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The Advertising Bubble (idlewords.com)
551 points by vorador on Nov 16, 2015 | hide | past | favorite | 325 comments



I agree with this article but I think it should be noted that advertising is much more powerful/effective today than it ever was before. Modern advertising is capable of messing with people's lives in extreme ways.

Advertising is not about selling individual products - It's about selling a lifestyle. Any media which encourages you to 'upgrade' your lifestyle should be considered advertising.

I myself have fallen victim to advertising. I used to live in a big-ish town where the cost of living was low. Advertising (in my case; the promise of a higher salary and access to a wider range of consumer goods and services) convinced me to move to a bigger city where the cost of living is ridiculously high.

So I am working harder and longer, I am able to save less money and I have a lower standard of living overall (in spite of a higher salary).

This lifestyle was advertised to me and I bought it. Much of the value I lost (in terms of quality of life) went into the pockets of advertisers (in the form of cash).


I think much of the value you lost went into the pockets of your landlord and the local businesses you patronize (which is what you wanted?). How exactly do you suggest your money ends up in the pockets of advertisers? I'd love to hear it.


I guess, cities advertise for themselves because of tax reasons (you work there, you pay your taxes there). And ads for cities are supported by local businesses. They pay for the ads and get paid by you in return, if you fall for the ads and move.


You have to be careful if you start thinking that way. It's a good way to think, but it takes care. I can just as easily draw diagrams that prove that all the money ends up in government's hands: 25% of your income is tax, %X of your spend goes to cover taxes paid by various corporations which have to cover the taxes of all their corporations which are covering taxes of all those corporations all of which have to pay their employees who pay taxes so all labor costs are also hidden taxes, my gosh, everywhere you look it's just money going to the government! The solution is that at each step, other money is also coming in, diluting the "tax" flow in various ways before everything ends up there. Likewise "advertising" and "inefficiencies" and "the pockets of the 1%" and all sorts of other things like that.

I doubt very much of the cost-of-living delta between a city and a suburb or the country has to do with advertising.


Those are tourism ads


The rent is high because of demand - Which is driven by advertising - Which someone has to pay for.


If only we knew who's buying all the advertising, maybe it would start making sense.

Walk me through the causal process here. Does it go something like...

Landlords want more money so they devise a massive marketing campaign, including a complete cultural narrative, TV series, movies, and even gasp whole companies created out of thin air.

They infiltrate media outlets to con dreamers into coming to their city, and expect to charge them 10x more than they used to pay in rent. They have to, after all, to cover the costs of the largest ad campaign ever created in the universe.

And it's a massive success! It just worked. Whoa.

Or... Maybe that's just not very realistic.

Maybe your rent is high because you live in a city with a flourishing job market for highly qualified and highly paid workers who came there to find new jobs, and whose real estate market has a chronically low supply of housing due to various cultural or regulatory reasons.


Maybe there's a convergence of shared interests across all advertisers that serves to create a culture of consumption? I don't think it's that hard to explain or that it requires the positing of any sort of conspiracy.


Maybe there is a whole human culture of consumption and it isn't the advertisers fault that humans are greedy. No need to play the victim card all the time.


Or maybe they exist symbiotically? And the role advertising plays is to accelerate the feedback loop in a way that's beneficial to the interests of their employers.

Not to mention, advertising often has been used to create markets out of thin air:

http://www.theatlantic.com/past/issues/82feb/8202diamond1.ht...


You don't think it's hard to explain what?

How advertising causes high rents in San Francisco?

Be my guest.


It's not hard to find reasons other than conspiracies, to explain the role of advertising in creating a consumption culture.


If by "consumption culture" you mean "sales", then yeah.


A sale in and of itself doesn't necessarily imply a broader ideology about what it means to be a consumer. There was a time before consumer culture when we still had sales.

While consumer culture certainly includes sales, it's also about deeper things such as associating your identity and self esteem with consumption, the way those ideas intertwine with culture, the psychological structures through which those ideas are mediated, and the way it all congeals into a way of life.


> advertising is much more powerful/effective today than it ever was before

There's just so much information available to us now through the internet/TV/radio that it has really become exhausting to conduct the necessary critical analysis to defend against malicious ads. Who is funding this advertisement and why - how does the value flow back into their pocket at the end of the day? If the ad industry keeps the firehose on, we get tired of asking these questions, and some ads will inevitably get through our mental defenses.

Sometimes biased/misleading ads are pretty easy to spot, such as in most Tech Crunch/VentureBeat articles where the product or service that is being "objectively reviewed" or covered on a seeming whim is clearly sponsored content. In some other cases its much harder...PG's 2005 essay "The Submarine" [1] is a great read and continues to gain relevance 10 years later. PR/ad agencies manufacture what is hot and trending, and it's usually incredibly hard to determine how or why.

So I've engaged two different strategies to help deal with malicious and/or deeply submerged ads:

(1) Disconnecting from many social media sites that serve as media/info aggregators. Facebook, snapchat, and instagram all had to go. I stay on HN because I find the community to be a bit more ad conscious and averse, but it always pays to remember that HN is both a great tool for discussion and a marketing tool for YC.

(2) Engaging friends and family heavily before making any sort of major "upgrade" decision. Perhaps your friends in said city would have had some interesting advice to share with you about your move had you asked for their frank and honest opinions beforehand.

One negative side effect of the constant barrage of ads/info is a certain critical, skeptical, and frankly negative mindset that has become SOP when digesting any new information. It's really a problem of trust at the end of the day, which is the fabric of any healthy and productive unit, whether that be a relationship, a family, or a society. It's not a new problem, but I feel like it's a hard and important one that has increased in difficulty with the rise of the internet.

[1] http://www.paulgraham.com/submarine.html


But the hilarious part is that by your definition , HackerNews is an advertisement.

Because that's what it's doing. Selling a particular lifestyle.


There are two kinds of ADS in my book:

One kind is an appeal to the person in some general fashion. The usual forms apply. There isn't much of a value add, beyond the appeal. "Ours is 2x better", or "You will feel GREAT!", etc...

The other kind is a value add, in that something of value is given in return for a bit of mindshare or implied consideration. This is HN, and a lot of other content marketing type approaches. Some use forums for discussion, others blogs, still others white papers, and or maybe things like apps, or data one can make use of.

In my own personal thoughts, I refer to this as, "give 'em a cookie. Who doesn't like a free cookie?" And when they take the cookie, they will often give you that little bit of consideration, or a contact address, opinion, something.

Musicians do this by dropping free to play and sometimes free to download tracks. "Here's your cookie, I'm selling more in the store."

I'm generally OK with value added type advertising. I like my free cookie, same as most people. The non-value added ADS are often trading on shock value, or their ability to interrupt you, or some other inane thing. Noise.


Unfortunate double meaning on the word 'cookie.'


Indeed. For my own use and thoughts, it's a non-issue. I don't often use that means to express the idea to others, because of it.

Figured the crowd here would sort it easy enough.

For me personally, I tend to map things to simple concepts in that way. Makes a lot of stuff easier, and it often highlights the common where it might not be obvious too. Just FYI.


I don't think it's too much of a leap to call HN a promoter of YC.


It could absolutely be considered 'influencer marketing' with the popularity of YC alum posts and the aggressive moderation of opposing viewpoints.


*content marketing.


Three hundred years ago, people literally sold themselves into temporary slavery and sailed across an ocean because of advertisements that a different place would be nicer to live. I don't think the power of advertising has changed much.


For sure, persuasion is all about exploiting the backdoors of your consciousness to influence your free will. Powerful stuff man.


I think that spoke more to the conditions they were leaving than it does to the message they received.


Yes, and people left Syria to go to Europe because of advertisements too. Damn advertisers. They were behind it all along.

Preposterous.


I'd just like to point that this is brand advertising. The one people are claiming does not work on other threads.

And yes, it is very powerful. It can change the values of an entire society.


An obvious example of this is the diamond engagement ring scam that succeeded by almost nothing but advertising. Some of that advertising was very subtle as well.


This is not brand advertising - there is no advertising (besides job listings) at all in his post.


So - you actually saw ads saying, "come work in a big city and make more money?". I've never heard of this.


First, it was the whole startup craze; TechCrunch, VentureBeat, GigaOm, etc... Then being exposed to startup job adverts on LinkedIn and other career sites... All these media sources together guided my decisions.


That's not advertising at all - that's news and culture. There's no shadowy conspiracy paying techcrunch et al to talk about how great big cities are. Job adverts, the only advertising part of your post, don't sell a lifestyle generally either - it's just a list of what they want and what they offer.


I've seen a number of ads saying "Come work in slightly smaller city and pay less rent."


Actual ads? Pieces of media payed for by someone?


Tacoma in Washington State puts up billboards in Seattle every so often, targeting techies (e.g. a campaign a few years ago boasted how much better broadband was down there).


I have seen plenty of ads for jobs in North Carolina and other low cost of living locales whose call to action is "move here and pay less rent (plus have a job that might not suck)."


Yep. Mitt Romney made some as gov of Mass, trying to lure biotech.


Yes. Pieces of media payed for by someone - mostly in the subway.


Why haven't you moved back? Genuinely curious.


Moving can be expensive. The majority of my current debt is due to multiple moves from state-to-state. Most of the time the moves were because of jobs. If he's unable to save money then it may be hard for him to move away.


This is mind-blowing to me. I trust there was mostly good reason to it, but why did you need to move with so many physical things? I've moved all around Europe with 3 suitcases (and even that seemed a bit excessive). But then again I've always accounted for these plans and only bought furniture of either "use and discard" or "high resale value" variety (used design classics, etc.)


Well, I don't think it's quite fair to compare different people's lifestyles in that context. Especially since I live in the US where things might be a bit different in various situations than in Europe.

Believe me, I agree with the idea of shedding useless stuff before a move. Which we have. But you tend to accumulate needed stuff with a family in tow. Also, keep in mind that the amount of money involved isn't just for moving physical items.

There's distance as well. I've moved across the entirety of the United States twice, mostly for jobs. Although it was a bit of adventurous thinking because we liked the idea of such a huge change.

I regret nothing.


> family in tow.

That does change things a bit.

Like I said, often there are some good reasons sometimes many good reasons. But as a stereotype, in the US people will have lots of material possessions, most of which are crap.

I know the comfort of having your own things that have been with you throughout the years, and everything is exactly how you're used to them. I do miss the feeling, and will eventually settle down somewhere, or at least settle down my "things" somewhere.

I still couldn't resist pointing out that being geographically mobile is a viable option, even if it does require some effort, planning and certain trade-offs.

And it isn't totally binary, it's a scale from "living out of one luggage-sized suitcase" six flags -style, through being able to pack up and leave on a week's notice, to having planned a lifestyle around moving every couple of years, to having deep roots etc..


> advertising is much more powerful/effective today than it ever was before

I'm sceptical of that. I grew up pre internet and much information on stuff to buy came from TV ads, magazines financed by advertising and the like. Now I've basically stopped watching TV and reading those, read non commercial stuff like HN and when I want to buy toys check out the review sites to see which product is best, not which has the sexiest ads. Here's a graph showing ad spend tailing off http://www.digitaltonto.com/wp-content/uploads/2011/11/Ad-sp...

(from http://www.digitaltonto.com/2011/how-digital-leakage-is-rede...)


This is a great contribution. Wish I could give it more than one upvote!


Sounds like buyers remorse, not that you were swindled.

You wanted "access to a wider range of consumer goods and services" you got that access. Now that you want to save money instead means that you just changed your mind... again.


I'm not convinced that targeted advertising even works. I see the advertising targeted at myself, it's pretty obvious why I get those ads. For example, I bought a kitchen sink faucet on line. For months afterwards, I received constant ads for the exact same faucet - as if I had multiple kitchens.

I've tried running context sensitive ads on my own site. I happen to believe that appropriate advertising is something users want - for example, I buy hot rod magazines specifically to get the ads for parts and other cool stuff for my car.

The context sensitive ads Google servers are just not interesting, and they happen to be one of a small handful of ads repeated over and over. There's no way I can tell Google "display ads in these categories".

I tried running context sensitive ads from Amazon. I wanted ads for programming books in various categories I'd select. What I'd get is ads for the latest Batman movie, over and over, I finally removed them. I don't know how Amazon decided that visitors to a programming site wanted to look at Batman ads.

There is a way to put an Amazon ad on the site for a specific product. But those get stale after a while. Again, I want to be able to list categories of the kinds of ads that would be appropriate for a particular page, but I can't. Ideally, I'd like to specify a list of categories for a context sensitive ad, like "programming books", and have Amazon scrape the page for keywords and then display programming books that are related to those keywords.


> I'm not convinced that targeted advertising even works.

Yes, your intuition derived from a single anomalous data point (yourself) is definitely more accurate than the companies which have seen demonstrable success from targeted advertising.

If you wanted to argue that brand advertising doesn't work, I might agree. Brand advertisers tend not to have high standards of data analysis.

Your publisher experience seems to actually be a case of wanting the former (targeted advertising) but getting the latter (brand advertisers), which can be a real problem because brand advertisers often overspend and undertarget.


I'll weigh in on morgante's side here.

What WB discusses is a common misconception. Just because it doesn't appear to work for yourself, doesn't mean that targeting is not worthwhile. It's not really designed for an improved user experience, but to provide an advantage to those running the ad campaigns.

The crucial thing that people forget, is that that targeting only has to be a little bit better than random to be worth doing (from the ad operations perspective). Given a large number of ads shown every day, with nominal cost, we've only got to push a fraction of those toward users with a slightly better propensity to interact to increase the interaction rate, and get paid more from the advertiser (presuming a model where the advertiser pays us based upon interactions that we generate).

One of the reasons that it is profitable is that the amount we might get paid for an interaction could 50p, £1 or even £10 depending upon the client and media. The cost of showing that ad is a few pence per thousand! So, we can get it wrong many many times, and still show a statistically significant improvement in interaction rates and make a huge dent in profitability for ourselves.

I discuss all of this in Chapter 5 of Algorithms of the Intelligent Web. 2nd Ed. https://www.manning.com/books/algorithms-of-the-intelligent-...


> Given a large number of ads shown every day, with nominal cost,...

And here we descend into spammer-logic. It took a decade or more, but spam filters are good enough now that spam is almost a non-issue; the flip-side is that email, which was designed to be reliable above all else, is now flaky because some legitimate mail can't find its way through the maze of filters, many operating according to machine learning that defies introspection. Ad blockers will eventually be that good, will break web pages in equally unpredictable ways, and the "Open Web" will be a worse place for it.

But I guess you make some money from your book.


Spammer logic is basically human nature. You can't kill it with morality because a few self-interested actors are enough to spoil the soup. It's an inescapable arms race.


I would add that Spammer logic is the nature of life itself. I think it was Neal Stephenson who commented that plants "Spam nature their environment with pollen." Same goes for sea turtle eggs, tadpoles, and sperm.


The Spamming Gene, I guess.


Targeted ad talking about targeted ads, so meta.


Exactly. I almost fell out of my chair laughing when I read that last line.


To complete the circle, dgmdoug should post an analysis of the funnel from HN post to book purchase as proof that targeted ads do work.


I missed a trick it seems. Should have posted a link where I could track conversions. :-/


Yet it would still be better to show useful ads. To try and predict what you would buy next, instead of showing more of what you've just bought. Its astonishing how 'little bit better than random' they are.


There is literally billions of dollars begging someone to figure out how, and plenty of contenders trying.


>Yes, your intuition derived from a single anomalous data point (yourself) is definitely more accurate than the companies which have seen demonstrable success from targeted advertising.

"Single anomalous data point"? His description is exactly how targeted advertising works for pretty much everybody. He's not some weirdo outlier -- we're all show the same things we've bought and tangential things to our searches with the stupidest ad AI.

He might be wrong that "it doesn't work" (e.g. doesn't pay since it's crude), and probably he is, since so many businesses follow it, but he's totally right in that it's crude and far less effective than its potential effectiveness.


The outlier is the kitchen faucet, not the person. It's fact that there exists multiple data-driven targeted advertising firms, and their data shows them that it works. That doesn't mean that every single impression works, it means that a high enough (likely very low) percentage of the impressions work.

Now we can debate if it ought to work, if it's ethical etc., but let's get the facts straight, it does work.


Works is a pretty low bar. Obviously it makes money for some people. Obviously it's better than no targeted advertisment.

The parent described how it's broken and works crudely and bad.

That it still works and gets some sales, he probably doesn't doubt.


What other bar were you hoping for? It's advertising. The fact that it works better than other kinds of advertising is a pretty relevant bar.

FWIW, since we're doing anecdata, I just checked my Amazon front page. Many things are irrelevant, a few comical (I recently looked at a 80-book box-set of Penguin classics[1], now it's systematically recommending each individual member of that box-set to me :-/ ) -- and a few are quite relevant and I clicked on them to check it out.

1: http://www.amazon.co.uk/Little-Black-Classics-Box-Penguin/dp...


> The fact that it works better than other kinds of advertising is a pretty relevant bar.

And that's in a nutshell both the solution and the problem because users have only so much to spend on product. So you end up with an arms race and that's exactly what we are seeing.

It's like the joke about two guys in a jungle, one with boots, the other with running shoes. The one with boots asks why are you wearing running shoes. The second one answers: In case we get chased by wild animals. "You won't be able to outrun a wild animal so don't bother, wear boots". To which the guy with the running shoes says: "I only have to outrun you".


> And that's in a nutshell both the solution and the problem because users have only so much to spend on product.

I don't see the problem? It's probably much more expensive per impression than traditional advertising, but probably much less expensive per sale (which is the metric that matters). This arms race means that if I'm a plumbing supply company, I can now spend my money on displaying ads for specific plumbing goods to people searching for specific plumbing goods, even when that means I'm going to hit some people no longer in the market for these goods -- but even hitting people who are no longer in the market is vastly better then hitting people who were never in the market. This lowers the barrier to entry (less cash required to advertise your products) which means more and better competition which means prices go down.


But that's not at all what happens. First, the plumbing company buys ad space from that morass of companies in the article's diagram. Then the add distribution network decides who sees the ads. And in the specific case we're talking about, users didn't see the relevant ads until after they made a plumbing purchase. So it failed at every level.

They don't appear to be targeting people who are in the market for plumbing supplies and hitting a few who already have them, from what we can tell. They appear to not be targeting people who are in the market at all until after they're out of the market.


I remember the talk the former Prime Minister of Poland gave to technology students on event I was attending; he retold this joke and wished us to be "the guy with the running shoes" in today's competitive market. I recall feeling pretty disgusted by this remark. I guess I prefer cooperation over competition.


It's not a proven thing that humanity would excel if people co-operated instead of competed. So what we have instead is this hybrid: groups of people co-operating in competing with other groups, think team sports, the various tech challenges, companies competing for market share and so on.

The only places in which people are really competing directly with each other are in the labor market (which drives the price of labor down) and in professional sports or other one-on-one contests.

Almost everywhere else we co-operate before we compete.

So far this model is a bit like democracy, it may not be optimal but it seems to be the best we have. If you can improve on that model you'll go places but you're going to be ironically in competition with everybody else!


I guess it's not proven, though it seems intuitively obvious (which, I admit, is often the sign of pitfalls) ;). I think what hit me during that talk wasn't glorification of competition per se, it was promoting ruthless competition. In the end, team sports and tech challenges are healthy as long as everyone remembers it's just a game and doesn't treat it too seriously. It works in business too, but there people often forget - sometimes because of greed, and sometimes because money is like hit points - losing them hurts; lose enough and you die.

Also interesting note: from my experience, most tech companies aren't really competitive. The market is big enough that most successful companies either compete superficially or sometimes outright cooperate, even when working in the same market.


It's called an eco-system for a reason, the parallels are many and the differences few.


>It's not a proven thing that humanity would excel if people co-operated instead of competed.

It doesn't matter if it's proven or not. We're (hopefully) not automata just doing what's proven to make us excel without consideration for the others.


> The fact that it works better than other kinds of advertising is a pretty relevant bar.

But a very low one. Conventional advertising is what, 0.1% effective?

I find my Amazon recommendations are often pretty good. And I'm willing to spend time curating them. If advertising on the rest of the web was as relevant as my Amazon recommendations then I'd probably stop blocking it.


> since we're doing anecdata, I just checked my Amazon front page. Many things are irrelevant, a few comical (I recently looked at a 80-book box-set of Penguin classics[1], now it's systematically recommending each individual member of that box-set to me :-/ )

I'll raise you mails that I get from Alibaba - after few months of receiving offers of aerospace-grade struts, I'm now getting mails advertising... stones.

(I do know how this happened though; the first is the result of me searching for aerospace-grade struts after CSR-7 launch failure, seeing if I can find the unnamed vendor by looking if someone is dumping cheap struts on Alibaba; the second is the result for me accidentally typing in "Pebble", meaning Pebble Watch).


I think if someone already bought a product a better ad would be of similar products other people with said product.


What I've noticed personally is that searching/researching for some very specific purchasable term (e.g. Love sac furniture) triggers the targeted advertisting. The thing is, the ad agency does not know whether I've made the purchase or not. Usually, I'll start researching something 1 day to 2-3months before purchasing depending on how large of a purchase it is, so the ads are useful up to the point I use the ad to make the purchase. Unfortunately, after the purchase is done, the ad just becomes irrelevant and annoying.

So there's probably a significant number of people where targeted advertising is able to get the click that leads to the purchase. In reality, it's probably just taking organic traffic that would have purchased anyway and counting it as a targeted advertising win versus an organic purchase.


Do you really need a lov sac? More than any other beanbag chair or alternate seating?

Or did the ad nudge you toward the conclusion that it is right for you, before you got over it and forgot?

Are you sure?


> It's fact that there exists multiple data-driven targeted advertising firms, and their data shows them that it works.

If this is an unassailable fact because data, where can I see that data?


econsultancy.com most likely have some studies and reports on it.


Every single impression might not work, but this happens extremely often. People joke about how they get ads for stuff they recently purchased. Lots of people.


> "Single anomalous data point"? His description is exactly how targeted advertising works for pretty much everybody

The anomaly is not how targeting works, the anomaly is that it "doesn't work" on him. The fact is that most people do occasionally buy things because of advertising, particularly targeted advertising.

"Doesn't work" is in quotes because I suspect that he has in fact bought something based on a targeted ad in the past.


No, his argument is that he won't buy the same kitchen sink faucet, or any other kitchen sink faucet for that matter, anytime soon yet gets them advertised for month. This should also hold true for those people that "do occasionally buy things because of advertising, particularly targeted advertising".


If you comparison shop for a faucet online, it would require collusion between all faucet vendors for them to know when you finally purchased one.


I assume he bought the faucet from Amazon so Amazon knows that. You would think Amazon would sell ads based on past purchases too. Then all the kitchen utensil/product/cleaner companies could pay for an ad that is displayed after the purchase of related items, like kitchen faucets. The weight should be lower on impressions for more faucets(unless it was returned) and higher for these kinds of ads.


> the anomaly is that it "doesn't work" on him. The fact is that most people do occasionally buy things because of advertising, particularly targeted advertising.

I'm not so sure. It's quite a big claim to say online advertising is effective on "most" people. It's also quite possible that it's not, and that online advertisers are all chasing an anomalous minority population that is not yet ad-blind.


You're both right, but OP is more right. Targeted plumbing ads elicit slightly higher click-through rates and purchases. Let's say 0.12% instead of 0.1% clicks. So in the ad community's eyes, the targeting is "effective."

But for 99.88% of people seeing those plumbing ads -- including many folks who have already bought their sinks -- such ads are stupid distractions. The net result: there's a big surge in the use of ad blockers, and the swamp is starting to drain.

Another case in point: I now follow Twitter trending reports for Yokohama, even though I live 5,000 miles away and can barely read a few characters of hiragana. It's my primitive hack to disable the trending "service." I'd rather have incomprehensible squiggles on a corner of my screen than a bunch of garbage content that's clamoring for attention, even though it's irrelevant to me.


I mean, that effectively is just an adblocker. Many readers here really get bent out of shape on the use of blockers, and you may be one of them, I don't know. But directing the ads to you from a language you can't even read might as well be an adblocker as your mind can't even absorb the ad by osmosis. Just use uBlock Origin.


I shop at Amazon quite a bit. They have more information about my purchasing and browsing habits than they could reasonably need, plus the same data on millions of others. On top of that, when I visit their website, they know I'm already there to spend money. Amazon's front page should be the absolute pinnacle of targeted advertising.

And yet, if I buy a coffee maker, the front page is covered in coffee makers for weeks. I've never bought anything based on what's on the front page and I'm not sure I've ever even clicked those suggestions. I'm sure targeted advertising can work in the long run, but at the moment the success rate seems so low that it's more often an annoyance than a convenience.


...and then you see coffeemakers on Facebook for weeks. Its creepy. And as you suggest, ineffective. Whatever 1st-order ad-prediction algorithm they're using is clearly crap. How hard could it be to write something that predicts your next purchase based on a previous one? That could even be helpful.


How many consumers have this style of interaction:

* buy an item from Amazon (coffee maker or otherwise)

* realize the build quality/size is rubbish (which from some of the less well known sellers, it really can be)

* return the item using Amazon's generous returns policies (never had one rejected, I've used it many times)

* buy a different item in the same category.

* repeat?

If this type of purchase happens a non-negligible number of times, could that be the reason we see so many 'buy more of X!' style ads?


But wouldn't it make sense to only do that if the return actually happens? It's not like Amazon doesn't know whether or not the item has been returned.


I truly hope so, that means Amazon ad-networks' ads are hurting Amazon. Internalizing the externality of spam and privacy violations.

Haven't you ever wish for a 'Punch Advertiser' button during commercials? This would be like hearing they built it themselves.

(To be clear, by having someone making $0.03/click sign their customer up for buyer's remorse thus destroying the profit from serving them because those return policies, the customer service time, etc, aren't free.)


For a lot of companies, brand advertising seems to be the only thing that works and targeted advertising almost useless. Eg: Companies like Coca-Cola and Pepsi, which get a significant share of their revenues from people who buy the product once or twice a year, rather than "engaged" users who buy lots.

The following is a very interesting read: http://www.ft.com/cms/s/2/cd1722ba-8333-11e5-8e80-1574112844...


Who buys Coke only twice per year?


People who never drink soda...except that one time at a restaurant on a holiday, where your sanitary considerations make you ask the waiter for a beverage you know, that beverage being coke or pepsi. I will go for the coke, even though I can't taste the difference in a blind test.


Does two datapoints help?

As far as the success is concerned, the advertising company is hopping from one aggressive technology to another mostly because their techniques work but only for a while and then users tune out. So it may be that WB has a point that is rather stronger than you make it out to be.


> Does two datapoints help?

If we're comparing anecdotes, I'll offer the 3 companies I've helped build online advertising campaigns for which had a positive ROI.

> hopping from one aggressive technology to another

I'd agree with that if the argument was that "this specific ad technology" is going to fail. I totally agree that ex. clickbait headlines are a temporary boom which will disappear soon.

But to argue that advertising as an industry is in a bubble, we'd need evidence that the industry is bigger than historically or what it can support. Which there just isn't evidence of (take a look at my other post).


Online ads are here to stay, there is no doubt - in my mind at least - about that. That said, the industry is in trouble, there seems to be a disconnect between the users and the products advertised hitherto unseen and many in the advertising industry are acutely aware of this. Nobody has found a silver bullet on how to fix this and it is only a matter of time before there will be some reaction to this ever decreasing engagement.

Making an ad campaign that has a positive ROI is doable, but if you are that well embedded in the industry then you will quite likely agree with me that it has become quite a bit harder to achieve that today than it was in the past. The solution (performance based advertising) shifts the burden of the effectiveness of a campaign onto the wrong party (the owner of the inventory) which has resulted in a series of start-ups that optimize on behalf of inventory owner.

This is all like watching eb-and-flood erode a beach and just like real life erosion there are turning points at which the situation can go from steady state to dynamic quite rapidly and it is anybody's guess what the new steady configuration will be once all the potential for movement has been exhausted.

The ad industry is imo not exactly in a bubble as much as that they are more than a little bit worried about why the usual bag of tricks no longer works and how they plan on going back to when conversion rates were still something to be proud of. I don't doubt that this will initially be tackled with a wave of even more invasive advertising, or advertising masquerading as content.

The problem is that what was initially an absolute boon for the advertising industry, that you can 'measure' engagement ended up being the exact problem, you can measure engagement, including a steady drop in engagement over time. And so, by making advertising more and more aggressive the industry has made it impossible - or nearly so - to make a non-aggressive campaign because it has to compete with all the aggressive ones for attention (from the users perspective it is a zero sum game, they only have 24 hours in a day and usually something else to do besides watching and engaging with ads, and if they don't then they are not exactly prime material for some demographic to begin with).

So now there is a problem, which is that the ad industry can't suddenly stop reporting all these engagement metrics, nor can they pull more technological rabbits out of the hat that spawned all these new tricks because these too will work for a while and then run out.

It's not a simple problem.


I've been running ad campaigns for about 10 years. The market seems to have done a fairly good job of balancing out inventory costs. If a publishers hammers their audience with ads they lose them. In the short term, people throw up their hands, but eventually those users move to greener pastures. There is a damn good reason the most dominant parties in advertising - Google and Facebook - have the tiniest, and most targeted, ads.

There has yet to be a point at any time in the past decade where I said, this doesn't work, and shut all of the ad campaigns off. There definitely are issues that exist. There is a problem with mobile app ad quality. There definitely are bot traffic problems. The ad exchanges will be pretty brutal on inexperienced advertisers, but this was the case pre-exchange too. One "bubble" point is I suspect many of the adtech companies involved in exchange inventory may fine themselves on the line for the bot traffic. It will be enough to wipe out the investor equity. This follows based on class actions Google, Yahoo, and others have had to settle in the past and Google especially has always been aggressive about this stuff (although less so in the past two years.)

I read the original blog post and the writer doesn't seem to make a very good case outside of things that happen in normal capitalism. Lots of middle men, tools, and supply chains attempting to add value along with investors dumping in a ton of money in an attempt to gain some return -- possibly more than they will ever get back out. Sounds like a healthy marketplace to me. Some ideas are terrible, some are good, some are amazing but will never return their investment. That is ok.

The bigger problem is for small publishers and likely medium sized ones too. Ad inventory and the users online has ballooned many times over over the past decade. It also is a problem for traditional media companies like radio stations, newspapers, and television channels. I don't need to extrapolate on that one.

Advertisers need to be sophisticated. They had to in the past too but few had access to tools that told them they sucked. I'm not sure that is any more extraordinary than asking a commodity traders purchasing cocoa beans to know what they are looking at and know how to be sure that is really what shows up at port.


Presumably there have been points at which you've said "this space isn't generating enough return any more, I'm going to stop advertising there". And while few businesses are set up in a way where it's ever politic to say "I think other departments could use part of this budget more effectively than mine", ultimately that kind of choice gets made one way or another.

You're right that this is part of the normal cycle of capitalism, with all the creative destruction that entails. It's quite normal for a new, growing industry to support a whole forest of new businesses, and then as the industry matures some of those will die off. But I think there's one extraordinary thing here: the advertising industry is growing like a new market, the kind of market you see when the customer base is growing by 100% every year, like the early days of the Internet. But that growth simply isn't there; advertising is by most measures a mature market. So what's fueling all this expansion?


It depends on how you define the market. Advertising as a whole has grown no faster than GDP over the last century, yet specific sectors have grown much faster over that time (at the expense of other sectors.) Twenty years ago online advertising started to crowd out newspaper advertising, and hundreds of companies (mainly ad networks: I have a list of >300 ad networks from about ten years ago somewhere in my archives, and that was just a sample) sprang up to deal with that demand. Now programmatic advertising is growing much faster than the market, and crowding out ad networks.

Advertising was a mature market when Google started. Media was a mature market when Facebook started. (And, to make a slightly different point, people believed computers were a mature market when Apple started.)


Yeah, "placement doesn't work" happens, and it is because another party keeps increasing their bid. Sometimes that was because they blind bid, sometimes it is because they have funds to burn through (Groupon, Zynga, all the big mobile games, Uber, Lyft, all fit in this category, and they bought enough in their time to really move ad rates), other times the company just had a better model and it forced me to make other adjustments to my campaign.

Is the question the expansion in adtech companies? If that is so, I think a huge part has been the Facebook traffic dumps to publishers like news sites. Basically the available display inventory something like doubled. That isn't sustainable, Facebook fully intends to recapture that external traffic back in to their platform. The drop is already visible to some publishers. Many companies certainly are turning a blind eye to fraud so as to hide the bad news from their clients and investors.

At some point the shift from offline to digital ends and the growth moves more in line with GDP. That will bring down valuations. Google and Facebook probably want to integrate the ad model with every human transaction. One could imagine getting in a Google car and saying "pizza" and be driven to the highest bidding pizza shop.

Certainly ad costs get baked in to some products in a big way: Coca-Cola, Geico, hotel rooms, for profit universities, and so on. Sometimes the costs are so much the profit center moves to another area, such as investing the float from insurance or maybe just straight up stealing money out of a person's bank account (pay day loan lead aggregators selling bank info to criminals, has happened many times, see FTC.)

As a whole, I don't know how this plays out. If the ad competition is brutal enough the costs will be driven up to the point where the parties not spending money on advertising are just far better deals. If it isn't the prices running up, the cost could be offloaded somewhere else like cutting maintenance at a hotel. Eventually the advertiser's reputation tanks.

These are marketplaces. On a micro level there are many perverse distortions because of some condition at a given time. Over time they should re-balance.

Some things like Coca-Cola, which has probably physically harmed and killed people on the scale of cigarettes, just last a really long time. Coca-Cola has a truly perverse combination of trademark law enforcement, addiction (caffeine+sugar), general scientific ignorance by consumers, and a long list of government subsidized cost advantages. All of these strengths save trademark law are being chipped away at right now. Which, at some point it flips and they have the McDonalds problem (toxic brand.)


I've been on the advertiser end (of Facebook and Google ads) and it didn't work. At all. I guess this is what you mean with 'being brutal on inexperienced advertisers', and I want to believe you.

Most of the time, I've been at the receiving end of advertising as a publisher (web/mobile). And I'm looking at the money stream from a different angle. What I hope (and fear the opposite of) is that for all the money I make with advertising (plus Google's share) there's actually more money earned (profit) by the advertisers. Because only then the system as a whole is sustainable as it is now.


If there is a problem with the $600~ billion of advertising spent globally in 2015 (online & offline), it is going to be at the macro-economic level and have nothing to do with whether its a good deal for the advertisers or not.


Nothing in marketing is ever going to be a silver bullet. The seconds something is shown as a slight improvement everyone is going to use that as their new strategy until it looses it's effect.

The thing to remember about advertising is that at the end of the day it's really about finding ways to be different than it is about anything else. And so when everyone is doing TV ads, start doing online ads, when everyone is doing online ads, start making centent marketing, when everyone is doing content marketing use email and so on. It's an ever moving target. Thats why it's effective when it works.


Eh … targeted advertising certainly worked on me. Pretty definitely and pretty much guaranteed better than non-targeted ads.

My purchasing decisions tend to be pretty long and drawn out (it will take me months to decide that I want, for example, a camera and then to decide which one I want), but targeted ads have several times caused me to pick up the slack and continue my line of investigation into what to buy.

Their aggressiveness is an asset – and they also don’t really annoy me. Comical, sure, but they also remind me: Ah, I wanted to check out those cameras.

Obviously it’s a blunt instrument and not a scalpel (we know for to little about how human brains work to make that work – we need the blunt approach), but it’s a different blunt instrument compared to other advertising.


Oh, they work alright, on a statistical basis. They work better than non-targeted advertising, that's all it takes. After all, you're definitely not the only person who can be influenced this way.


Another datapoint here.


There was a story on HN the other day about someone who had definitely had success with targeted advertising. A company called Grasshopper, I think. It wasn't the first one.

The problem is that although these stories exist, they're so rare. Drops in the ocean. All they say is that highly targeted advertising definitely works for a small part of one per cent of the advertisers.

(Which isn't to say that it doesn't work for more. Maybe it does, I wouldn't know.)


Probably the reason you don't see more stories about the effectiveness of advertising is because:

(a) On HN, it doesn't match the ideological overtones so it won't be voted up.

(b) In general, it's not interesting. Most business owners already know that advertising works and aren't terribly interested in hearing the obvious.


There is a filter on HN, but that doesn't sat much about the unfiltered reality. Another commenter, who seems to know, says combining various targeting techniques typically gives 20-100% improvement over untargeted advertising.

I'll trust his numbers. But is 20-100% enough to say "targeting works"?


The question then becomes is that 20-100% improvement over untargeted advertising as observed from the advertisers (not the agency or some tech layer in between) point of view also an improvement when compared with the same situation say 5 or 10 years ago. And if it isn't then there still is a problem (but a smaller one, that may or may not be repaired in time).

And yes, targeting works. But non-animated banner ads also used to work, and they worked even better than quite a few targeted campaigns do today (hence the shift to performance based advertising rather than CPM and CPC campaigns, they are also much more resilient against fraud but much harder to properly set up).


I thought about it over lunch, and have decided that I think targeting doesn't work, in the relevant senses of "targeting" and "works".

There's an exception: Targeting geographical areas obviously works. If your market is the city of Toulouse, targeting by geoip gives you most of the intended audience and eliminates almost everyone else, at low cost.

The rest of the targeting techniques? Trying to pick male users, trying to pick users over 50 or between 20 and 30, trying to pick people who've visited faucet FAQs in the past? There's a long-term strategic cost in user revulsion and there's an immediate technical cost in implementing the tracking.

I won't try to put a number to the cost of creeping out users and making them install adblock, ghostery etc, but it does not seem safe to assume that the cost is smaller than the value of those 20-100% additional clicks.


It depends on whether you look short-term or long-term. Short term the advantages are easy to quantify, more dollars -> it works. Long term the advantages are much harder to quantify, and it may even be a net negative. But by then the sector has moved on to the next shiny technique, possibly with even worse long term effects. This sort of thinking is what got us here in the first place.


I think brand advertising does work. Otherwise you can't explain the survival of Coca-Cola.


Coca-Cola makes art that is pleasing to the eye and valuable in its own right. For example, I own a classic Coke machine and think it's quite a beauty. This is commonplace with Coca-Cola equipment and marketing stuff. And who doesn't love the little Santa bottles they make for the holidays?


No, it is still Ad. No ads are appeasing, because they are, by their nature, distractions and freeloaders, no matter how appealing their disguise might be. I am more than happy to skip all coca-cola ads that shown before movies, even they look OK, but I don't need them.

But after all, those ads leave an impression on me, that coca-cola is still there, in a red glassy bottle/can, and people seem happy drinking it. That is the reason I might choose it as my go-to soft drinks other than some unknown small brands. So that is advertising works, laziness.


It's not laziness, it's risk-aversion. They're different. I will put in significantly more effort to go to McDonald's instead of some no-name fast food joint because I know for sure what the price will be and what the food will taste like.


Speaking of McDonald's, I really learned to appreciate them and if anyone starts whining to me again about "americanization of everything" I'll tell them to go spend a month in southern China. As a westerner, unless you're particularly fond of sweet food and sea food, you'll likely quickly appreciate that there is always a McDonald's, KFC and Starbucks nearby. Being able to buy safe food that you know you'll like is godsend when trying to ease into another culture's cousine.


McDonalds to me represents everything that's wrong with the western world, everything from its diabetes inducing substances that try hard to mimic actual food and designed to be eaten in a car, to its employment practices. And if you're in China, or in another place where you don't like the food, assuming that you've got access to a kitchen, you can of course cook. Surely you can find chicken, eggs, milk, rice, onions, garlic, beans, peas, potatoes, lettuce, tomatoes or pasta at the supermarket and there's plenty of dishes that you can cook in under one hour and with low effort from those.


There's plenty of data-driven academic research to back you up. It's not very interesting to read, but the stuff I've gone through confirms that brand advertising does work (although maybe not in the way you think it does. Some research, for instance, shows brand advertising not increasing the volume of sales, but allowing brands to justify higher prices, increasing their revenue.)


Not sure what research you're talking about, but it's all about the paradox of choice. People hate making choices, so when in a supermarket or at a restaurant, confronted with the choice on "getting something to drink" for example, you often end up going for the familiar and seeing a brand on TV counts as familiar. This is also why the taste of Coca-Cola does not change or why Coca-Cola continuously does brand advertising, even though most people are already familiar with it - the brand advertising for Coca-Cola is not targeting the 30 or the 40 year olds, but rather the preadolescents and the adolescents that don't have a sense of familiarity yet.


This research: http://www.jstor.org/stable/1059217

"...advertising was positively linked to brand prices in manufactured food products. Prices of weakly advertised manufacturer brands, private labels and generic products were substantially lower than the prices of leading brands, especially highly advertised leading brands. Since the products selected for analysis were relatively homogenous, real quality and cost differences do not appear to account for the price differences across brands."

This may or may not be a result of the paradox of choice. That would be an interesting paper: "brand advertising increases prices when there are fewer than five choices of brands" would be a testable hypothesis, but I haven't been able to find that paper.


Instead of thinking of the difference between targeted and untargeted advertising as a shotgun vs. sniper rifle type of situation, you should think of it as a sawn-off shotgun vs. regular shotgun type of deal.

Targeted advertising does in fact work. I know this because I work for an ad company, and it is very clear in both click- and conversion-rates.

The product specific level of targeting you are talking about, might be feasible for amazon... might be. But it isn't for our company since it is relatively difficult to maintain the segmentation and targeting rules required for it to work. The ROI is simply too low.

There are lots of other easier targeting options with a proven effect such as, frequency, geo, audience segmentation, site/product segmentation (such as the retargeting campaigns you have probably experienced), predictive behavioral targeting, and so on.

We typically see 1.2 to 2 times as many clicks on campaigns using a mix of the mentioned targeting options above, compared to campaigns with no targeting.


> I know this because I work for an ad company, and it is very clear in both click- and conversion-rates.

Which are, over time steadily dropping. Even simple non-aninmated banner ads used to have a high click-trough and conversion rate, higher than the best and most aggressive campaigns today.


Absolutely true, but so what? The first banner ad had a click-through rate of like 70%. Novelty works. That's why ad agencies have never gone away: they are tasked with doing something new.

But novelty can exist within a specific frame. The print ads of the 1950s stopped working, and a new approach to print ads was taken in the 1960s. The TV ads of the 1960s stopped working and a new approach was taken in the 1970s. Flashing banner ads that say "Click Here!" don't work the way they did in the 1990s, so a different approach is being taken. That approach will stop working and something new will be ginned up. But that doesn't necessarily entirely invalidate the technology being used or the basic form. Chances are the tech and form evolve, and the evolution will be driven by the dominant companies in the category. Revolutionary change is rare.


Well, there is only so much you can do before you simply run out of subtle options and resort to sledgehammer methods that irritate a substantial portion of the public. We're getting there. It's not there yet but even family members have now installed ad-blockers because of a re-targeting campaign gone bad. Of course that will lead to ad-blocker evasion and so on but in the end it does not look as if we all have the same goals here or if there is any respect between the various parties and that can't end well for all of them.


I've had great good results in thinking of my site as a magazine and trying to target the ads more towards the content and less towards the readers. The content is photo tours of new office design projects, so the ads are banners showing office design products. Readers are interested in the published content, so they are generally going to be interested in the advertising.

In addition to battle between adblocking and adblocker evasion, I think there are going to be a lot more sites with fusions between advertising and editorial (sponsored posts, product placement, and just good pr) making it more difficult to distinguish between the content and the advertising.


There's a subtle but important mistake here: You saw those adverts because you looked at faucets online, not because you bought one. The reason you saw ads for them is because advertisers don't know you bought one, not because they do.


What I cannot figure out is why Amazon is not able to tell what I purchased on their own website... Why don't they have a "things people only purchase once" flag to avoid trying to sell me the same watch or pair of shoes twice in the same week?


The cohort for someone repurchasing the exact same item within the following month is probably a lot higher than just showing an ad for some other random item. This probably isn't a number like 20% more likely, it could be like 500-1000x. There may just not be enough data to exclude specific products. On the other hand retargeting companies definitely are over selling inventory to non sophisticated clients that should be excluded.

Targeting definitely works. A big entrepreneurial mistake is looking at things through your own eyes instead of those of users. Many brilliant coders can't get a handle on the business stuff because they just assume everyone else thinks and behaves like they do.


> Many brilliant coders can't get a handle on the business stuff because they just assume everyone else thinks and behaves like they do.

Ironically, the successful products I've created in my career I built to please myself. The ones I built to please others have all been failures. Apparently I'm not the unique snowflake others allege I am :-)


But what has been your target audience? Grandma or fellow John J. Hacker?


What I really detest in Amazon Adverts, is the tracked adverts for stuff they wont sell to me. I live in Switzerland, and some things I can order at amazon.de, others not. I often only find out at checkout which it is. So lets say I want to buy an SSD, I shop at amazon.de, find out they won't sell/ship it to me. Then for a month I get followed by amazon adds for that SSD that they wont sell to me.


Sometimes, when I'm angry at Amazon, I deliberately window-shop all those expensive feature phones from the mid-00s that Amazon still has not pruned from their database. For weeks the whole web will be decorated with ads for the fast-forgotten technical marvels of the past and there is that stupid little satisfaction of seeing what is supposed to be the greatest AI in existence filling the tipjar of websites for putting my eyeballs on pictures of a Walkman phone.


The Amazon.de branch is especially bad at this. It got worse with the new EU VAT that differs for every country, most third party vendors on Amazon.de ship only to destinations in Germany, but not to neighbour countries. Only on the checkout page Amazon.de shows one that they won't deliver the item - very bad UX.


Exactly. I recently bought a pair of bluetooth headphones form Amazon, and for weeks after I was getting stalked by ads for bluetooth headphones from Amazon. For a product I'd just bought. From Amazon.


> The reason you saw ads for them is because advertisers don't know you bought one, not because they do.

Given the amount of tracking they do, I'm surprised this is still a problem.


These algorithms do not work on 'specific people' or 'specific products' they work on vast buckets of A/B tested users with equally vast buckets of products. That's why you will get these 'bugs', which can be fixed by much more specific targeting (soon, on a website near you).


I think retargeting ads can tell that "you're you" and are capable of having implemented such check as a condition for not showing. But I don't know for sure, I only had to deal with them once at my work, when the boss asked me to put some magic hash number in some frontend code.

> soon, on a website near you

Yeah, screw you advertisers. I honestly tried to browse with ads, but I couldn't any longer and finally reinstalled AdBlock a few months ago.


> finally reinstalled AdBlock a few months ago.

Amazing you held out that long. The difference between 'with ads' and 'without ads' is so large I can't understand how people in the tech scene (for who it is trivial to set this up, luckily for the advertising industry not all that trivial for others but getting easier all the time) still browse without some kind of blocking. Besides the security implications of running third party code on just about every website.


Call it well-developed banner blindness. Too well-developed, I'd say, as I caught myself at times (and ended up in an IRC flamewar once because of it) missing pieces of content because they looked too much like ads. It's amazing how your brain can learn to filter out the noise before it reaches conscious level. I also don't care that much about security implications other than malware. All that combined with me a) generally not visiting mainstream sites, and b) being too lazy to install a new extension meant that I managed to run without ad blocker for a few years.

Ultimately it was YouTube ads that play before videos that were the last straw; I sometimes run YT as music source and I got too pissed off about having to listen to 30 seconds of unskippable advertising in order to get to 120 - 240-seconds long video. Mostly it's mood-breaking.


I looked at a number of faucets online from the same company. The only one I later received ads for was for the exact one I actually bought.


He looked at faucets a few months ago, then stopped. What does that sound like to you?


The question is whether this additional effort is strictly necessary or whether it’s just nice to have.

Why do complicated things when something simple already works pretty well? Your thinking that just because something is possible it will be done is not very close to the practical reality in the trenches. Because something is possible it might be done if resources are there. If not, best effort, done.

All of this analysis is expensive, so don’t expect it all to be done.


How do you detect the absence of a visit if all you have is a hidden pixel on a page?


Okay, let me rephrase. If you have tracking pixel logs that show his having searched for faucets for a while, and then that stops, what does it sound like?

Theory A: He wasn't shopping for faucets at all, he's just a bot following links and who had recently visited a faucet portal page.

Theory B: He searched, found a faucet he liked and bought it.

Theory C: He searched, then installed Ghostery, and is still in the market for a faucet.

All are possible, but one of them sounds a lot more likely than the other two to my ears.


Let's assume Theory B is correct, and searching for a faucet and then stopping can be treated as having bought a faucet. That tells the advertiser that the user buys faucets, and that's exactly the right person to advertise to. I'd bet that in a large number of cases someone who buys a faucet is likely to buy another faucet in the near future - faucets are something that you buy when you're doing up a house, or you've moved house, etc.

Advertising to someone who you have reason to believe is going to buy your product is much more effective than advertising to an unknown person.


>>Advertising to someone who you have reason to believe is going to buy your product is much more effective than advertising to an unknown person.

Totally depends on the product and the person you are marketing to. Marketing hammers to carpenters makes sense: they use many different types, and presumably go through them quickly. Marketing faucets to regular folks is a dumb thing to do. A faucet is something you buy once in a blue moon.


Also, the fact that he bought a faucet means he probably owns a home. And is much more likely to have to buy a faucet again than a random person who may rent and never have a reason to buy a faucet.


No I don't think that's a mistake. I suspect the probability that someone who has recently bought an item buys the same one or a similar one again is pretty high.

People buy stuff for others. People buy stuff for professional reasons. And yes people do need more than one faucet when they are building or redecorating a home for instance.

Also, showing people stuff they have recently bought may provide an incentive to recommend it to others or write a positive review online.


Targeted advertising works. Retargeting works. Banner ads work. Not for everybody, but do you really think that all businesses pouring money to advertising are stupid? I've seen e.g. Facebook advertising to work for online fashion stores and numbers tell a clear story: it works. And that's the scary part, IMO.


It's more complicated than what you are saying , what you witnessed is generally called behavioral targeting which is user specific generally . Sponsored search generally is a solution which shows ads which have your keywords in it . Behavioral targeting ideally should show you stuff you might interested in buying or buy on a regular basis , if it's showing stuff that you already bought , it probably indicates a stale feedback loop between two systems


OT: WB, I'm making a space for people building project cars. Sounds like you'd be into it: drop me an email me@alexmuir.com, I'd love to get your thoughts.


I'd click an 'I bought it' button to get rid of the follow through annoyance, surprised I've not seen that yet.


You purchasing the product should have fired a "conversion pixel" which would now exclude you from being a valid user for seeing the product ad(s) in question. The advertiser is just wasting money if they're not using a conversion pixel.

(Unless you meant just clicking "I bought it" to get rid of retargeting ads in general, not that you actually bought the product)


That's something Amazon already knows if you bought it through them...

And even if such a button were present one could press it even though the product had not been bought.


For example, I'm browsing for tyres, I get that it knows that, it's even useful sometimes in helping making a purchase, but then, I do it, I'm done looking, I have tyres, regardless of where I got them, now when I see tyre ad's they are even more annoying, oh look, there's a better price than I paid 20 minutes ago, so... can I just click something to say, I have that thing, find the next thing to show me. For the advertiser having a user click it even if they had not bought the product might still be a useful flag, the user would learn that it's not going to stop adverts altogether, just move things along, if they click it too much, they'll end up back where they were and the advertiser will have learnt some things.


There's no way I can tell Google "display ads in these categories".

Actually, you can: http://www.google.com/settings/ads


That influences ads served to me. I wanted to influence ads served to readers of my web pages.


That is called 'publisher optimization', google does not offer much in terms of that today but the buyers of advertising do have a whole raft of tools at their disposal to the point where pranksters have used it to target individuals.


Do you happen to block ads in general? - I do, those few sites I whitelist, I constantly see Namecheap (which the registrar I use for domains) ads. I'm getting really sick and tired of it. I can only assume my digital profile for ad networks is too small. Also, sometimes Amazon ads for the products are already purchase, no idea why.

I think Facebook enjoys the current Adblock situation, the native advertising is the future. Good luck blocking those ads in their app which everyone is using. Also paid tweets, paid Facebook shares - I don't think many people on HN realize they are being tried to sell something all the time, just the fact your Adblock doesn't block it, it doesn't mean it's not happening.

I can't see myself browsing the web without Adblock, but I think the future is really dark because more and more people feel that way.


Re: no way to tell Google what kinds of ads you would prefer:

I wonder why they don't do this? For example, offer $1 Play credit for filling out a short form of your preferences.

Before I upgraded to no advertising on Hulu, they would sometimes ask after showing an ad if you were interested in the target market for the ad.


> I don't know how Amazon decided that visitors to a programming site wanted to look at Batman ads.

Machine learning/recommendation systems?


Sounds like you should start an ad-tech startup. The reason the number of companies in the space has exploded in recent years is because there's clearly money to be made by making this better, especially for specific niches.


There IS a way to tell google "display ads in these categories".

http://www.google.com/settings/ads


> I don't know how Amazon decided that visitors to a programming site wanted to look at Batman ads.

NaNaNaNaNaNaN Batman

More seriously: "20 to 40 year old male"


And I'm sure some advertising employee has built some "logic" that "thinks" as follows

Programming -> Nerd -> Comics -> Batman


Are they wrong? If I were advertising Batman I'd expect maybe 2x as many people on a programming site want to see it as on a random internet site. And the marketing budgets for these films are so massive that any opportunity like that is well worth spending on.


Honestly, I'm pretty sure the demographics have enough overlap for this to be an emergent behaviour out of statistical modeling with nobody building any specific logic.

You can see plenty of this in, say, music recommendations where Youtube will follow a Foo Fighters song with Taylor Swift because they're both in the same "top 100 popular" category. It's easier than understanding content.


Yeah, I didn't think the decision to show Batman ads on a programming site was particularly mysterious. This looks like conflicting goals -- Amazon is trying to show ads that sell products, while the site owner is trying to set a particular tone (while still showing ads).


This reminds me a lot of PG's essay on how Yahoo was a beneficiary of its own advertising bubble that it created in the 90s:

> By 1998, Yahoo was the beneficiary of a de facto Ponzi scheme. Investors were excited about the Internet. One reason they were excited was Yahoo's revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in.

http://www.paulgraham.com/yahoo.html


This cycle of hype is extremely similar to what's going on with mobile advertising on Facebook. It's described pretty clearly in one of Evan Spiegel's "leaked" emails from 2013:

> Facebook has continued to perform in the market despite declining user engagement and pullback of brand advertising dollars -- largely due to mobile advertising performance - especially App Install advertisements. This is a huge red flag because it indicates that sustainable brand dollars have not yet moved to Facebook mobile platform and mobile revenue growth has been driven by technology companies (many of which are VC funded). VC dollars are being spent on user acquisition despite unknown LTV of users - a recipe for disaster. This props up Facebook share price and continues to justify VC investment in technology products based on abnormally large mkt cap companies (i.e. "If this company attracts just 5% of users that FB has, it will be HUGE" - fuels spend on user acquisition as user growth is tied to values). When the market for tech stocks cools, Facebook market cap will plummet, access to capital for unproven businesses will become inaccessible, and ad spend on user acquisition will rapidly decrease - compounding problems for Facebook and driving stock even lower.

(http://businessinsider.com/snapchat-ceo-on-tech-bubble-and-f...)

I can't help but think of Marc Andreessen's recent liquidation of 3/4 of his Facebook stock: http://businessinsider.com/marc-andreessen-selling-facebook-.... Despite a stellar revenue report it looks like all is not right in the Faceland.


YC was one of the best things to come out of Yahoo... Imagine, if Yahoo had not bought out PG and company this whole thing would have never happened. Yay for the bubble, and apparently even Ponzi schemes can have beneficial side effects.


Which "whole thing" are you referring to? YC has been good, but I doubt it has created the industry. The money wanted to flow in, and it would have, YC or no.


This whole thing: Ycombinator, the 100's of start-ups that it has funded, the network of alumni it has created, the very website you are writing this on and the community that goes with it..

And sure, that money would have flowed in but the track record of YC to date is one that I think would not have been duplicated without the unique elements that YC has managed to bring to the table. They literally hacked the start-up world and that's nothing to swipe under the table.

A ton of wanna-be competitors has come and gone (some are still there) but none of those have done nearly as well as YC. Whether or not it will continue for ever is unknowable but for now the results are quite amazing and not to be compared with what 'the industry' managed to achieve in the same timeframe. No other group has managed to create this number of start-ups, no other group has managed to change the dynamic between founders and funders this dramatically.


Sounds a lot like AdSense too, honestly.


in 1998, google (er, alphabet) got its initial round of $100,000. You're not wrong but things in 1998 were weird. it wasn't clear that the internet should or would be commercial at all. 1998 was a big bubble, because we didn't know, at all, how the internet should work. c10k wasn't met yet. Parents (not grandparents) thought the internet was scary.

Maybe big G (er alphabet) is indeed cannabalizing it's own resources to juice adsense revenue. It's different than the late 90's though. For example pets.com, or moo.com. There are ideas that were tried that make money now. In the beginning it was just weird. all sorts of crazy stuff was tried.


At first glance, it seems very logical. Why do you need a middle man, these companies will all die out. The problem with this argument is that he doesn't realize advertising is 600B globally. Each of the small boxes there is 1b-40b depending the bucket (from tag management to mobile (100b)). When you realize that there's only 15 companies serving a 1 billion dollar market, you realize that it's not that small.

Granted. There will be companies that will die in the ecosystem, but the logic is poor. It's like saying why do you need a CRM system, it's just a tool standing between the sales person and the customer.


The HN community has an outspoken minority that believes: a) ads do not make money, b) ads do not work, and c) ads (targeting) are morally wrong. My sense is that the silent majority recognizes just how massive the advertising business is (its demand generation, nothing more complicated) and how important it can be to all types of businesses across every sector of the economy.

Global advertising spend (est. 2015): $592B

Global digital ad spend (est. 2015): $170B

Global VC investment (est. 2014): >$48B

[1] http://www.emarketer.com/Article/Advertisers-Will-Spend-Near...

[2] http://www.pwc.com/us/en/press-releases/2015/annual-venture-...


But isn't artifical demand generation exactly the problem? We already have growing problems with overconsumption, yet we're still told to keep buying more? The only thing your numbers show is that marketing is great at selling its own services, which should not be surprising.

Then (for me at least) there's the problem that almost all TV advertising is targeted at the more vulnerable groups in society: they invariably equate spending with a superficial emotional quality. I can't even remember the last time I've seen an ad that contained factual information.

And since consumer money can only be spent once, it's a zero sum game to me. I'd rather have people spending money on things they really need, instead of trying to fill an emotional hole created by advertising.


You are conflating the role of advertising in general vs specific kinds of advertising and consumption that you view as a waste. Our entire industry (tech) relies on advertising to boost awareness of our products. Is it overconsumption that I saw an ad yesterday for Load Impact & subsequently tested & paid for their (very cool!) service?

Overconsumption can be true on an individual level (person X did not need to buy Y). On an aggregate, consumption is "the economy" and advertising is the primary way of informing potential buyers about an offering.


It wasn't my intention to conflate, but I do consider advertising based on emotional appeal as harmful to society. I have no issues with content-based advertising, but that's not the norm in my experience.

I know that may very well be because of selection bias, in that the less egregious forms of advertising don't register with me (oh the ironing). For example, I actively search for reviews when buying new hardware. But the sad state of affairs is that it's very hard to find quality information between all the content-free fluff even though both are produced in the name of "advertising".

I disagree with your latter assertion though, that "consumption is the economy". To me, that's like saying "TV is society" or "the president is politics". The economy is much bigger than consumption, and I did not suggest that less advertising would lead to less consumption. At least that's what I meant with zero-sum game: it would just lead to different consumption.


> Is it overconsumption that I saw an ad yesterday for Load Impact & subsequently tested & paid for their (very cool!) service?

I don't know, but I do consider your comment to be an excellent example of an advertisement masquerading as content. (see: https://news.ycombinator.com/item?id=10573590 )


Masquerading? As long as its relevant and engaging, it is content.


If you should in the future ever wonder why people dislike advertising or marketing please go back and re-read this comment. I understand that right now you are not in a frame of mind to take that input but imo everything that is wrong with the advertising industry besides the tracking aspects is present in these 11 words.


Relevant yes, engaging fine, but is the outcome better? Being flooded with overly biased information is exhausting and not what is good for the outcome. If I am buying a GPU I want as unbiased a reviewer as possible to tell me all the upsides and downsides to each. Content that pretends it doesn't have a huge bias is lying, and it leads to poor personal decision making.


No, it is fluff, which is why I ignored that sentence. You did not provide any content about that service, other than the emotional qualifier that it is "very cool".


i'll go out on a limb and suggest that most things that consumers buy are things that they don't need to buy -- at least in my part of town.

i wonder how much of the world's economy is geared to providing consumers with things that they don't need? (this easily covers fashion + cars + travel + the latest gadgets + a lot of food)

i wonder how much of the world's economy is B2B style businesses geared towards assisting companies provide consumers with things they don't need? perhaps a fair bit?

i think one can argue that advertising makes "the economy" more efficient, perhaps.

one still has to answer the question of "is the economy a good thing?" -- i.e. efficiency in itself is not obviously a positive attribute - it isn't good to find increasingly efficient ways to carry out something that is a terrible idea.

it isn't obvious to me that the economy we find ourselves stuck inside is a particularly good thing (it doesn't seem particularly good at dealing with the problems that it causes).


Ads make an enormous amount of money, but ads are also (at least the online ones) undergoing a trend where the same amount of effort by advertiser, creatives and agencies leads to less and less user engagement and $ spent on product over time. More and more people are experiencing a disconnect with advertising and the advertising industry, rather than doing some introspection sees this is a technological thing that needs 'fixing' rather than as a basic problem with their approach. It will be interesting to see how they plan to fix this long term, for now it does not look - to me - as if they are on the right path, another focus group or user panel is not going to magically solve this. Until then the money is good.


Part of the explosion in ad-tech companies are alternative ad-formats and methods. The future lies in native ads - TripleLift (among others) is doing interesting things. You'll see more and more "sponsored stories". With Taboola/Outbrain, brands can create their own content (giving new life to agencies). We've experimented with embedding sponsored stories into digital properties (ex: a shoppable gift guide within a digital magazine's website).


> You'll see more and more "sponsored stories".

Great. /s


This is the industry reaction I expect from wide-spread ad-blocker usage.

There's a certain future-blindness that afflict us techies: in our fervent zeal, we think that the things we don't like (flash, ads, and flash ads) will be "killed soon": instead, they evolve into hardier, more insidious strains (HTML5/canvas ads, native ads).


Because advertisers have a god-given right to our attention. I got that long ago. Which is one of the reasons I worked hard to get them out of my life as much as possible. Those ads may not be 'killed soon' but they're 'killed for me' today and if it gets to the point where let's say even HN would be infested with advertising then I would simply move offline and read books again or something like that. My eyeballs are mine, and so is my brain.


Though they may not be "killed soon" it still seems worthwhile to take up the fight to help people protect their bandwidth, screen real estate, and mind. Just because it will be an ongoing fight doesn't mean you should just give up.


Ads will die soon. Any day now. Doomed business model.


The current claimed size of the market is irrelevant to the argument. The argument is that there is more money being made from advertising than actual advertisers are paying and that this isn't sustainable.


If that's the argument, the writer needs to put up some numbers.

Here's an attempt at some numerical estimates: http://www.bloomberg.com/bw/articles/2014-03-03/advertisings... Spoiler: ad spending in the US has grown roughly proportional with the growth of the economy, no bubble in sight.


That's more or less impossible by definition. What isn't sustainable is that advertisers tend to see over time lower returns for an equal investment in ads and that this trend has been fairly steady ever since online advertising became a commodity. Each new technology sees an initial (sometimes huge) uptick in clickthrough/engagement/conversion and then after a short while (and ever shorter it seems) the initial uptick transforms into a reversion to the previous mean and a subsequent steady trend downward. It has been exactly this phenomenon that has driven ad-technology and targeting forward and it's the equivalent of turning up the volume on an amplifier because the people intended to listen are going deaf from the sound levels.


Is this article a joke?

Suppose for the sake of the argument that instead of drawing an arrow from the consumer to ad tech, I drew an arrow to... any other market.

Couldn't I make exactly the same argument?

People pay a "consumption tax" to fund every part of the products they buy.

That money flows into the pockets of myriad companies with intricate supplier/client links.

Investors pour money into that market and create new companies hoping to make money back on their investment.

That happens when their investment manages to get market share by "cannibalizing" competitors.

Some investors lose their shirt. Some companies go bust.

My question is: so what?

It seems like there's little more in the article, not to mention the complete absence of any numbers to back the claims that are made or give a sense of scale.

So my conclusion is that what the author really wants to talk about is how these bad companies own private data, yadda yadda. Nothing new here.

So I guess the author is just doing this to push his own ad-free product.

Inception.


>People pay a "consumption tax" to fund every part of the products they buy.

Yeah, only those other parts:

a) are not relevant to the topic discussed. If I discuss where ad money go, I don't have a reason to show where money for packaging go.

b) are essential to the production of the item (besides the fact that there are millions of products that are sold without ANY advertising at all -- e.g. all no-brand-name items) [edit: fixed "not essential"]

>Some investors lose their shirt. Some companies go bust. My question is: so what?

So, when it comes to online advertising, it's the basis for tons of tech-related activity (the reason d'etre of most typical web startups for example, most online media, etc.), and if it goes bust there will be a lot of blood.

The impact to HN's crowd and the web as we know it in general is not even comparable to what happens if some market like "PVC supplies" for products goes bust.


Your message is a little disjointed. Are "other parts" marketing or not-marketing? Take your pick.

Anyway, the article doesn't discuss where ad money goes. It would need to use figures for that.

Instead, it tries to paint a market as some sort of a conspiracy that purposely creates complexity to steal money from consumers. It's essentially FUD.

You seem to suffer from the very common bias of "build it and they will come."

It's irrelevant whether a cost is "essential" to the production of the item. Distribution is a cost that's not part of production. Would you say that people pay a "consumption tax" on freight transport when they buy any physical product?

You say "most" web startups are based on advertising. That would require proof. I recall seeing someone breaking down the list of the current "unicorns" by revenue model. A minority is financed by advertising.


>Your message is a little disjointed. Are "other parts" marketing or not-marketing? Take your pick.

Oh, I see what you mean. I meant to write: "are essential to the production of the item" (scrap "not").

>Anyway, the article doesn't discuss where ad money goes. It would need to use figures for that.

It would only need figures to do that in detail, whereas the article wants to give an overview of where money goes, not go into numbers.

>It's irrelevant whether a cost is "essential" to the production of the item. Distribution is a cost that's not part of production.

Well, even if I got the wording wrong, I obviously consider "distribution" an essential cost too. It might not be part of production per se, but it's necessary for getting the item to the buyer. Advertisement, much less so.

There are tons of products that are sold without any advertising, but very few sold without distribution (e.g. some products you get directly from their makers' facilities), and it's totally inconvenient for larger items or items manufactured abroad.

>You seem to suffer from the very common bias of "build it and they will come."

Well, if we're to discuss my preferences on the matter, that (non advertising) is how most commerce worked for milenia, and how it's working even now for millions of non-advertised products.

Sure, for people to know and buy specifically an X brand, it takes advertisement.

But that's neither essential to society's functioning, nor beneficial (e.g. allows crappy products to advertise more than good ones, and be preferred over them, and also makes people over-buy with ads as constant reminders for consumption).

As a consumer why should I care whether brand X sells -- except if I'm its owner?

People can still buy whatever they want and need, without advertising. And in that world the best products can get word of mouth and organic growth unobscured by paid advertisement. As for further "discovery" there are always articles and posts about upcoming products, reviews, etc.


> It might not be part of production per se, but it's necessary for getting the item to the buyer. Advertisement, much less so.

Is that so? How do you figure? How do you get an item to a buyer that will never be a buyer because he never heard of your product?

> As a consumer why should I care whether brand X sells -- except if I'm its owner?

Well, thank you for unearthing what I believe is the crux of the question so concisely.

Let me put a twist on your question: As an employee, why should you care if the company you work for sells?

Society is not made of people who are 100% consumers.

People need to sell stuff to make a living. Advertising is a way to sell stuff.

I don't like to pigeonhole people, but I've heard the arguments you're making a million times. Almost invariably, they came from people who'd never had to sell anything themselves to make a living.

Go ahead an try to sell people "crappy products" with advertising. See if they buy. What you'll discover is that people don't buy crappy products. They buy "good enough" products. Sorry people's standards aren't up to yours.

We can argue until the sun comes down about what is "essential" or "beneficial" to society, but that's entirely subjective.

I also don't understand the very common belief expressed around here that it would somehow be a good idea if humanity were reduced to its "essentials" or to stuff that they "really need". Art isn't essential. The internet isn't essential. Comfort isn't essential. Entertainment isn't essential.


>Is that so? How do you figure? How do you get an item to a buyer that will never be a buyer because he never heard of your product?

That's a problem of the seller. Including the seller of bad goods (who has the opportunity to promote them over good stuff via a bigger advertising budget). Not a problem of the buyer or society at large.

Besides, as I said, billions of products are sold every day with zero advertising (all the generic brand items we buy).

>Society is not made of people who are 100% consumers. People need to sell stuff to make a living. Advertising is a way to sell stuff.

Selling stuff without advertising is also a way to sell stuff. We managed to do with 1/20 the advertising just few decades ago, and almost 0 targeted advertisement compared to today.

Besides buying stuff you don't really need just because you're conditioned by 24/7 advertising is not that good for consumers anyway. That's how people end up in debt.

>Go ahead an try to sell people "crappy products" with advertising. See if they buy.

You mean like the $100 billion "bottled water" industry?

http://money.cnn.com/2007/07/27/news/companies/pepsi_coke/ http://www.forbes.com/sites/nadiaarumugam/2012/10/19/nestle-...

Or selling "brandname clothes" to 10-20x markup all around the world similar to quality (and often made in the same factories by the same people) to much cheaper alternatives?

In fact you could take away "crappy products" and replace it with "equal quality products" and my argument would still hold: you can artificially promote the brand who spends more on advertising over the brand who is equally good, and might even be cheaper.

>We can argue until the sun comes down about what is "essential" or "beneficial" to society, but that's entirely subjective.

Something being "subjective" is not the same as "entirely arbitrary and "anything goes", unless we've lost all sense of purpose and reasoning.

Taste is subjective too, but a home cooked meal with fresh ingredients is better for you than McDonalds and Hot Pockets, and that's a scientifically verifiable fact.

>I also don't understand the very common belief expressed around here that it would somehow be a good idea if humanity were reduced to its "essentials" or to stuff that they "really need". Art isn't essential. The internet isn't essential. Comfort isn't essential. Entertainment isn't essential.

Only if by "essential" we only take into account the survival aspect. If we take into account our emotional well being, then arts and entertainment, and occasionally comfort, are essential too to one degree or another.

On the other hand, an always updated smartphone, the latest adidas, a sports car, etc, are not "essential" by any measure. And it's a good idea to reduce them, because their endless production is also environmentally harmful.


While "a few winners and a whole fuckin' lot of losers" applies anywhere, the difference, the article says, is that in this case the losers have a lot more potentially malicious power over consumers, and you never want to be standing next to a desperate dying animal.


It makes sense for an industry to grow if the consumer base is growing. E.g. maybe all these home-cleaning startups make sense because a whole lot more people are now getting their homes professionally cleaned than were a few years ago.

But how can advertising "consumption" increase in the same way? Either people buy more stuff (unlikely, because people already spend all of their money on stuff), or advertisers spend a bigger proportion of their revenue on advertising (which also seems unlikely, because their business models haven't changed). It seems more likely that most successful advertising companies are making their money by cannibalizing the rest of the industry. In which case, why is the industry growing?


I'm not sure I understand exactly what you're asking.

How is which industry growing? If you mean how is ad tech growing, it's growing because digital advertising as a share of total advertising is growing. It's mainly eating up advertising budgets that used to go to newspapers.

You can check out this article linked somewhere else in the thread for more data: http://www.bloomberg.com/bw/articles/2014-03-03/advertisings...


The difference of course being that the transportation market isn't being economically upheld by venture capitalists in hopes of one day cashing in on increased transportation revenue.


First, numbers would be required to see exactly how the market is "economically upheld" by VCs.

Second, I'm not sure if you're being sarcastic, but your example seems poorly chosen. Uber and Lyft live off of venture capital. Even absent Uber/Lyft, the transportation market was/still is one of the most cartelised around.

Third, you could certainly find satisfactory counter-examples where the money "ends up" (money keeps flowing, btw, that's why simplistic diagrams aren't very interesting) in the hands of a larger pool of companies. But if the point of the article is to tell us that social networks is a highly concentrated industry, that's hardly an upvote-worthy revelation.

Judging by the language used in the article, it is apparent that the author has a beef with advertising.

I'm glad he can have a lifestyle business sustained by earned advertising he gets with mentions on Hacker News, but it seems a little disingenuous to pretend that can work for all businesses.


Uber?


There are good points here and the flow diagrams certainly apply to startups in the Adtech space. And particularly those targeting other startups.

But these startups are trying to take market from the incumbent Google, and increasingly Facbeook. These established businesses have paid back their investment and are now cash cows for their owners. The flows for Adsense for example will be in balance between cash in from advertisers, and cash out to publishers and Google shareholders. I've been in all three of those positions, often simultaneously, and been happy with the outcome.

When the VC tide goes out Adtech startups will be running up the beach trying to cover their white bits. But with less loss-making competition it could be very good for Adsense and Facebook.

As an aside, I see a future where digital advertising is equally split between Google for transactional (buy something today) adverts, and Facebook for brand awareness and engagement. I think Facebook today is in the same position that Google was when it was only selling ads against its search result pages. When Facebook launches adverts beyond its own property then the cash is really going to start flowing.


I think the theory the article puts forward is that the cost of advertising has been bid up by venture-backed advertising companies.

If this is true, all advertising companies will suffer; a drop in the price of advertising probably won't sink the big players, sure, but it will probably cause them to cut some of their fat.


> I think the theory the article puts forward is that the cost of advertising has been bid up by venture-backed advertising companies.

I don't think that's the path the money takes. The path the money takes is that maybe some venture backed companies buy advertising to advertise their products. If that capital dries up then that particular segment will diminish but it will certainly not cause the industry to implode (though it definitely has challenges to deal with all its own).


I don't see how what you wrote conflicts with what I wrote. "bid up" and "buy" are synonyms in this context.

If you take buyers out of the market the price for whatever it is they buy is going to come down. If the buyers who are taken out were the least price-sensitive buyers, (the theory being that people who aren't venture-backed generally have to spend what they earn) prices are going to come down a lot.


> When Facebook launches adverts beyond its own property then the cash is really going to start flowing.

They already do this: https://www.facebook.com/business/news/audience-network


The central problem I observe, orthogonal to the one outlined in this post, is this: there has been, for many years, a symbiotic relationship between publishers and advertisers. The publishers are the host organism; they draw life-giving cash money from the advertisers. The advertisers are the symbiote, and they consume nourishing eyeballs secreted by the publisher. Print, TV and radio publishers increasingly used the money to subsidise their consumer offerings, which increased the yield of eyeballs. Everybody wins!

The trouble with the New Era of internet-enabled everything is simply that the bottom has fallen out of ad revenue. There is not enough money for this old relationship to continue. Advertisers on the web are parasitic, not symbiotic. They get plenty of eyeballs; the publishers get chump change.

This is an unsolved problem - analogous, say, to the streaming/Spotify problem. How many billions of people would have to lay out $10/mo on Spotify to keep the major labels in the junket-hopping, coke-hoovering manner to which they had long become accustomed? It's not going to happen. The reckoning, to my mind, starts not with the 1,876 marketing startups, but with the dying revenue models of mainstream publishing, broadcasting etc.

After that, well, you can be neither a symbiote nor a parasite without a healthy host, with a ready supply of tasty eyeballs.


I think one reason why there is so much negativity towards advertising in these comments is because user acquisition via buying online ads is fairly expensive, and unless you have very good conversion/monetization, these purchased users will come at a loss.

So, this makes it pretty tough for small startups or 1 person projects to acquire users via ads, since they need to do it on the cheap, which isn't really possible. It's one of the few startup related expenses that has gotten more expensive over time, rather than less.

And why has it gotten more expensive? I believe it is because there is a bubble in this space, but not what the original article is claiming. The bubble is from the boat loads of investment capital in online startups. They take their 100m round and have no issue paying $5 per user, losing money with every one.

Companies that need to be revenue positive (or just don't want to waste money) can't compete with the high ad prices that this creates, which I think leads to a lot of hostility towards the whole space.

I believe another reason for the negativity is all the fraud related to online ads. It's hard to not be negative when there are so many accounts coming out about just how much of the paid advertising traffic isn't even real.


I think a distinction on revenue-positive in a given period vs. ROI-positive on LTV is an important one.

Many SaaS products cannot hope to be ROI-positive off of initial revenue when their plans start at $10/mo, CPC's are $1+ (and that's being generous), and conversion rates are <1%. But if a customer sticks around long enough or generates enough LTV to be worth substantially more, and you have smart data on that, suddently your ROI calculation changes dramatically, and you can be more aggressive where less-savvy/more conservative competitors cannot.

Now, startups who spend all of this with high CAC and no business model other than "we'll monetize someday" are a different story, and inherently more risky. But that is certainly not everyone.


It has nothing to do with how much ads cost. Modern ads are not helpful to society. They exploit human psychology for profit. They slow down the web. They collect vast amounts of personal information. They divert resources which could be used to actually improve the world.

I understand that ads are a necessary evil for some businesses, but scroll to the bottom of a news article sometime. Is this really what we want our world to look like?


I came from a B2B agency background before my consumer startup gained a little bit of traction. I was, philosophically, anti-ads / push marketing for the most part. Then the curtain was pulled back for me on how startup acquisition machines really work. Two points here: 1) the flooding of VC money and subsequent aggressive push for "high growth" essentially funnel cash into online ads. 2) A bit more to your point of ads not being helpful to society, what about the many thousands of users I've acquired through ads who have stayed with my subscription service and have reaped the benefits of what my startup does (not gonna use this space to self promote the actual company)? These are not high-churn users, they are not bots (well, most anyway), and I've personally spoken to many of them who have expressed the happiness we bring them each week.

There's a lot of cool shit out there I may not find out about directly from friends or organically through social media (which is a horrible discovery engine anyway). This begs the question: If the ad is relevant to me, why is it "bad"? Now, I can absolutely get on board with an argument against poorly targeted ads or bulky designs that clog up space/speed or simply an overall surplus of them everywhere you go online. But that doesn't mean ads cannot be useful to society.


That's just market forces at work. If what you say is true, you can just as well say it's a startup bubble where they are willing to lose money on customer acquisiton. Inflated costs to advertise is a normal effect of increased demands. That's not an advertising bubble.


We're mostly saying the same thing. There is too much money flowing into startups, causing them to spend it less efficiently than they should. Part of that spend is in buying ads (increasing demand), and being willing to pay higher prices than they would if they had to be a little tighter with their capital.

But anyways, all I was trying to explain was why I think there is a lot of negativity towards ads here- because HN'ers are sick of being outspent on ads, and they're being outspent in a (perceived) unfair way.


You make some valid points but... Complaining about a $5 user acquisition cost?

If you think that's expensive, try a field sales team.


Well, the context here is user acquisition via advertising. You are talking about user acquisition via field sales teams. So, apples to oranges when compared directly.

But anyways, in both cases what matters is the LTV of the customer vs the acquisition cost. The scale of the number doesn't matter.

I doubt this same scenario is happening with field sales teams anyways. It's much harder to scale up your field sales team than it is to just raise your online ad spend.


It's not a bubble, the advertising industry has always followed this cycle:

The post war television boom in America begat many new Madison Avenue ad agencies in the 50s who reached a high point in the 60s and the 70s, but then by the 80s and 90s were consolidated via mergers and acquisitions.

Even the great Ogilvy & Mather was swallowed by up WPP in 1989. In fact one of the David Ogilvy's greatest regrets was taking the company public which allowed the take over years later.


Isn't it a bubble, when a lot of startups provide free services that are supported by online ads? Wouldn't a crash in the online ads market have a resonance cascade through all of those startups?


There already was a crash of ad banner rates in 2008, in fact that killed many small publishers. You'd have a real bubble if there was a ton of moneys still being pumped into AdTech, but that hasn't been the case for a year now. And you're now seeing mergers and acquisitions take place. A good example of this on a bigger level would be Verizon buying up AOL for their ad business.

Although something to realize is that there are winners in that business. Most people don't think of Facebook as an ad company, but they really do get mobile advertising and from the looks of things they'll keep growing. And that's not just Facebook but other properties like Instagram which will snag more and more ad dollars.


That isn't quite a bubble, in fact, what you're describing happened to broadcast television advertising and online ads. If people shifted their attention from online to something else, advertising (and thus startups) would follow.


A lot of industries follow a cycle. That doesn't mean they're not bubbles.


It might not be a bubble, but there's an oversupply of advertising space. TV, radio and print ads have traditionally been expensive due to the limited supply. You can only have so many ads in an hour of television programming.

Now we have a hundred TV channels, a massive amount of online content, all attempting to attract ads buyers. As a result the price has gone down. The oversupply also opens up the marked for targeted ads and companies that works as brokers. They need to get paid to, so they skim of a few percent, leaving even less to the sells of the ad space.

In the end I don't think that selling advertising space is sustainable for all but the very biggest content providers. The rest will have to have to start finding alternative sources of revenue, or simple charge for they content. I also believe this will leave us with better and more diverse content.


How can there be an oversupply?

All increased supply does is drive down prices. At lower prices, there is sufficient demand to meet supply.

You're right that this is driving low-volume suppliers out of the business, but the world doesn't owe you a business model.


There's oversupply if more inventory is available than can be used effectively. If you accept the idea that there could be an oversupply of e.g. lumber then it doesn't seem too much of a stretch to say the same could be true of advertising space.


This is survivorship bias.

What you don't see are the spots that have disappeared because there wasn't enough demand to be profitable. The examples you've given are being used effectively because the price points have dropped to match demand for those specific service spots.

Advertising follows user attention, and as attention shifts mediums so does the advertising. That doesn't mean there is an oversupply in the advertising industry, it just means that it has liquidity (more so than physical goods like lumber).


The oversupply simply translates into 'more space for billboards' to make a real world analogy and all that does is make the ads get cheaper per unit (display, click, conversion) than it would have been otherwise. Though this holds less strongly for conversion based pay-outs because there is an obvious disconnect there between the displaying of the ad and any pay-out to the holder of the inventory.


What advertisers need to do is create advertisements that people want to see, rather than trying to force people or trick them into watching it.

For example, consider the TV show "Detroit Muscle". Ostensibly, it's about customizing and hot rodding your car. But it's actually a product placement show. I enjoy watching it, because various products are worked into the car project, and they show you what the products are good for and how to use them. For example, I'm likely to buy a welder that was featured on the show.


Product placement is not something that I want to see, because the reviewer will definitely be biased in its conclusions. This would be a classic example of throwing the baby out with the bath water.


On "Detroit Muscle", they don't review products. They show how a product fits in with building a project car. For example, they'll show how to do a suicide door conversion, including what specialty parts to use and where to get them, and sometimes how to modify those parts for custom effects.


Did you actually need a welder before you watched that show? Were you actively looking at different welders and weighing up their features vs. costs?

If so, had you considered the possibilities of hiring a welder for those seldom/rare occasions you need one? Or just paying someone to do the occasional bit of welding you might need done? (I am assuming, maybe incorrectly, that since you don't already own a welder, you are not someone who actually has high demand for welding at present. Perhaps you're planning some future activities that imply "lots of welding".)

If you were not actively Welder Shopping, then their advertising worked, didn't it?


There is such a vast array of welders available, I really had no idea what the tradeoffs were, such as MIG or TIG? The show not only explains the differences, they go through how to use them.

No, I don't need a welder. But the point of tinkering with a muscle car is to do the work yourself. Besides, it'd be a lot of time and hassle paying someone else to do the work, besides being far more expensive.

I've also learned from the show how freaking useful tools like angle grinders and sawzalls are. I've bought both, and they've made my work much easier than the older methods.

One area they go wrong is electrical work. They don't use proper technique in connecting wires - the work they do will degrade after a couple years and cause frustrating erratic behavior.


I've got two welders (MIG and SMAW aka stick), never looked at a single advertisement. I went to the local welding specialist, outlined what I wanted to do, listened to his advice. Then I went to three more such stores. Then I went to a friend of mine who is an all-position welder in the offshore industry, told him what I wanted to do, listened to his advice. Based on all that I made my decision and bought what I thought I should and have been pretty happy with that choice. Nowhere in this whole affair did 'marketing' or 'advertising' play any significant role other than maybe product documentation.

Also, at no point during all this would an ad for a welder have made me decide to purchase that particular product because there is no way a broadcast ad could inform me about a product in as much detail and with as much knowledge as the above process could.


I think parent's point is that, precisely, it does work, when things are intelligently targeted, rather than unintentionally weird and annoying.


And I think my point is that they probably didn't really need that crap, but the advertising convinced them that they did. I think that's a bad thing.

(And possibly I'm straying offtopic for the thread. Begs forgiveness.) :)


On the whole, you're then likely to have bought a worse welder than you would have otherwise. If the welder is just an impulse/emotional purchase that will be used only a few times in its lifetime, then I suppose that doesn't matter.


> you're then likely to have bought a worse welder than you would have otherwise.

On what do you base that statement?


In his seminal essay Dabblers and Blowhards Maciej Cegłowski made the case that Paul Graham's essay Hackers and Painters was inaccurate in its depiction of many programmer's work habits being similar to that of painters.

Cegłowski's argument was compelling because he had worked as both a professional programmer and a professional oil painter. That deep expertise in both fields made it possible for him to pick the holes in PG's arguments.

It seems that Cegłowski hasn't done much work in the AdTech industry. Pity, because his summary of the Scott and Scurvy[2] story is a wonderful piece of writing.

[1] http://www.idlewords.com/2005/04/dabblers_and_blowhards.htm

[2] http://idlewords.com/2010/03/scott_and_scurvy.htm


I think the article goes off the rails where he says that the money going into advertising companies as investment ends up in the pay-out stream. I have seen no evidence of that to date (but I'm happy to be informed if there is such evidence). Up to there it is mostly accurate.

The path investor money takes if it ends up with the industry is that it is used to buy advertising for new products and services backed with investor money.

And so I also disagree with the conclusion. There will not be an implosion, but what there will be is a change of direction to maintain revenue. This has historically been true of advertising in general, ads today on TV for instance are totally different compared to ads on tv in the 90's, the 80', the 70's and so on.


The problem with this article is that it says (in an entertaining way) that the numbers don't add up, without showing or linking to any math.


That's because the article is just a thinly veiled ad for the author's ad-free service.


How does that work? "Advertising is dead - that I means I should subscribe to this specific consumer ad-free service"?


"Advertising is very bad and unsustainable and it's going to bring about the end of the universe because of evil venture capitalists. Is this what you want? No! So if you want to save your soul, you can repent now and start using sustainable, ad-free services. Like mine. Only $11/yr."


What he says is that publishers, who rely on ads, will suffer from the bust. His service is in no way related to publishers. He also doesn't directly link to his service on the page.

I think your accusation is completely spurious, frankly.


If he was a multinational corporation this would be called awareness-raising sponsorship


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