I remember reading this article back in 2019 when it was originally written. Unclear why it is being dusted off now when it is still just as wrong as it was then.
Yes, it is probably hard for a large, well-known brand like eBay or Procter & Gamble or Coca-Cola to measure their return from online advertising. If Coca-Cola stopped all advertising for 1 week, would anything really change? Probably not. And it’s not as if anyone is clicking Google search ads for Coca-Cola and ordering a 6-pack right there. This is the same problem that these companies have with TV advertising.
But anyone who has ever run a small, consumer-focused startup with low brand recognition can very easily measure their return on ad spend, and will spend a lot of time doing this. You can easily tell which specific ad referred someone to your website, and how much money they spent once they got there.
If they’re not convinced by this data, at some point most startups will find the opportunity to simply turn off all advertising for a week for one reason or another. And can usually see the drop in revenue immediately.
I was involved in a consumer hardware startup where our COO shared granular ROAS numbers in our all-hands every week for Google, Facebook, TV advertising across multiple networks, etc. They regularly A/B tested different advertisements and messages across different media and directly optimized for revenue. It was clear beyond a doubt that this advertising worked. The company would not have been viable without it.
The fact that this proof is easily and readily available from small, lesser-known companies is part of why large companies continue to spend money on advertising despite the benefits being much harder to measure.
To be fair, the point of the article is that ROAS is not a very good metric, and while most of the article is wrong in that it effectively calls all advertising worthless as a result, it's not wrong about that one methodological point. What matters is incremental ROAS - not the conversions following exposure, but rather the conversions that would not have happened but for the exposure. For small companies that have no existing awareness, they're close to the same thing. But like you said, it is very hard to measure for the large brand advertisers that are very well-penetrated.
If Coke switched off their advertising they would eventually lose market share, but it would take more than one Christmas of not seeing the polar bears. For companies in their position, advertising is about maintaining dominance. Spending on a Superbowl ad is a way for them to say "we're the best, we know it, and you know it, and when you want a drink, you're going to buy Coke, not RC Cola". It takes a long, long time for that indoctrination to wear off, so there's no way to experiment on it - there's no untouched part of the market that's never seen a Coke ad against which you can do an A/B test.
>What matters is incremental ROAS - not the conversions following exposure, but rather the conversions that would not have happened but for the exposure. [...] there's no untouched part of the market that's never seen a Coke ad against which you can do an A/B test.
Sophisticated advertisers like Coca-Cola are aware of the concept about incremental ROAS. They can't do the exact A/B test scenario of isolated consumers you're talking about but decades ago, they did do A/B tests in different tv markets where one city had more ads than another and the city with more ads had higher sales. (What the industry jargon calls "lift" from advertising exposure.)
So even brands that are already very well-known by most of the public still constantly do A/B tests to measure incremental conversions in all media including digital, magazines, sports sponsorships, etc. Back in the late 1990s, many advertisers noticed that running banner ads on Yahoo didn't work which contributed to their stock price crashing. Recently, a lot of advertisers (e.g. Proctor & Gamble) quit spending ad dollars on 2nd and 3rd-tier ad exchanges because their A/B measurements showed they were a waste of money. (The "1st-tier" ad exchange examples would be Google & Facebook.)
> Recently, a lot of advertisers (e.g. Proctor & Gamble) quit spending ad dollars on 2nd and 3rd-tier ad exchanges because their A/B measurements showed they were a waste of money.
Can you share a link? I work in digital marketing and would be super interested in more info on this.
Whenever I buy woodstain I buy ronseals quick drying woodstain because it does exactly what it says on the tin. This is because I watched tv in the 90s as a teenager and it was ingrained.
The benefits of brainwashing can pay dividend over a lifetime.
Your point actually proves that, advertising gets the customer through the door, but, your product needs to be actually decent to keep the customer.You saw the advertisement, you bought the product and it worked as described, and continued to work in that way in the future.
The product is successful not because of advertising, because it is actually good. I find it weird that, most people spend huge on advertising, but sometimes neglect the product.
I have no idea. It’s rare I stain wood, I have never compared any other stain, I don’t know if it’s any good or not, or indeed the price. They may charge twice as much as bobs woodstain but it’s not worth me thinking about.
What you're describing is pretty typical though. You buy a product either because of advertising, because it "looked" like a good choice in the store for whatever reason, it was recommended on Wirecutter, the Home Depot worker or a contractor pointed you towards it, etc. And it seems to do the job and, for the amount you spend on that item annually, it's not really worth doing your own comparison which you probably aren't in a position to do scientifically anyway.
A lot of products are good though...So your point isn't very convincing that products aren't successful because of advertising given the zero sum game of hooking a customer for life that OP describes.
It also doesn’t mean that the advertising is money wasted. Coke spends that money to remain the go to brand, and surely values being the cultural default very highly. Saying “Coke would still sell without ads” really misses the point for why Coke advertises.
It reminds of car ads. Apparently (correct me if I’m wrong), but OEM ads aren’t about converting new customers, but they’re about trying to convert recent buyers into lifetime buyers. It’s to build in the consumer the attitude of “we’re a Ford household”, not to convince a Chevy driver to buy Ford for the first time.
The automobile analogy brings up another benefit of advertising. Items that are sold as socioeconomic status proxies don’t work unless everybody knows the brand.
It’s not just that Volvo wants me to think I drive a safe wagon that is a sensible choice for middle-class, educated people who watch public television.
I want my neighbours to think these things about me even though they drive Ford and GM. That advertising assures me I’ll get both a car and a cachet.
If Volvo had a way of only selling to people who want Volvo cars for the utility, but few others would have heard of the brand, it would have less value.
I don't disagree with you. My point wasn't that Coke-style brand advertising was worthless, just that it's extremely difficult to measure without much longer experiments - specifically because it's been so successful.
I remember an experiment about coparing cola and psi, they found advertisement of cola was so successful that people saw a cola bottle will let them feel it more delicious.
I assume they want to keep this advantage in internet era
Wouldn’t it be better just to have it as product placement rather than advertising? Warren Buffet makes it look great, 5 cans a day. With his longevity and investments he’s great for them.
You make a good point. But there is one more reason for advertising than just conversions. If Coca Cola were to stop advertising, it would free up substantial ad space allowing for their competition to advertise cheap. These large brands don't just advertise for branding/conversions. They plan their spend budget so as to actually influence the bid rate. This makes it harder for newer brands to compete and get any viable ad exposure at affordable prices.
TY. Incrementality is king. Measuring that as a marketer and advertiser is getting more challenging for a variety of reasons. The future, primarily for large brands, but increasingly accessible for smaller and smaller companies is in statistical analysis with properly controlled experiments.
It is the only path I've seen that can account for all the noise in the measurement ecosystem. And even then it is far from easy to do "right."
> The future ... is in statistical analysis with properly controlled experiments.
The future? No, statistical analysis was always at the core of advertising, from the moment statistics was invented.
It's only recently in the last few years that people forgot this, and only because techies and programmers without statistics knowledge successfully "disrupted" the advertising industry.
But internet advertising sucks balls compared to classical advertising forms, especially from the point of view of ROI to the client.
So we will eventually "undisrupt" this mess and make internet advertising more like the classical forms.
Fair point about statistical analysis. My comment was more that the tools and data to provide that visibility are starting to trickle down to smaller companies, sort of like how GA did it for web analytics. For better or worse.
Disagree on traditional vs digital though. It is totally circumstantial which performs better.
Incremental ROAS is the right metric in theory, but very hard (or impossible) to measure in practice, in particular for the small businesses with smaller ad traffic. Hence the industry falls back on measurable proxies such as ROAS.
I assume there must be some effect in getting new drinkers.
I’ve tried lots of colas. I’m never buying a Pepsi if there is Coke. I will always buy soft drinks in this order: Cherry Coke, Cherry Dr Pepper, Dr Pepper, Coke, maybe I’ll just have water. At this point no amount of advertising will change my mind.
This is a common anti-pattern when smart people start thinking about (brand) advertising.
“I have such strongly held opinions about my favorite soda! No amount of advertising will change my mind. I am immune to advertising!”
And then they go to the grocery store, and remember their girlfriend told them to pick up some fabric softener, which they know nothing about. So they look on the shelf and they think “Ok, Downy, I’ve heard of that one. It’s probably fine.” And away they go.
And the next time they need fabric softener, they reach for it again, because it worked fine last time, and what’s the point in spending any more time thinking about fabric softener?
This is what brand awareness advertising is meant for. It’s meant to change your weakly held preferences, not your strongly held ones.
This is precisely my point about getting new buyers but couldn’t think of the terms. There must be some clear up shot to spending so much on advertising.
The advertising doesn't simply need to affect your personal preferences to affect your buying habits. If you were buying a few different packs of soda for a group of people (e.g. for a party), how much cheaper would the case of Pepsi need to be than a case of Coke for you to buy it instead? Could that be affected by advertising that made you feel like, regardless of your personal affinity for Coke, Pepsi is the acceptable default choice?
Imagine further that this isn't a product category that you feel quite so strongly about (most people don't have a 4-deep ordered list of brand preferences for common product categories). If you were making a quick choice between Sprite and 7-up (again, for a party), are you sure that advertising couldn't possibly influence which of the brands is most accessible to your brain?
The point you're talking about ROAS/incremental ROAS is quite moot actually. Every online ad tracks the user from the moment they click the ad to whatever events they make (e.g. add to cart, purchase, etc). So the measured ROAS is exactly for the users who'd come via the ad and not any others.
I don't want to be offending but this is honestly a very basic point, of course one would only measure the Return On Ad Spend from the user's acquired by said ad and not any others... Advertisers are familiar with all such basic statistics and Google/FB ads give you very easy tools to track any person who clicks on an ad throughout their entire journey.
Edit: I was mistaken as described in the comments below
Yes, obviously ROAS is only computed over the people who saw the ad. That's not in question. The point is that knowing how many people saw the ad and then bought the product doesn't actually tell you how effective the ad was at improving your business.
Imagine a product, let's call it Oxygen, that every single person buys $10 worth of every month. It has 100% market penetration.
One day, Oxygen Corp decides to take out a $1M ad buy. They reach 1 million people, all of whom then go on to buy $10 of Oxygen, as measured by cross-site conversion tracking. $1M ad buy to move $10M of product - that's a whopping 10.0 ROAS. Must be the most effective ad campaign ever run, right?
I see what you mean and stand corrected; I wasn't assuming the case where the product sells without advertising at all.
From a gut feeling I can say that the customer came from some result of previous advertising (as we're talking about products like sodas not life-essentials like oxygen), but I guess there's no way to know since those previous ads being tv/print ads were not tracked.
If we suddenly stopped all other forms of advertising and only used online ads, in 10-20 years each customer can be tracked exactly to what ad created the first impression about the brand and thus be more accurate (still excepting marketing like word of mouth though)
You can run that same study with a control group, and sophisticated advertisers do. Show some of the users ads for your product, and other users ads for something unrelated, and compare their purchases of your product.
You are not understanding the point. You cannot actually measure incremental ROAS with basic statistics and easy Google/FB tools, because you would need to know how much they would have spent WITHOUT being exposed to the ads.
I don't know what lift tests are. It should be easy enough to devise a tool for measuring incremental ROAS under the following assumptions: a) all purchases happen online; b) I have a complete history of ad impressions and ad clicks for each user who made a purchase
As you said yourself, b) breaks down for multiple platforms. It also breaks down if users have disabled tracking.
Well, if we are talking about a recently formed company who (1) doesn't do any offline advertisment and (2) only does fully tracked online ads, you can calculate ROAS fully right? (The only exception would be word of mouth sales)
It's a big exception; otherwise you are just assuming that the only way people can get to your product is through ads. But this is equivalent to assuming "incremental ROAS = ROAS". So you propose to solve the problem by ignoring it. ;-)
PS: Of course that works if the difference is indeed small enough in your case so that it CAN be ignored.
I run an eBay store that has pretty decent revenues but no brand recognition, and we make pretty heavy use of their Promoted Listings function.
We've generally found for competitive items that sacrificing 5% to ad spend allows us to increase the price of the item by 20% without experiencing any reduction in sales. There is no way to fake that.
For my other business, though, (Low-cost USB Oscilloscopes) I found Google, Facebook and Amazon ads to be completely useless. Even then, though, it didn't cost a lot of money or take a whole lot of time to get a definitive answer and cancel the campaign.
I think with a company like Coca-cola, it is a little bit of a different approach. Taking Coca-cola as the example. My money is their ads are not placed there to get you to buy a 6-pack online. It is so when you see it, you go, 'damn a coke actually sounds really good right now.' And then you proceed to walk tot he fridge for one or next time your out and about buy one. However I would say that a product such as coke is a specific case. Some ads are for targeting people to go to their online store, then I am sure ones like coke exist to put the idea in your mind next time you stop for gas.
For commodity products, It’s all about creating a subconscious association so eg when you’re at the store you choose coke because you’re heard/seen it so many times it seems “familiar”.
Even for seemingly obvious things this article is wrong.
Maybe in 2009, when the market was playing ball, was it okay not to buy your own brand (eBay) as a keyword, as this is an audience that already want to go to your site. Now all your competitors are buying your brand and you'll end up in fourth or fifth position with your own audience if you don't buy it.
And while most will still scroll it through, you will end up losing a small but consistent share of clicks to competitors time to time. And if they manage to make their service slightly more sticky than yours, you'll end up losing small market shares over time.
The first thing one has to face when considering such experiments is that they fundamentally have an inherent cost. Because in order to get that measurement accurate, quite a lot of your ad impressions have to be withheld. This is a cost, a cost of the lost opportunity. (provided that the actual impact of the ad campaign is positive, that is).
So, as an advertiser, you end up coming up with some meta-strategy: when to perform those experiments and when to forgo them and rely on your educated guess.
Google, Facebook and alike developed support for performing such experiments throughout the last decade. But this meta-strategy kind of judgment is firmly in the department of advertisers.
Certainly not a new dot com bubble as the title suggests, and the article even mentions Randall Lewis, so I guess it's just the style of journalism these days...
> And it’s not as if anyone is clicking Google search ads for Coca-Cola and ordering a 6-pack right there. This is the same problem that these companies have with TV advertising.
Supermarkets already have a loyalty card program where you receive a small discount and in return you agree to receive targeted advertising based on your purchases.
Why don't these loyalty programs add a clause saying that they may also share your personal information with Google? That would mean Coca-Cola or Proctor and Gamble could see how much they spent on advertising to a particular person, and how much that person spent in buying the company's products.
I have a suspicion that the great majority of businesses have no idea whether their advertising is effective or not. Of course this is encouraged by all the dark patterns you see in the Adwords control panel.
Not providing proof and just anecdotal experiences won’t do your argument any good. Especially because that’s exactly how Ad companies/agencies got here in the first place, by saying it works without clear, verifiable ways to prove it: “yeah, it works, trust us, but we won’t let you see the data”
I have had the thought that there is something wrong, that I can access nearly any song of my choice on YouTube, with the small penalty of skipping an advert after 5 seconds.
Many of the adverts aren't even for products I'm interested in. They're either get-rich-quick schemes, or repeat-ad-nauseum ads for software like Grammerly, which I will never use.
If Google has some sort of complex picture about me, by invading my privacy, then they're certainly not using it to sell me anything I am interested in.
I guess if Google are funalling cash from advertisers to the record companies, then it will continue. But I have to wonder what would happen if advertisers actually look at how effective their advertisements are.
I feel I'm getting a good deal out of this arrangement.
Among Firefox, uBlock Origin, AdGuard Home and buying (for a couple dollars) ad-free versions of apps I use frequently, the web is virtually entirely ad-free for me. It blows my mind that it's different for most people.
Every time I use YouTube on Amazon FireTV, I lose interest in the video content very fast. Just atrocious to sift through the ads, popups etc.
> choice on YouTube, with the small penalty of skipping an advert after 5 seconds.
YouTube is now in the last stage, cashing out their popularity. Now it's 20 seconds unskippable ad, then ad skippable after 5 seconds, then video interrupted with an another ad. I basically download the video and watch it on my computer or shutdown the browser tab with youtube.
If using iPhone, iOS 15 extensions let’s you block those video ads. If using android, use Firefox browser with both an adblocker like uBlock and an addon to allow video playback in background along with another addon for auto skipping the “continue playing”
Popup. Both have made my life so much easier!
I think the typical commentator on HN is unaware of how they think very differently from the typical American.
Advertising definitely works. I've seen it work among many people in person. Even people who agree that ads are dumb, I've seen decide to get some candy after seeing an ad for it on TV.
Word of mouth is usually the most trustworthy. Yet people need to learn of alternatives from somewhere. Perhaps if those serving ads were more liable, much like friends risking their reputation to recommend something, the negatives of ads could be better mitigated.
Word of mouth is king. I've only seen 2 ads in the last year that were even relevant, and only 1 of 2 of them turned into a sales conversion. For the other product, I went to a competitor.
This sounds great and I want to believe it, but it feels like another case of someone saying the sky is falling when it clearly hasn't. What will it take for this advertising bubble to pop? Is it even a bubble?
Funnily enough, the ad based tech companies have the most reasonable stock prices. Facebook and Google are massively profitable, still growing at double digit rates, and each have only mid twenties PE ratios (the same as Caterpillar Heavy Equipment, or electric utilities like ConEd and PG&E).
Meanwhile there are companies out there like Lordstown Motors, Lucid, and Nikola, which have never sold a product but have billion dollar market caps. Nikola is universally known as a fraud, somehow has negative revenue, and is still worth $5 billion. EVs are the real bubble.
I agree with some of what you are saying, but on a deeper level I don’t think a 25 PE ratio is particularly healthy so I’d say the real bubble is an everything bubble we are currently in. Facebook and Google have some of the lower PE ratios right now because they actually have earnings.
>The current S&P500 10-year P/E Ratio is 37.8. This is 91% above the modern-era market average of 19.6, putting the current P/E 2.3 standard deviations above the modern-era average.
I'm not saying EVs are useless, or vaporware. Maintaining the comparison here, you look back and can see that the internet was clearly incredibly valuable and impactful in essentially every describable way, but there was still a dotcom bubble full of egregious excess.
Years ago, I read a book that categorized the development of consumer products in a three-phase evolution:
Phase 1 - Small firms serving whatever they could shove out to market in a scattershot way. Think of the early 1900s automakers who made 30 cars each before closing or merging away.
Phase 2 - Volume scale products are established which rolls over much of the market with economies of scale and price-first design. The Ford Model T is the canonical example.
Phase 3 - Brands get established to target different consumer niches rather than direct price competition. Think of the golden era of GM where there was more or less a clear market segment and message behind Pontiac vs. Chevrolet vs. Buick.
I think many investors see EVs as a "Phase 1" product-- they're willing to bite on hype and random bad ideas, because they expect someone is going to execute big to become the Phase 2 market leader, or even end up as a focused, high-margin Phase 3 brand. We don't know who that is now, so bet on everyone!
On the other hand, there's an equally compelling argument that EVs are less a new market and more a variant of the overall automotive business that's already reached "Phase 3". Existing brands know their places and markets already, so there may not be that much realignment as they replace fuel tanks with batteries.
Tesla has proven it's possible to muscle into the market, but a lot of that was by identifying an unserved niche (the luxury consumer-covetable EV, instead of the minimal-for-legal compliance EV intended to sell to government fleets) which provided enough volume and high-margin sales to bootstrap their play. They couldn't have competed by trying to sell the Model 3 in 2012.
They are naive, they really think advertising doesn’t work. It works it’s ass off. You can’t find one identity that isn’t influenced by it.
Real programmers use vim. I could sell that for ages. Don’t play games with advertising, you are just as much of a cuck as everyone else (rhetorically speaking, not you specifically).
Anyways, real programmers read HN. I could sell that forever. You think you’re smarter than all of this? Real programmers _______, and by god, you will fucking buy it. Here’s some Rust for you, you real programmer. I’ll inundate you, this stuff works.
There is the book on this called 'Subprime Attention Crisis' by Tim Hwang that tries to argue this point.
It is only partially successful in its goals of saying the sky is falling.
The overall message I came away with was that online advertising has some serious issues that need addressing - but they aren't anything that cannot be solved.
If there is a bubble then I suspect it isn't anywhere near as big as it is made out to be and that any "crash" will be more of a slow correction than the bottom suddenly dropping out.
I'm sure 99% of Apple users would be happy with a popup on first use of Safari that asked "would you like to block adverts?". It would be no skin off Apple's nose.
They already essentially killed off "ad supported apps" with App Tracking Transparency, and Apple doesn't earn anything from ads anyway (as opposed to paid apps where they take a cut).
Yeah, for now. I'm doing my part to change that. People love the fact uBlock Origin blocks the idiotic YouTube ads. There's always Brave if for some reason they can't stand Firefox.
And hey, if Apple will crack down on Facebook's espionage over privacy concerns, who says they won't do the same to these advertisers and their abusive surveillance capitalism? Maybe they'll realize that advertising is pure noise nobody cares about and block all ads in order to improve usability. Maybe one day they'll get pissed they aren't getting their fair 30% share of advertiser revenue and block them out of spite. Maybe they'll wake up one day and simply decide to kill the ads industry. Now that's a delusion worth having.
Apple's privacy stance is questionable (see the recent content scanning debacle).
Plus, I would say they profit more when the web experience on their devices is inferior to apps, which means annoying ads and popups help drive people to use apps, which Apple profits from... (and some companies, like Reddit, actively participate in annoying their own users to get the app).
> if sites can't make money, there is no web to browse
There are other ways to make money other than advertising. If they insist on ads, they should disappear.
Besides, not everyone creates a website for profit. Sometimes people just have something interesting to say. The web used to have a lot of those before these commercial interests started infesting it.
Sometimes I feel like ad block users get overzealous and try to convince themselves and others that every ad out there is trying to inject malware into your machine. Very few ads do this and the average person who doesn't use AdBlock won't ever have that happen to them. Ads solve an economic distribution problem by cutting the transaction of spreading and consuming information in half. It makes the web accessible.
In 2020, newspaper, radio, and magazine ad spending was $85 billion compared to all online ad spending (which is far more targeted and thus more valuable) at around $500 billion. Television advertising was around $193 billion. Unless we're in a generalized advertising bubble, I'd say online advertising is still in healthy territory
Annoyingly I feel like it's true. Personally I never had anything strongly against online advertising - there are tons of website and blogs where you can see that people have poured their hearts and souls into their work and the only thing they get in return are a few peanuts from ads. There's the case for trackers and cookies and whatnot but let's be realistic-the analysis and processing is done by a server in the dark corner of a datacenter, not an evil mastermind going through every website I've visited: no one is that interested in me or anyone else for that matter. Frankly I'd be flattered if someone showed that much interest into me but no... But at some point the over-saturation and overpopulation of certain species will cause cataclysms and I feel like we are close. While I stay away from all social media(I'm sure it's a similar story there), the thing that crossed my line was Google and more specifically Youtube. You open up a video, at which point you are already forced through two ads, one of which is unskippable, then you get to the "sponsored message" then another two ads if the video is slightly longer. If I wanted to watch TV, I'd watch TV. And this is what ultimately pushed me over the edge: Brave browser ftw and the hell with all that. And I see more and more people going that way for similar purposes. It's a question of time before enough people have had enough and ads become a financial burden to those who advertise online.
I pay for google music, or whatever the name is today, and I see no ads. Bandwidth, servers, the employees, etc. have a cost, so it is only natural that companies make money somehow, either through ads or by subscription.
Music is a different thing(I'm also a subscriber), I'm talking videos specifically. I'm sorry but the fact that I have to go through a minute of ads for every 4 minutes of videos watched is absurd. The worst thing I've had to endure was Antena 3 in Spain in terms of content-to-ads ratio. At this point if we include sponsored messages in videos, I'm willing to bet the ratio is worse on youtube.
If I had had a needle that would pop the dot com bubble, I'd hesitate before using it. Maybe there are cool things that were brewing and they just need a bit more time to incubate before we can benefit from them.
If I had a needle that would pop this bubble, I'd use it immediately. Advertising is all about making people do things that, when left to their own devices, they don't want to go. Whatever survives this bubble may need to be hunted down and exterminated.
That is actually the definition of bad, inneffective advertising. Good advertising comes from a deep understanding of what people want to do, and then presents them with an opportunity to do just that. This is literally why Google is so valuable. Their ad business is largely based on understanding “intent.” As any decent advertiser knows, you can’t create intent, but you can harness it.
I think you've got it backwards. The whole reason the trillion dollar industry of ad targeting exists is so companies can find the people that want what they're offering.
Ford isn't advertising their F150 to Amish communities. They're advertising to people who match the profile of truck buyers.
Oh wow, this is an older article. Read it before, it was much discussed and here we are 2 years later.
Market effects from the pandemic have reinforced the reliance on online advertising (more hours spent online by individuals working remote, growth of streaming services).
This is the strongest antitrust case against Google in my opinion. They are the monopoly search engine. Tons of people google a website name instead of typing in the URL. Tons of people don't know the ads are actually ads and Google is making it harder to tell them apart from the every year[0]. It's basically like the mafia telling you to fork over money or else they put up your competitors' billboards in front of your store. Not a very scary mafia, but still.
They may not be able to call themselves by the competitor's name, but what about the "alternative to <company>" that we see a lot.
Furthermore, Google will "dynamically" assemble an advert based on the current search to 'optimise' click-though (and they recently sent a mail out making it clear this will be the only type of text ad going forward)
They think they're optimising "click through" rate.
But what they're really doing is using heuristics to find the advert that's most likely to be confused with the top search result.
Did anything change there? I remember Basecamp’s Jason Fried complaining about it[0] but I wasn’t aware of any policy changes that prevent someone from bidding on their competitor’s names and essentially placing their brand ahead of yours when searching for your brand name…
as luck would have it, my mum (nearly 70, but pretty good with technology) just fell for something like that. She wanted to book a Ryanair flight so googled for Ryanair. First result is an ad for some kind of a scummy reseller called esky. She ended up paying way more for the flight plus some extra unwanted stuff like insurance and online check-in… urgh.
I don't think you can build a new consumer facing business without advertising on facebook and google. A lot of the moden consumer internet was built by advertising on those platforms and diverting dollars away from brick and mortar. Some well known examples include Airbnb and all the kardashian family brands. Advertising metrics might be hard to measure for large well known companies, but for startups/ solo entrepreneurs the numbers tend to be much clearer.
Ultra-clear for small businesses, at times. I was once a partner in a shop, and there was that time that we had a account problem/billing error on the credit card, and all the advertising stopped for the better part of a month. Worst month ever.
The whole article reads like something the author wishes was true, but that's predicated on the notion that everyone buying advertising is just stupid.
Digital advertising is much more accessible for the small fish too. If a business has a Facebook presence, $10/day can get a campaign going, and scaling it up is trivial.
I've always wanted to inquire the significance of advertising from the standpoint of the business, and yet its failure to please users. Advertising sucks from the standpoint of the user, and some say that if you want to scale any online business from 0 customers to N, advertising is pivotal and word of mouth won't do. Whether it comes in the flavor of give $10 to sign up a Paypal account, banner ads, search engine ads and these days also social ads (YT promotion, sleezy product reviews, IG celebrities) - it's important. So how come we have not solved the problem of user hostility in advertisement? Blendtec's "Will it blend?" series blends entertainment and advertisement. Engineers go to trade fairs and conferences voluntarily to seek out new suppliers/companies. People pay to go to Disneyland. Another genius in advertising is products/services that self advertise (Louis Vuitton). My gut feeling is that there is a deeper, more fundamental trade-off between advertisement effectiveness, and user hostility that always persists. Most of the time, we just adandon further inquiry and call it off as "It is the way it is because it damn well works".
We haven’t “solved” user hostility because the industry still relies on user data collection and tracking on a massive scale with default opt in rather than opt out. Consumers are spooked by that and the industry has (by and large) failed to convince them of the utility of targeted advertising.
It’s the original sin of online ads that nobody really wants to address. Because of that, we have a lot of rather shady players in the industry making the problem even worse.
I feel like there is a distinction between targeting ads based on the profile you've created on their site (say, Facebook) and targeting ads by tracking users all over the internet.
Almost every web property with a significant user base uses “identity resolution” to personalize ads. Without regulations forbidding organizations from doing this it’s not going to stop.
One thing I don't get: if in the entire industry $273bn were spent on ads in a year, how come that one company which derives most of its revenue from ads, such as Alphabet has a market cap several times larger?
Market cap assumes that the company captures revenue over multiple years of its future existence. Therefore it could easily be more than one year ad spending, especially if it is assumed that year over year the spending would grow, and the company would continue to successfully exist over decades.
You can stop advertising for a while and compare the outcome. Or take 2 similar markets and only advertise in one of them. Online tracking enables fine-grained analytics, there's little left to guessing - especially for small or medium businesses who do not (yet) have high brand familiarity.
It’s simple. You use a URL with the campaign id, and store that when the customer clicks through, then when a sale is made you count that towards the campaign. In offline advertising people would achieve this using campaign-specific phone numbers or discount code given in the ad.
Online advertising math is not rocket science. If ROAS is positive you continue the campaign, if not you abandon it or try other methods.
Guess we'll skip branding and awareness campaigns, ignore all post-view purchases, not use cross-device or cross-channel attribution, and not look at attribution of offline conversion/visitation activity.
If the only thing you do is Search and Email Blasts, the query string on your URL might work okay.
The query string method will not provide stats for the above point; but the newer methods e.g. using the FB pixel that tracks users based on the user's email/userid you create can accomplish much of that (only offline conversions are difficult, but there are still modern ways to match an offline customer with their past ad exposure e.g. if you get their email/phone on purchase...)
Direct conversion to sale via clickthroughs are an almost invisibly small part of online ads . No advertiser uses only that metric for determining ROAS.
I can’t speak for ad agencies, but every company I’ve worked with to do advertising measured ROAS using customer attribution (which ad campaign brought which customer, and how much did that customer spend).
I used to work for a B2B advertising agency, we did a campaign for the largest teleco in the US targeted at C-level executives to by their enterprise products. Our engagement team said (privately) that they had spent 20k per click. And had no idea if any of those targeted VERY expensive clicks resulted in leads let alone sales.
There are two different assertions that should be distinguished:
1) most online advertising doesn't work
2) the revenue from online advertising will soon decline, perhaps precipitously
I believe (1), but not (2), hence it isn't a "bubble". If you tell a CEO "hey, you're not going to be able to solve your problem with advertising", then you are in effect telling them, "there's no easy solution to your problem, you must do the much harder work of making your goods or services better".
Not many CEO's will want to hear that. They will continue, I think, to spend money on advertising, including online advertising, not because it works well (it only occasionally does), but because it's easier. It's like selling someone a diet aid that says they can lose 50 pounds without having to work hard. Regardless of whether it works or not, people want to believe it does, so they will keep buying.
I used the exact title from the article and someone changed it. (I did forget to include the date. That was a mistake and thank you to whomever fixed it.)
I think you are right, but the process you describe is so similar to the way we actually create value. Transforming or changing something from less into more. Normally we might call it work, or a patent.
Making garbage can look similar to doing work and making something of value in the right circumstances.
Not a fan of advertising (online or otherwise, wish online wasn't exclusively...targeted) (tax it!) but bubble accusations seem unfounded. It's possible to find negative or uncertain returns to spend but that doesn't make a bubble.
Tangentially related, I think political advertising actually does work. Not just ads ran by candidates, but all the different memes and infographics and whatnot. At least in America. Most Americans are sort of middle of the road, but in recent years, the right has gotten very good at drawing people in through media. I know many people who are now all wrapped up in all sorts of right wing conspiracies and viewpoints that they were not wrapped up in before, that if it wasn't for seeing it on Facebook, Twitter or Reddit, they never would have believed this stuff or even thought about it.
I can make at least three people IRL that do this regularly.
My business has had huge success with promoted listings on eBay. People will gladly pay 20% more for a sponsored item rather than scroll down literally one inch to get better organic results.
Even if these people are a tiny minority population-wise, they make up a disproportionate percentage of people that waste money on frivolous or overpriced goods.
Intriguing!
I am new business, and my online ads campaign seen by 4000+ people produced maybe about 2 installations. Appealing to people in real life was much more effective for me.
I know my target audience is in the hundreds of thousands but I just cannot reach them through more or less blind online ads.
As someone else pointed out in a different thread, it depends a lot on what your product is. If you're selling something aimed at a highly tech-literate, "elite" audience, ads will likely be much less effective than if you're selling, say, decorated cupcakes.
Very different from most people on HN, but very common in reality. I've witnessed this exact thing multiple times: see an ad for something, immediately have to go get it.
"Larry Page and Eric Schmidt, Google’s founder and its CEO respectively, were already seated in the conference room when co-founder Sergey Brin came in, out of breath. He was wearing shorts. And roller skates."
Why do tech guys always try and act like they don't care when they obviously do?
Why would Google tell Karmazin how they made money?
Yes, it is probably hard for a large, well-known brand like eBay or Procter & Gamble or Coca-Cola to measure their return from online advertising. If Coca-Cola stopped all advertising for 1 week, would anything really change? Probably not. And it’s not as if anyone is clicking Google search ads for Coca-Cola and ordering a 6-pack right there. This is the same problem that these companies have with TV advertising.
But anyone who has ever run a small, consumer-focused startup with low brand recognition can very easily measure their return on ad spend, and will spend a lot of time doing this. You can easily tell which specific ad referred someone to your website, and how much money they spent once they got there.
If they’re not convinced by this data, at some point most startups will find the opportunity to simply turn off all advertising for a week for one reason or another. And can usually see the drop in revenue immediately.
I was involved in a consumer hardware startup where our COO shared granular ROAS numbers in our all-hands every week for Google, Facebook, TV advertising across multiple networks, etc. They regularly A/B tested different advertisements and messages across different media and directly optimized for revenue. It was clear beyond a doubt that this advertising worked. The company would not have been viable without it.
The fact that this proof is easily and readily available from small, lesser-known companies is part of why large companies continue to spend money on advertising despite the benefits being much harder to measure.