built around this specific concept. You can run a
"ghost ads" test on Google for as little as $20k in ad spend; it's relatively
accessible even for smaller players.

------
tacon
This is a rather unimpressive article. Yes, brand advertising is a disaster,
just like it has always been. But to say that all digital advertising has
unknown ROI is ridiculous. Digital _direct response_ advertising allows very
accurate ROI calculations. (Admittedly, a lot of advertisers are not applying
the tools to their advantage. They call that the "Google stupid tax". Ditto
these days on Facebook.) And direct response advertising is nothing new. Mail
order guys were cleaning up by running early (expensive!) experiments that
showed if they were going to go out of business. Oddly enough, when you have
skin in the game, you follow the money much more closely. Who knew? The fact
that golf course brand advertising deals don't pay off is not news. They never
have much.

The bad news for digital direct response advertising is that the platforms are
starting to remove the knobs that actually let people determine and optimize
their ROI. Google is in the process of actively removing ad functionality and
data that has, historically, been crucial to ad profitability. Google claims
their machine learning can see much more of the data available, so "trust us."
Perry Marshall, Google ads guru, has recently held several webinars about "Why
Google is Objectively Evil."[0] Not pretty.

[0] [https://www.perrymarshall.com/60-second/gama-
replay/](https://www.perrymarshall.com/60-second/gama-replay/)

~~~
jessefrederik
Hi this is the author of the article. You're just making the exact mistake
this article is about: you assume people who click on your ad and then buy
something, bought something BECAUSE of your ad.

From the article: "Suppose 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. Pizzerias do not attract
more customers by giving coupons to people already planning to order a quattro
stagioni five minutes from now."

It's the same in online marketing, you often target people who are searching
for say a pair of shoes. People who are searching for shoes have way higher
baseline probabilities of ending up buying a pair of Nikes, whether you show
them a Nike ad or not. So if you do not correct for this 'selection bias', you
have no idea what your ad did.

The research I describe in the article clearly shows (and please look it up
yourself, the links are all there) that selection bias is HUGE, and that it's
hard to know ROI, because true advertising effects are tiny if you measure
them in an experiment.

~~~
jameslk
The effects may be low but what is the alternative? You suggest there's a
digital advertising bubble but to have a bubble with the assumption it will
burst, you need to show that advertisers can achieve a better return by doing
something else.

There's no digital marketing bubble more than there is a traditional
advertising bubble. There IS however a conflict of interest in advertising
that's caused by the agency which performs the advertising being tasked with
showing a return on investment.

~~~
jessefrederik
I agree that advertising as a whole might be a bubble. In fact, my next piece
is about TV advertising which is arguably worse. See:
[https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3273476](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3273476)

I do think it's more accepted in traditional advertising that we just don't
know how well it works. In digital advertising there is a grand illusion of
measurement.

~~~
nopriorarrests
Hey Jesse,

I spent 6 years working in ad-tech, and I was researching the incrementality
effect of ads, selection bias and stuff like that for last 3 years. I want to
let you know that your article is good. Online advertising is not a bubble,
but your article perfectly explains why it is much harder than it seems.

~~~
DataWorker
The thing about bubbles is that nobody knows they exist. So an insider such as
yourself saying, “there is no bubble,” is actually strong evidence of said
bubble. Necessary but not sufficient.

~~~
nl
This isn't really the case. Bubbles usually have plenty of people claiming
they are bubbles, and people on the inside privately acknowledging it.

In online advertising there are few people on the inside who think that non-
brand advertising is a bubble. It just works too well, in too many places, and
too many people are making money using it. It's reliable and effective, and
those just aren't attributes associated with bubbles.

Yeah, attributing everything to the last-click isn't the best measurement in
the world. But as pointed out elsewhere there are techniques to avoid it.

And there are enough direct-to-consumer brands which launch on Instagram and
do _nothing_ else to be able to see how effective it is.

------
mlang23
What I notice is that internet advertisment is pretty selective, I dont know
about effective... If your interests happen to diverge from mainstream just
that bit enough, you can end up in a pretty much ad-free zone. I happen to
watch a lot of conference recordings on YouTube, and most conferences dont
monetize their channel (yet). But thats not the end of the story. Stay away
from mainstream, and you get complete ad-free shows. Take Joe Rogan for
instance. The people he hosts are largely pretty interesting, but the way he
does controversial topics pretty much led YouTube to demonetize him. Which,
for the consumer, is a blessing. Because you get 3h talkshows without a single
bit of advertisment. Or ARTE, which is a german/french coop television
provider. They have very interesting content, but a policy of not enoying with
ads. Which makes their YouTube channel even more worthwhile subscribing to. I
could go on, the pattern seems to be the same. To be honest, the more cheesy a
program is, the more likely it is that you will be flooded with ads.

~~~
pjc50
So, how _is_ Rogan funded? And what is he advertising? His Patreon? Product
placement? Ideological placement?

~~~
alvah
There are over 5 minutes of ads at the start of every Joe Rogan podcast, as
well as others throughout. One analyst suggests Rogan has acheived a net worth
over $1bn based on the number of downloads & estimated advertising revenue
based on those figures: [http://www.insideradio.com/podcastnewsdaily/joe-
rogan-podcas...](http://www.insideradio.com/podcastnewsdaily/joe-rogan-
podcast-billionaire-and-poster-boy-for-subscription-
podcasts/article_05317272-cffc-11e9-be43-2f6532b4be9c.html)

~~~
mlang23
As written above, I know about the intro ads, but they are only being done in
the podcast version. The youtube versions of the same talkshows dont have a
single bit of advertisment for me, neither at the beginning nor in the middle.

------
leoedin
I've always wondered about those adverts for the website I'm searching for. If
I type its name into Google, I'm already 100% committed to going there.
Sometimes I click the advert (it generally depends how much I like the
company).

The other aspect of online ads that strikes me as ingenious but probably not
sustainable is the way Google inflates the auction system with fake money.
Anyone who's run a website will have received a letter offering hundreds of
dollars of free advertising with Google. Of course, it's an auction so the
presence of that money just drives up the cost for everyone. Google wins every
time!

~~~
cubedrone
There was a post about this recently. They need to buy the ad to keep their
competitor from being the first result.
[https://www.seroundtable.com/basecamp-google-
ad-28161.html](https://www.seroundtable.com/basecamp-google-ad-28161.html)

~~~
pizzaparty2
Well, at least there is no law allowing ISPs to serve their site more slowly
unless they pay a ransom (I mean business professional tier).

------
ghaff
It's seemed pretty obvious for a good decade that, if a bubble were going to
pop, it would probably be related to advertising. Because if online
advertising falls off a cliff, that hits two of the big tech employers
directly. And you can be sure there would be major secondary effects on all
the companies whose plan is to more or less never make money but be acquired.

------
davidedicillo
Overstated.

This article assumes that: \- All online advertising is Google search \- That
brand search advertising is representative of the entire industry

There are plenty of companies making double-digit ROAS (return over ad spend),
especially direct response advertisers.

~~~
jessefrederik
Hi, I'm the author of the article, and I don't assume all online advertising
is Google search. I also cite research on display advertising (meta-study of
432 display experiments on Google):
[https://www.ssrn.com/abstract=2701578](https://www.ssrn.com/abstract=2701578)
And on Facebook advertising:
[https://www.kellogg.northwestern.edu/faculty/gordon_b/files/...](https://www.kellogg.northwestern.edu/faculty/gordon_b/files/fb_comparison.pdf)

The problem with all online advertising is that there are huge selection
effects, which are hard to correct for using conventional statistical methods.
So you need to do experiments. And when economists do experiment, they find
that advertising effects are so small that they are hard to measure.

~~~
marrone12
There is a selection bias in these studies as well -- that you are focusing on
large, already established brands that have good brand recall and people who
had intent to purchase there anyways.

For smaller companies that are just starting out, it's relatively impossible
to have prior intent when people don't know who you are or what you offer.
There are a number of companies who started with nothing and grew their
business via online ads and this seems like a giant blind spot in the article
as well as the studies that you mentioned.

~~~
sharkmerry
> There are a number of companies who started with nothing and grew their
> business via online ads and this seems like a giant blind spot in the
> article as well as the studies that you mentioned.

But is that number statistically significant? some do, how many others tried
the same route and failed, how many grew without it, etc

------
loeg
"New"? Pinboard-guy Maciej Cegłowski has been harping on this for years now:
[https://idlewords.com/2015/11/the_advertising_bubble.htm](https://idlewords.com/2015/11/the_advertising_bubble.htm)

------
itronitron
Just as Google won the search engine wars by helping people find what they are
looking for, the e-commerce winners will be the companies that help people
find what they want to buy (reliably and with confidence).

Retail companies are blind to just what a shit-show their websites are (a lot
of them even have ads _in_ their online store). Any company that solves this
problem for their sector will win it, and this is good news for techies as
every company can and should have a unique solution.

~~~
dageshi
Amazon more or less won didn't it?

It doesn't have total domination of ecommerce but frankly it'd run into anti-
trust issues if it did. No company is going to do ecommerce bigger than amazon
without getting broken up so yeah... amazon.

~~~
magashna
Moving more and more away from Amazon. If I especially like a product or
company, I'll see if it costs about the same to buy direct and do that. I've
found that lots of companies actually have better deals on their site or offer
a coupon.

~~~
kristianc
> I've found that lots of companies actually have better deals on their site
> or offer a coupon.

If coupons and discounts are the best the competition have to offer, then
Amazon doesn’t have too much to worry about.

~~~
kadoban
For me, avoiding the counterfeit gamble is a good reason to step outside of
Amazon if there is any other reasonable option.

------
vivekd
I do not work for google facebook or any other internet company. I do however
purchase online ads for my law firm. I also tried turning off the ads for a
few weeks to disastrous results.

I can say the big problem in the examples in this article is the keyword
selection. For example ebay advertising the word ebay to customers who are
googling the word ebay is probably fruitless for the most part. Those people
were already looking for ebay and would find it with or without the ad.

However if you are a lesser known online auction and you use the keyword
"internet auction" or something similar, it would probably help.

This article, to me, seems to be more about the importance of experimenting
and critically evaluating the data rather than an actual indictment on online
marketing. With online marketing there is no clear answer: what keyword you
bid on, how you target, how you write your ad copies, how your competitors are
behaving all come into play. It's difficult for anyone to parse through those
factor and really come out definitively as to whether online marketing is
effective or ineffective in general. We can only do the smaller measurements
and see if our particular ads are effective for our particular business, which
in the end is all any of us who buy ads really care about.

------
ta-49173
I've had the impression that "online advertising" has been rife with fraud
since its inception.

Using cloud services to cheaply farm the clicks reported by the ads seems
obvious.

That we collectively turn a blind eye to it is the most disheartening part.

------
Razengan
How many people here have purchased something solely because they saw an
advertisement for it, or how many people do you know who have done that?

I can't recall myself ever seeing an ad for something I did not already know
of and then spending money on it.

Whenever I have found something that I didn't already know and then purchased
it, it has been because of word-of-mouth (including online comments), reviews
or recommendations/features on digital stores like Steam, GOG, App Store etc.

~~~
vangar3
Me neither. However HN is an echo chamber of intelligent people who aren't
going to sway their opinion or purchases based on ads. It's harder for me to
visualize but the majority of people out there pay attention to ads and even
will convince them to purchase.

When I go to the movies, people will laugh or agree at the most stupid ads. I
don't think most people educate themselves or their children about not
engaging in such content. It's why those morning shows that are really just
ads in disguise are still airing today.

------
hannula
> "What frustrates me is there’s a bit of magical thinking here," Johnson
> says. "As if Cambridge Analytica has hacked our brains so that we’re going
> to be like lemmings and jump off cliffs. As if we are powerless.”

Probably not, but nevertheless their efforts to polarise thinking and support
the formation of echo chambers have been quite successful. While selection
effect has indeed been disregarded often, in the case of CA it actually
amplified the outcome.

~~~
buboard
its also very difficult to measure anything about political ads, so better
keep the research to commercial ads for which data can be found

------
LocalTrust
> A former Facebook engineer once said (and he’s been quoted a thousand times
> over): "The best minds of my generation are thinking about how to make
> people click on ads." I spoke to some of those best minds: economists
> employed and formerly employed by the most powerful companies in Silicon
> Valley...

Not to be a jerk, but almost none of the best minds in SV or of my generation
are economists.

~~~
tomrod
If you are a millennial or younger, I respectfully disagree. The "best minds"
have been sought out to build out the new infrastructure in the service of the
new railroad tycoons.

------
AkshatM
I'm still dubious about the implication that digital advertisement is
fundamentally broken.

My issue is that the article doesn't demonstrate selection effects dominating
over advertising effects for companies with no major brand identity. The
examples cited to back the case - eBay (which is huge), "large" retailers in
the case of Facebook ads, "major U.S. retailers and brokerages with millions
of customers" per Lewis and Rao 2015 - are all established companies that have
already received substantial presence. Where are the experiments that
demonstrate selection effects dominating over advertising effects for
companies with no pre-existing brand identity e.g. The Correspondent (sorry, I
couldn't resist :P)?

Second issue: the article demonstrates convincingly that brand-keyword ads are
broken, which is great. But at the same time brand-keyword ads are not (to my
knowledge as a former engineer at an SEO company, so it could be imperfect)
the primary kind of keyword ads. A brand-keyword ad is when someone types in
"eBay" and you get paid eBay links - but the majority of keyword ads (again,
this is from memory) are targeted keyword ads e.g. someone types in "fur coat"
and Macy pays Google to put a link to its "fur coats" pages. Equally
interesting, multiple companies can pay for the same targeted keywords,
meaning you can have multiple links pointing off to different sites on the
same page.

The pizzeria analogy explains why brand-keyword ads make no sense monetarily
(someone searching for your brand specifically will find you anyway), but it
falls apart for the targeted keyword space, where people are searching by
items but not by brand.

Given that much of SEO and digital marketing are target-based rather than
brand-based, I'm not sold yet on the ineffectiveness of digital advertising
overall.

------
TekMol
So 16 years ago it has been shown that advertising for your own brand name is
worthless?

Yet still in 2019, when I google for "Amazon" I see an Amazon ad?

Color me skeptical.

I doubt the marketing guys at the worlds biggest companies are _that_ out of
touch with reality.

Would love to know why they do it though.

~~~
tguedes
I think your answer is in your comment. Why would the digital marketing guys
at Amazon say that their advertising doesn't work and their budget should be
cut? They want a bigger budget with more responsibility, not less!

~~~
nitwit005
Unlike most companies, Amazon can easily track ad display or click to
purchase. While they still can't establish causality (you might have bought it
even without the ad), it's still fairly easy for them to calculate if the ads
are worth it.

~~~
dontich
When you have Amazon's scale, you can easily do geo-controlled lift studies
like the ones mentioned in the articles to get a pretty good estimate of the
incremental ROAS.

------
jameslk
Sounds similar to this other bubble where we blindly pay software engineers to
create and modify software but we don't know how much revenue those software
features, refactors or bug fixes generate, if anything at all. /s

~~~
thendrill
You are very correct. But what I always wonder. How long can this system
perpetuate?

------
rhys91
The biggest ruse is Facebook convincing marketeers and agencies alike that
three seconds counts as a video view. They justify this by saying people don't
want to watch videos are attention deficit.

The truth is that very few people want to watch an ad. But if there's a strong
enough value exchange with the consumer, they will. Just make effective
content that's emotive, funny or offers utility.

Creatively, the impact of this is clients wanting ALL the messaging in the
first three seconds of video content, which often causes the consumer to skip
the rest of the content anyway.

------
annoyingnoob
I worked for an ad network for 6 years. The level of fraud in online
advertising is staggering. It might work for some but a lot of it goes to
waste, not even seen by humans.

------
chokma
Coming from the other end (after someone clicked an ad), I got to say: ads
work well. The metric used @work is: cost of sale.

The merchant pays for each click on the ad that is redirected to his product
page. What seems like a recipe for wasting incredible amounts of money on an
army of click bots is working - because the merchant defines a target cost of
sale for those clicks, meaning for example he expects a sale worth 100$ when
spending 10$ on ads (a cost of sale of 10%).

And the merchant will set a budget and won't repeat/continue a campaign beyond
those costs, so it is in the ad publisher's best interest to deliver real
paying customers instead of an army of bots.

Cost of sale is of course different for each product category - clothes and
perfume have huge margins (so the merchant may be willing to pay 30% of the
final sale price for advertising costs), computer parts less so.

In the case of ebay and amazon and other large retailers it's common to not
pay per click but for a percentage of an order's total volume (x% of shopping
basket's value once an order is placed). In that case, we have to trust the
retailer to deliver correct sales data to us.

~~~
tempestn
But doesn't this ignore the selection effect discussed in the article? IE to
use your numbers say you get a $100 sale for every $10 spent on ads. And say
your profit margin (outside of ads) on that sale is 20%, so you earn $20-$10 =
$10 in profit.

However, what if 3/4 of the people who clicked on your ads would have found
you anyway, through organic search results or other means? Then that $10 spend
only actually generated $5 in net income before ads, or a $5 loss after the
cost of the ads.

It's tough to say what that number is without doing some testing, but the
point is that you can't simply treat all the business coming in via ads as
attributable to the ad spend.

~~~
chokma
True, you could very well cannibalize your own advertising efforts. I think
that may be a problem for brands who already advertise themselves. For
example, I agree it makes no sense for Ebay to place an ad for the search term
"ebay" if they are already the first search result. If you have a well known
brand, you will have a lot of people who will search you out directly. In that
case it's a matter of running campaigns and see what sticks - if you spend 10%
of your budget on an agency's ad campaign, and very few new customers turn up,
you may be wasting money.

But if you have a small to medium online shop, I think it makes sense to have
someone run ad campaigns for you on as many domains as possible - and pay only
for high quality traffic. If you re-sell shoes from Nike, you will have a very
hard time getting a click from someone who would have bought at your shop
anyway, because your competitors will pay for Google PLA and other ad
campaigns and anyone who is looking for a good offer will run into their ads.

~~~
user5994461
Since you're taking the example of Ebay. When Ebay doesn't pay for ads, the
top paid result Amazon most of the time. When Amazon also runs out of ad
money, it's a less reputable site taking the top site, sometimes a plain scam.

------
jessaustin
I kept waiting for the other shoe to drop on the #fitgirl/yoga pants anecdote.
It seems plausible that such a targeted campaign could be more effective than
the standard "dump a bunch of money in this set of adwords" crap. At least one
executive was really certain about it. The way this section is written, it
seems like we're making sport of that guy without actually knowing that he is
wrong.

------
harry8
I wonder how much under-the-radar advertising happens here.

Good karma user: meaningful context to the thread "But now I just use
$product"

Immediate response: "Yeah $product is amazing - but here's something related
and a different to the gist"

The whole thing is an aside but it's in context and make sense in the flow.
That kind of advertising is massively more effective than a google/facebrick
ad.

~~~
buboard
i notice that with a lot of comments about cloud-related services. While
effective it's also limited to a few niches

------
countryqt30
How successful companies do ads: ONLY invest in the ad if you have at least 3X
ROI to cut out all the "bullshit tiny 1% improvement" ideas, and you don't run
into any problems the article mentions.

eBay ran into millions of problems, because they focussed on "how could we
improve sales by 0.0001%" and is the ROI of this ad 0.001% or 0.002%?

------
rossdavidh
So, there are a lot of reasons to think ads might not work, and a lot of
reasons to think surely market forces would punish companies who spend $$ on
ads that don't work. Which to believe?

Well, reality check: do the ads you get shown, work? For me, almost never.
It's either: 1) the thing I was google searching for anyway, or 2) the thing I
bought online yesterday, which I therefore definitely don't want and won't
want for a long time. This even happened with things like cars and house air
conditioners, where someone who's recently made a purchase is the LEAST likely
to want it.

I can think of a lot of reasons for ad-supported companies (which includes
news journalists) to want to claim that ads work better than they do. I can
think of reasons why executives want to believe ads will save them, when they
won't, because actually improving your product is much harder than spending VC
money on ads.

------
QuantumGood
Where companies have investment, they can afford to place ads that are
unprofitable. Though LV (Lifetime Value) can make an unprofitable ad
profitable eventually, I question any measure of "effectiveness" other than
profitability.

That said, by every measure that we make, Facebook ads for our local events
have been profitable for us.

------
lazyjones
I wonder how much (in %) the 'Google tax' is these days, which is paid by
businesses that advertise for their brand as keyword on Google despite being
the top search result, just because Google sells the almost indistinguishable
ad spot above the first result to their competitors.

~~~
buboard
It shouldnt be too hard for websites to teach their users about this: "When
searching for us on google, look for our domain name in the results".

------
vmurthy
Somewhere near the very bottom of the article is this gem. Emphasis mine.

"And it wasn't because it was working for them. ... 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 other words, even if a lot of people figure out that digital advertising is
worthless to increase sales or whatever, they might still buy it for defensive
reasons .. It's a win for Google/FB either way

~~~
dehrmann
This is one of my gripes with Google and not being evil. Allowing competitors
to outrank you for your brand if they pay and you don't is racketeering.
Allowing this is so blatantly wrong I'm not sure why it doesn't get more
attention.

------
wyxuan
I can’t read the article but I think it’s starting to deflate on its own. Like
when J.P. Morgan stopped advertising on google after the whole controversy of
ads being shown in front of extremist content and realized it didn’t make a
difference.

~~~
the_mar
you can, just click "maybe later" at the bottom where it says "become a
member"

~~~
godson_drafty
I did that, and then afterwords it told me that the article was being gifted
to me buy a paying member. After that I just closed the tab. It is kind of a
stroke of genius, encouraging me to sign up by showing me that I'm enjoying
the largesse of a paying customer. On the other hand, if letting me read the
article is such a huge imposition, I guess I don't want it.

~~~
tkoolen
The paying member is the first author.

------
nabla9
Is there similar studies about management consulting?

It seems that most of it is just holding CEO's hand when they must flip a coin
and having someone outside the company to blame. (they do it with PowerPoint)

------
ativzzz
I just want to say I love the little built in links/dropdowns within the
article to expand information. Much more user friendly and smooth than using
formal citations.

------
The_Corres
This article was published by The Correspondent, a new media startup funded by
members – if you'd like to read more by the journalists you can become a
member (pay-what-you-
like)[https://thecorrespondent.com/](https://thecorrespondent.com/) | or
follow us on Twitter --> @The_Corres, @jessefrederik, @mauritsmartijn

------
countryqt30
"The experiment continued for another eight weeks. What was the effect of
pulling the ads? Almost none. For every dollar eBay spent on search
advertising, they lost roughly 63 cents , according to Tadelis’s
calculations." \- that issue isn't related to a problem with digital
advertising, but to horrible financial management

------
m463
Some advertising works on me, and might be self-selecting.

The "thing x added to cart" on amazon, showing lots of similar things, and
related things. At that point, I have capitulated on many occasions.

It's like giving a coupon for a drink in the pizza waiting area. (Or in some
cases, showing me there's a better pizza)

------
ACow_Adonis
If you think about it, the very line that the smartest minds of our generation
are working on making people click on things is itself marketing designed by
marketers to sell the prestige/status of working for a big advertising
company.

That actually is genius in its own way... but just as the quants in finance
during the early booms were "the smartest guys in the room, until they weren't
and you realised they all were poor implementers of undergraduate statistics
and jargon during economic bubble and crash", I don't think the workers for
facebook/Google are necessarily that bright.

It's depressing that our economic and social system is geared towards pushing
maximum consumption, no argument there, but the smartest people on the planet
already self selected out of that over the last 20 years, and what you're left
with is... well... marketers and advertising dressed up as prestigious tech
firms talking about how great they are.

~~~
buboard
> smartest minds of our generation are working on making

Considering the deterioration in software functionality that i m experiencing
the past years across the board (from superheavy web apps to mobile apps that
for no reason remove features to desktop apps that function worse than even
mobile apps) - i m not even sure they re employing the " smartest minds of our
generation"

~~~
username90
In my experience the smartest people don't want to work on UI's, which is
probably the reason they are bad. The smartest go work on other parts of the
stack, doing things like machine learning or infrastructure.

The only place where you have the smartest people making UI's are in games,
they often have very impressive performance and functionality. But even in
games people hate making UI's, it is just that in games people care about the
product so they bite the bullet and do it themselves.

Note that I am not saying that UI is easy or unimportant, making UI's is both
hard and super important which is why it is a huge problem that we can't find
good people for it.

------
mrmrcoleman
Measuring the effects of marketing started a bit earlier than Google:
[https://en.m.wikipedia.org/wiki/Scientific_Advertising](https://en.m.wikipedia.org/wiki/Scientific_Advertising)

------
tempodox
Has anyone ever been fired for buying digital ads? Also, there are enough
examples that show that the toxicity or ineffectiveness of a technology
becomes immaterial once a sufficient number of jobs (and other vested
interests) depend on it.

------
undercover89
The "experiment" you mentioned here is observational. The reality is, major
digital ad platforms today (google, facebook, etc.) all provide rigorous RCT
experiments. That will reveal the true effectiveness of ads.

------
zecg
Anecdotally, a bubble sounds right, since I know I never see an ad anywhere.
Firefox + ublock on both computer and mobile, never even consider a smartphone
app if it has ads. So how can it be effective?

------
mokarma
One thing I don't understand, is why advertisers won't give me a way to tell
them that I've already bought a car, so I don't need to see car ads anymore.

------
rosstex
There was a bus company that started service from Princeton to Philadelphia.
They advertised via Facebook. I saw the ad, and I bought a ticket. Sometimes
it works.

------
mars
I disagree with the author. Although all points outlined in the article might
be independently true, making a general rule out of it is not ok. Especially
modern, agile marketing teams that understand the importance of testing and
learning are able to produce campaigns that generate positive ROI/ROAS.

Sidenote: Co-founder of Admetrics here. We provide an experimentation solution
that enables businesses to run marketing experiments on their data at pace, so
we see a lot of test results on a day to day basis.

------
mikeiz404
Moral of the story: If you’re not testing the null hypothesis when measuring
ROI on ads you might not be measuring what you think

------
lucd
Just remove the ads and allow the supporters to reward creators anytime, with
any amoun.. Like the Pepo app..

------
neonate
[https://web.archive.org/web/20191106191434/https://thecorres...](https://web.archive.org/web/20191106191434/https://thecorrespondent.com/100/the-
new-dot-com-bubble-is-here-its-called-online-advertising/13228924500-22d5fd24)

------
cookie_monsta
Tldr: Google is a kid handing out discount pizza coupons in the waiting area
of a pizzeria

------
zenyc
I’m skeptical about one of the main premises of the article: that brand
keywords don’t have a positive ROI.

Background: I took part in running millions of dollars of brand keywords for
multiple companies. This is not what my business sells anymore.

I’ll explain my counterargument in two different ways: with an analogy, and
with data from a project that I was tasked with figuring out whether branding
ads had an ROI. I'm looking for responses that can poke holes and help me have
a better understanding.

The analogy. Imagine you own a Chinese restaurant. John Doe is in the mood for
Chinese chicken dumplings. John is hungry and in a rush so he gets in his car
and starts heading to the local restaurant area because he heard about your
restaurant. There are multiple ways to reach your restaurant (same as when you
search a brand name in different ways + product A/B/C). No matter which route
John takes when he is looking for your restaurant, he will have to go through
one of the many roundabouts (the roundabout is the first page of the google
search results). John reaches one of the roundabouts that’s right before your
restaurant. There are 10 exits, some of them lead to your restaurant and some
of the lead to other places. Since this is a roundabout, you don’t get to see
each exit at once, but rather go one by one. Each exit has a sign that states
the name of the place and a small description. The information on each sign
was put up by the local authority (google), which is based on what the
restaurant initial provided but it’s relatively the same across all
roundabouts that lead to the restaurant. Since John is hungry and in a rush,
he tends to take one of the very first exits he comes across (similar concept
to the amount of traffic the 1st search result gets VS the 2nd Vs the 3d). The
problem is that your restaurant is not the first exit for every roundabout
(i.e the 1st result in google). For some roundabouts, the local concierge is
the first exit (i.e a number of brands I worked with had the 2nd result for
certain brand+product keywords as the 1st result was taken by major
informational or review websites). For some roundabouts, the local authority
agreed to add a new exit as the 1st one you come across that has a digital
sign which changes based on what every "John" is looking for ("yummy chicken
dumplings") and leads to the competition (paid search ad that always shows up
before the organic results and the title/copy changes based on what someone is
searching). For other roundabouts, your restaurant is 1st but John searched
for your brand + "product by the wrong name", so the description of the first
result doesn't reflect what John is searching for and he skips it (because
Google doesn't let you dynamically change the organic title/description as you
are allowed with the paid ads).

The data. We stopped google SEM brand ads for 6 months, restarted them and let
them run for a few months. We noticed that when we restarted the brand ads,
the organic revenue decreased. The organic + brand ads revenue also fell by
about 25% VS the time we didn't have brand ads running. The key question was:
Did the number of people searching for the brand decrease during the same
time? If branded ads are 100% cannibalizing the organic ROI, then the organic
search impressions (i.e how many times the brand's links show up when someone
searches the brand on google) and clicks should have remained the same. We
looked at the top organic brand keywords that were responsible for 99% of the
impressions/clicks the brand got on google. During the periods that we
checked, organic impressions/clicks had fallen by about 40%. So the number of
people searching for the brand fell by about 40% and yet the revenue from the
organic search + brand ads only fell by about 25%. If you crunch in the
numbers, you'd see that we had about a 20% increase in organic + brand ads
revenue VS purely organic revenue.

Last but note least... I don't have the links to the following research with
me right now but it's available online: (1) competitors bidding for your brand
terms can steal a double-digit percentage of your organic traffic if you don't
bid as well, (2) consumers think brands are more legit the more they see their
results all over the first page, (3) consumers put significant weight on the
first result of the page, (4) the message brands use to get the user to take
an action can have a double-digit percentage impact on whether the user will
that action or not. Bonus: the high CTRs from the branded keywords help
overall google ads account health/quality which helps you get cheaper ads from
Google, better positions, etc.

~~~
JohnFen
Honest question here...

I thought analogies were supposed to be simplified to ease understanding. This
one is complex and hard to follow -- is that because the underlying idea is so
complex that even the simplified form is complicated?

~~~
zenyc
Maybe. It could also be because I did a terrible job at explaining it.

------
moltensodium
Maybe this is just a generational thing, but I still have never clicked on an
ad. I hate ads. I don't know anyone who likes them. I don't know anyone who
has intentionally clicked on them.

I have literally never met anyone who places any value in advertising at all.
Everyone hates it with 100% of their being. It is the garbage we all just sort
of accept exposure to as some sort of fee for existing online.

Who are all these people that subverted technology and turned it into
advertising-tech?

~~~
stvswn
But, you like accessing content for free, correct? That content doesn't exist
and then ads are layered on, the context exists BECAUSE of ads. Like, no one
would produce the content without the plan to make their money back via ads.

This is how mass media has worked from the get-go. Radio stations were built
by advertisers for the purpose of advertising. Entire genres of popular music
wouldn't have happened otherwise.

Online advertising did not create the notion of advertising being the
predominant media funding model.

And, just because you'd rather ads not exist, it doesn't mean there's
something "evil" or whatever about a business promoting itself. I'm going to
guess that if you ever find yourself needed to market a business you'll be
happy if there's an option to advertise effectively.

~~~
ACow_Adonis
Your post is literally the content I'm reading that you claim no one would
produce without ads, and it's unsupported by ads.

And again (I feel like a broken record on this site), that's a totally
inaccurate history of the internet.

Content arrived first, THEN the advertising companies arrived.

~~~
cameronbrown
Hacker News is not mass media. Plus don't forget Y Combinator funded many ad-
based platforms. HN isn't free either.

~~~
ACow_Adonis
A fair point.

So I see two takeaway questions: would we be fine/better off without mass
media funded by advertising(it's obvious what my answer to this would be since
I don't generally listen to it or watch it, though I acknowledge it going away
won't likely happen).

And the second, would content we like to consume/ be worthy of consumption be
produced anyway, and my contention is that it would still, just like it did in
the past and continues in the current (some free, some paid for), as can be
seen in the history of books, early internet, street art, leisure, bloggers,
hobbyists, cinema, documentaries, etc.

There might be a third point of mine, which is that we're actually suffering
from a glut of content and competition for eyeballs: so to me, worrying about
that content disappearing is a bit like worrying about dying of thirst while
drowning in a freshwater lake.

~~~
cameronbrown
I don't know, really. I don't want to go back to a time where artists struggle
to eat, to make a metaphor. Independent creators are using advertising revenue
now too.

