The new dot com bubble is online advertising (2019)

The effectiveness of online ads is easily measurable: Return on ad spend (ROAS) = (revenue from ad referrals) - (money spent on ads)

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.

Market effects from the pandemic have reinforced the reliance on online advertising (more hours spent online by individuals working remote, growth of streaming services).

But then I watch youtube of tech hardware, and want the new shiny.

Oh look, sponsored video...

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.