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What do we really know about the effectiveness of digital advertising?

thecorrespondent.com

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Re: What do we really know about the effectiveness of digital advertising?

#121

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

This feels like a multi-billion dollar industry in which every entity involved has the ability to sink the entire thing, and simply stated, nobody does because they all make money from it.

Marketing departments are burning money like mad. It's google and other brokers that make a ton of money.

Re: What do we really know about the effectiveness of digital advertising?

#122

Earlier quoted context omitted.

Hi this is the author of the article. You're just making the exact mistake this article is about: you assume people who click on your ad and then buy something, bought something BECAUSE of your ad. From the article: "Suppose Luigi’s Pizzeria hires three teenagers to hand out coupons to passersby. After a few weeks of flyering, one of the three turns out to be a marketing genius. Customers keep showing up with coupons…

Well its pretty easy to tell if its because of the advertising. Just turn it off for a while and see if it affects revenue.

Really not that easy, except if you can everything the same, aka go back in time.

Otherwise, causal inference is sadly not easy.

Re: What do we really know about the effectiveness of digital advertising?

#123
post #7

I've always wondered about those adverts for the website I'm searching for. If I type its name into Google, I'm already 100% committed to going there. Sometimes I click the advert (it generally depends how much I like the company). The other aspect of online ads that strikes me as ingenious but probably not sustainable is the way Google inflates the auction system with fake money. Anyone who's run a website will have…

I had the same thought. Our PPC consultants strongly recommended that we do branded ads and I pushed back against it using this same logic. Ultimately we performed a test, but the results were very different from in the article—we did find that a significant percentage of those who clicked our branded ads would otherwise click the organic results... but far from 100%. And because cost per click on branded ads is so low compared to other ads, it appears that they are still profitable for us, even once we take into account the users who would have arrived through organic links if the ads didn't exist.

This was and is surprising to me. The only explanation I have is competitors bidding on our brand keywords and taking traffic that would have come to us absent any ads. Which makes the whole thing look like a nice racket for Google. Regardless, for now we pay since the alternative is apparently to lose those users.

Re: What do we really know about the effectiveness of digital advertising?

#124

Earlier quoted context omitted.

Hi this is the author of the article. You're just making the exact mistake this article is about: you assume people who click on your ad and then buy something, bought something BECAUSE of your ad. From the article: "Suppose Luigi’s Pizzeria hires three teenagers to hand out coupons to passersby. After a few weeks of flyering, one of the three turns out to be a marketing genius. Customers keep showing up with coupons…

The effects may be low but what is the alternative? You suggest there's a digital advertising bubble but to have a bubble with the assumption it will burst, you need to show that advertisers can achieve a better return by doing something else. There's no digital marketing bubble more than there is a traditional advertising bubble. There IS however a conflict of interest in advertising that's caused by the agency whic…

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

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

Re: What do we really know about the effectiveness of digital advertising?

#125
I wonder how much (in %) the 'Google tax' is these days, which is paid by businesses that advertise for their brand as keyword on Google despite being the top search result, just because Google sells the almost indistinguishable ad spot above the first result to their competitors.

Re: What do we really know about the effectiveness of digital advertising?

#126
post #16

Maybe this is just a generational thing, but I still have never clicked on an ad. I hate ads. I don't know anyone who likes them. I don't know anyone who has intentionally clicked on them. I have literally never met anyone who places any value in advertising at all. Everyone hates it with 100% of their being. It is the garbage we all just sort of accept exposure to as some sort of fee for existing online. Who are all…

But, you like accessing content for free, correct? That content doesn't exist and then ads are layered on, the context exists BECAUSE of ads. Like, no one would produce the content without the plan to make their money back via ads. This is how mass media has worked from the get-go. Radio stations were built by advertisers for the purpose of advertising. Entire genres of popular music wouldn't have happened otherwise.…

Actually, that's not (historically) the case. From The Attention Merchants (a great book, by the way), page 12:

>"Day's idea was to try selling a paper for a penny...he felt sure he could capture a much larger audience than his 6-cent rivals. But what made the prospect risky...was that Day would then be selling his paper at a loss. What Day was contemplating was a break with the traditional strategy for making profit: selling at a price higher than the cost of production. He would instead rely on a different but historically significant business model: reselling the attention of his audience, or advertising. What Day understood--more firmly, more clearly than anyone before him--was that while his readers may have thought themselves his customers, they were in fact his product" (emphasis original)

His paper ended up being the New York Sun.

Just something to think about. It wasn't always like this.

Re: What do we really know about the effectiveness of digital advertising?

#127
Great to see an article like this. This subject is almost suspiciously under-researched by journalists. There 's definitely something rotten in the promises that internet advertising has become somehow more effective. If that were true, wouldn't businesses notice? Wouldn't they spend a bigger part of their revenue on ads ? Wouldn't that return even bigger ROIs? Yet businesses spend roughly the same for over a century in ads, and it's not like the 2000s-2010s were the period of massive growth in consumer spending.

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

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

Re: What do we really know about the effectiveness of digital advertising?

#128

Earlier quoted context omitted.

Hi this is the author of the article. You're just making the exact mistake this article is about: you assume people who click on your ad and then buy something, bought something BECAUSE of your ad. From the article: "Suppose Luigi’s Pizzeria hires three teenagers to hand out coupons to passersby. After a few weeks of flyering, one of the three turns out to be a marketing genius. Customers keep showing up with coupons…

The effects may be low but what is the alternative? You suggest there's a digital advertising bubble but to have a bubble with the assumption it will burst, you need to show that advertisers can achieve a better return by doing something else. There's no digital marketing bubble more than there is a traditional advertising bubble. There IS however a conflict of interest in advertising that's caused by the agency whic…

the bubble is in the price premium of online ads

Re: What do we really know about the effectiveness of digital advertising?

#129

Earlier quoted context omitted.

Hi this is the author of the article. You're just making the exact mistake this article is about: you assume people who click on your ad and then buy something, bought something BECAUSE of your ad. From the article: "Suppose Luigi’s Pizzeria hires three teenagers to hand out coupons to passersby. After a few weeks of flyering, one of the three turns out to be a marketing genius. Customers keep showing up with coupons…

Well its pretty easy to tell if its because of the advertising. Just turn it off for a while and see if it affects revenue.

That's not what the article is about - but try scaling it back to 50% and see if it results in 50% drop. The graphs show that the relationship is probably very nonlinear

Re: What do we really know about the effectiveness of digital advertising?

#130
post #116

Coming from the other end (after someone clicked an ad), I got to say: ads work well. The metric used @work is: cost of sale. The merchant pays for each click on the ad that is redirected to his product page. What seems like a recipe for wasting incredible amounts of money on an army of click bots is working - because the merchant defines a target cost of sale for those clicks, meaning for example he expects a sale w…

But doesn't this ignore the selection effect discussed in the article? IE to use your numbers say you get a $100 sale for every $10 spent on ads. And say your profit margin (outside of ads) on that sale is 20%, so you earn $20-$10 = $10 in profit. However, what if 3/4 of the people who clicked on your ads would have found you anyway, through organic search results or other means? Then that $10 spend only actually gen…

Almost all tech companies run lift studies / incrementality tests on all of the largest channels. For net new users, the incrementality is usually quite good. (for SEM-Brand and other high intent traffic, not so much... )
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