We Have No Idea If Online Ads Work

http://www.slate.com/articles/technology/technology/2014/06/online_advertising_effectiveness_for_large_brands_online_ads_may_be_worthless.single.html

by hownottowrite • 12 years ago

258 157 12 years ago

slate.com

hownottowrite• 12 years ago

Plus research paper, "Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment" without the paywall: http://faculty.haas.berkeley.edu/stadelis/tadelis.pdf

djim• 12 years ago

this seems to be based on a study done by ebay, who had an atrocious ppc campaign. it was run by monkeys. really no wonder they didn't achieve any good or predictable results. http://www.searchenginejournal.com/how-not-to-run-a-ppc-camp...

mcfunley2• 12 years ago

To be fair, for all these people know the examples of insane ebay ads are the experimental control. Probably not, but maybe.

coldcode• 12 years ago

We have no idea if ads work anywhere but it doesn't stop the ad industry.

Mahn• 12 years ago

My previous employer was a company doing hundreds of millions in revenue per year built almost exclusively on ppc advertising.

I think the question is not whether ads work, but when and in which cases do they work.

rahimnathwani2• 12 years ago

What do they sell?

1stop2• 12 years ago

Yeah we do: Coca-cola <-- The product offers no value other than "brand". (Brand is advertising).

DanBC2• 12 years ago

But is that advertising or just excellent distribution of product?

hackuser2• 12 years ago

Yeah we do: Coca-cola <-- The product offers no value other than "brand". (Brand is advertising).

It tastes good. How is it different than any other form of pleasure that is sold, such as (non-artistic) video games, alcohol, any luxury good, fashion, etc.

EDIT: ... or World Cup soccer, on my TV now.

zwieback• 12 years ago

There are also new annoying features of online advertising that might turn consumers off. Even after buying something I frequently see ads for the same exact product from the same exact vendor for several days. For some reason this annoys me so much that it turns me off from the vendor.

esw• 12 years ago

It's called remarketing. If they're showing you an ad for a product you actually bought, they're doing it wrong. It's supposed to show you an ad for something you looked at, but didn't buy.

gerbal5• 12 years ago

Or they are trying to do the thing BMW and Apple do where they are trying to make you feel good about a decision you already made.

unclebucknasty3• 12 years ago

If it's not being done purposely for reasons others have mentioned, then I wonder if it comes down to the company's integration with Google. Presumably, Google wouldn't know if a sale took place unless the merchant somehow notified them. I'm guessing this might be with a pixel, script, or similar on their order confirmation page.

So, if the merchant failed to implement this, Google would never know to stop showing the ad.

gumby2• 12 years ago

...after buying something I frequently see ads for the same exact product from the same exact vendor...

There is a theoretical justification for that (note: "theory" not used in the scientific sense!) -- for large ticket items like cars, recent buyers are more likely to notice an ad for the expensive item they just bought. Some ads are aimed at them to make the whole "experience" somehow better, to offset buyer's remorse. That way you will talk up your purchase and be more likely to buy another when you replace it.

The other is when you have a high volume low-price item (e.g. toothpaste): you've demonstrated a willingness to buy (i.e. you're a qualified buyer at some level) so why not try to remind you that the next time you need toothpaste you should get it from the same place?

Since so much marketing "science" is bull, nobody actually knows if this works (any more than they do with the online ads). But at least your seeing these time-wasting ads is intentional, rather than necessarily a software error.

blumkvist2• 12 years ago

Please make a difference between marketing and advertising. Advertising is a very small part of marketing "science".

DanBC2• 12 years ago

There was a time when I could use a search engine to get a bit of information about something and then move on.

Now? That one minute websearch will stay with me for weeks as people push ads for things that I have no use for.

Prosthetic testicles for dogs; specific terms used for bras; packers and binders - my search history gives me a variety of eye-popping adverts.

Also: they really need to let people opt out of some advertising. People with alcoholism might not want any alcohol; people with OCD might not want cleaning products on a TVOD page about OCD (real example. I'd post an image but it's on the other computer).

lukasm2• 12 years ago

Ad impressions don't work. Twitter & Facebook can't monetize. Facebook paid >20B for companies that don't sell ads.

frandroid• 12 years ago

The point is that the ads don't work for the advertisers; clearly, they've worked well for the platforms selling ads, e.g. Google.

lukasm2• 12 years ago

Yes. The advertisers are more and more aware of that.

fumar• 12 years ago

Online ads is a broad category. It includes social media, display ads, re-targeting ads, and paid search ads. Social media adverts are hard to measure in terms of ROI. At my workplace we have found a way to measure profitability for paid per click ads. We can optimize to drive more conversions at a cost effective price. Success depends on what one is measuring and what the end goal is. In the sea of data it is easy to get carried away on optimizing and improving front end metrics.

cbsmith7• 12 years ago

Read the article. The point is there is so much noise in the signal that optimization is generally not possible unless you are running a truly massive campaign.

hawkharris• 12 years ago

This reminds me of a fascinating article in The New Yorker called "Twilight of the Brands." [0] The author's basic argument is that brands have historically filled an information gap. Before the Internet, when consumers didn't have tons of on-demand info about products, brands were a compass that pointed them in the right direction. If the last Sylvania TV you bought worked well, you might buy another one without hunting down reviews for the new model.

Now that product info is ubiquitous, the author says, the role of brands and traditional advertising is declining. So, when I hear critiques about a particular form of online advertising, I think about the broader, more subtle ways in which websites influence our purchases. Companies are starting to pay more attention to online forums and social sites, which are more persuasive to consumers than traditional banner ads.

[0] http://www.newyorker.com/talk/financial/2014/02/17/140217ta_...

josu4• 12 years ago

I understand the point he is making, and I agree that the importance of advertising is declining. However, I wouldn't be able to explain Samsung's success without looking at advertising.

baddox3• 12 years ago

How about economy of scale in manufacturing, and (mostly) competent design and engineering teams?

Zigurd2• 12 years ago

If that were mostly attributable to advertising, I think you would see an equivalent success built on a horizontal brand - that is, an OEM without Samsung's vertical integration.

Otherwise an equally valid conjecture is that Samsung bought-in to the idea that the only way to consolidate success is through establishing a brand. As Intel did, for example. But I don't think anyone could argue that Samsung's ad campaigns are mostly cost-effective, coherent, and well-targeted. In other words, I don't think one can articulate a set of hypotheses that links the vast majority of Samsung's ad spending to Samsung's market success.

Contrarywise, there is a pretty good theory that Samsung succeeded in PCs, before they cranked up the ad spending, by being vertically integrated in almost all high-value components except CPUs.

davemel375• 12 years ago

Really? I could just as easily explain their success to an insane amount of press coverage.

rimantas• 12 years ago

Well… http://83-136-248-155.uk-lon1.host.upcloud.com/wp-content/up...

baddox3• 12 years ago

I wouldn't think that the role of brands would be declining for products that are not very differentiable in a blind test.

LiweiZ• 12 years ago

Well, I have to say that there are many labels call themselves brands. And a brand is actually more like a notion in one's mind, if there is any, connecting the cognition and the outside world. It helps people quickly get their answers from their brain "HDD" without extra time/energy cost. We often call this "impression" or something like this. ad banner is just one of those channels to deliver the information to your target audience. It is a way to deliver your message to help build the notion in people's mind. So I think they are different things. Hope this helps.

gerbal5• 12 years ago

For medium scale purchases with many interchangeable competitors, this may be true. But for cheap impulse purchase and for high-end commodities, brand still matters quite a bit.

Apple and Samsung are two great examples of higher end companies whose products aren't appreciably superior or inferior to most of their competitors, but through relentless advertising, they have made themselves seem distinct from their competitors.

A significant function of advertising is to reinforce decisions. Very few people buy a car because they saw an ad for it, or a iPhone, for that matter. But the ad serves to reinforce the decision of those who already bought the product, decreasing buyers remorse. It's the reason most higher end car ads are selling the idea of a car rather than the car itself. Ditto with the older iPhone and iPods ads.

And a similar thing is true for low end, cheap products. People buy Coca Cola over store brand cola because of the brand identity coca cola creates. They may be totally unaware of it, but it's just enough of an impetus to push someone to spend the extra $1.50 on a 12 pack of Coke vs another brand.

jseliger• 12 years ago

Apple and Samsung are two great examples of higher end companies whose products aren't appreciably superior or inferior to most of their competitors

I'm not sure this is true: Samsung is not a (particularly) higher-end company, and their phones at least are lower cost than Apple.

In the case of Apple, their phones were appreciably better up until two years ago or so. Their laptops have been physically better in fit and finish for at least a decade (http://paulgraham.com/mac.html).

pyk• 12 years ago

Piggybacking this, Coca Cola is the king of marketing prowess, in part because the product stays the exact same (or 99.8% the same). It's part of their "moat." Tech can't do that, in my opinion almost by definition due to expected and continuous innovation -- you can't stay the same. You do see it sometimes in short bursts -- such as with the Thinkpad brand (but even that line will be short lived vs. Coke).

With Coke, they can then use that consistency on anything from Santa Claus to the Olympics to feed on nostalgia of that recurring same-ness -- they're investing in a lifetime of feelings, not a few years or months of popularity. Hershey's, Disney (high repeat visits), and McDonald's to some extent are other great examples of being able to leverage long term marketing on consistent or nostalgic products -- something difficult for tech to do.

hga4• 12 years ago

One big issue for me is that brands have become drastically less useful in predicting product quality.

Very few of the major brands that were big when I grew up in the '70s haven't thrown away their quality in favor of ... I'm not sure. Sony is a good example, even good through the '80s as well, as long as you didn't get something manufactured in Mexico with cold soldier joints, as my family back in SW Missouri did, fortunately they knew how to deal with that problem.

Today every purchase I make is proceeded by research, caution or whatever to make sure I'm still getting the same thing, or that the New And Improved version isn't significantly worse, or that the manufacturer hasn't thrown away quality in their new model.

For me, outside of some rare exceptions like Amazon, or some providers of higher end products, brand equity is all but dead. No amount of advertising can counteract the facts on the ground for someone who's been around long enough, and I'll bet even young whippersnappers are getting wise to this new scheme of things.

x0x0• 12 years ago

I think people underrate how much this benefits apple. While I'm sure there are people with different experiences, apple in general, and in my experience, don't sell shit products and stand behind what they sell. With a full motherboard changeout available at a local apple store if necessary. Contrast to hp: we had a hp laptop w/ a next business day in-home warranty that nonetheless spent a week or more in hp's repair shops on two occasions. I've also gotten new power bricks outside of warranty basically by asking nicely at the local apple store. It may be because I do spend a lot of money on apple gear, but I used to do that w/ dell and dell never gave a shit.

The brand I'm most surprised about is sears. They used to make great appliances and stand behind them until the private equity thieves fucked that all up. My partner runs a medium-sized apartment building; the owner is happy to pay for quality, and if sears cost less on the 10-15 year time frame they'd buy it. But sears is the same cheap crap, so they just buy whatever is close to cheapest at home depot.

When brands throw away their brand name and turn into the same cheap shit, you can't blame consumers for shopping just on price.

brownbat• 12 years ago

Yeah, now you get brands substituting inferior parts on the same model after the initial reviews come in.

http://www.extremetech.com/extreme/184253-ssd-shadiness-king...

http://www.autoweek.com/car-shopping/articles/2012/01/decont...

HN discussion: https://news.ycombinator.com/item?id=7893068

superuser22• 12 years ago

One place where marketers have gotten around this quite adeptly is Windows PCs and laptops.

Try searching for reviews on a laptop you find at Best Buy. There are none. The model number is 10+ random characters and completely meaningless. Comparison shopping between laptops on the basis of reviews is impossible. Consequently, they have you buying on 1) brand and 2) specs, which is right where they want you, and completely ignoring things like build quality and MTBF of parts which might be revealed by long-term reviews.

This is one of the (many) refreshing things about Apple. Macbook Pro is Macbook Pro until the next refresh.

josephcooney• 12 years ago

I think Best Buy and co. do that to prevent them having to make good on "price matching" promises - everyone sells a different model (that really only differs by the model number), so since no-one sells "the same" model they can SAY they price-match without ever actually having to. I believe they do this for TVs too.

lelandbatey• 12 years ago

I noticed this as well, but it just pushed me towards those kinds of companies that use reliable identifiers like Lenovo. I find that if a company is doing this kind of weird naming, they're probably not in the business of selling things based on quality.

Nursie• 12 years ago

Ummm... I love my MBP but it's no way 'the' Macbook Pro until next refresh. I got a choice of two form factors and multiple hard drive/SSD, processor and RAM configurations.

The build quality is great, but don't pretend for a moment Apple don't play the specs game.

liquidcool• 12 years ago

And it's way more pervasive than that. Companies who make appliances, mattresses, etc. have been doing this for decades. It enables them to say, "We'll beat anyone's advertised price!" Since all the major retailers are getting models tailored and numbered for their chain, they know they can do this with impunity. This is one of the reasons it's so hard to find the models Consumer Reports reviewed at your local retailer. You have to buy the one from that brand that's close enough.

bushido• 12 years ago

Try searching for reviews on a laptop you find at Best Buy. There are none. The model number is 10+ random characters and completely meaningless.

This is a problem for a number of users but I think you got the reasoning a bit wrong.

The real reason this is done is for the purpose of reducing price-match deals when other retailers have a discount on the same model.

I for one have never faced a problem finding reviews as a number of tech reviewers mention all model numbers in their posts.

Also, this is not limited to Windows PCs but to most high(er) ticket electronics like televisions.

This is one of the (many) refreshing things about Apple. Macbook Pro is Macbook Pro until the next refresh.

While partially true, Apple does have multiple model numbers within the same generation, they just don't tell the customers about it. The models are based on hardware used. This makes any review somewhat inaccurate as different customers who bought the same product based on the same reviews from the same retailer may get marginally different hardware.

ex. Macbook Pro - Retina - mid-2012 - came with either a LG display or a Samsung. The LG displays had problems with image retention. A few Samsung had a yellow tint. And at the time of purchase the customer had no way to know which one they were buying.

Personally this is extremely problematic.

sp332• 12 years ago

This is one of the (many) refreshing things about Apple. Macbook Pro is Macbook Pro until the next refresh.

That may be more true of Apple than of others, but it's not completely true. http://www.anandtech.com/show/6727/apple-is-using-sandisk-ss...

larrys• 12 years ago

"Now that product info is ubiquitous, the author says, the role of brands and traditional advertising is declining"

Declining but still very important. All else equal someone will make a purchase from a brand that they have used, know, or trust, over another brand which they have less or no experience with. I would also argue that even on a lesser feature set the existing brand has a clear edge. And there are other issues like wanting everything to look similar (say with kitchen appliances) or other tie ins.

Let's look at YC as a brand. My guess is that even if statistics were shown that another place was "better" for a startup (if better could be defined) the edge, because of the "brand", would go to YC. Now if YC is not "in your face anymore", say HN declines in popularity, that brand could easily suffer.

raverbashing• 12 years ago

The premise of the article is naive at best

You can use web analytics to measure a conversion rate from ads. Hence user clicks ad -> sales happens (in the best cases). That's Internet Ads 101

In fact, with online ads the "if it works" part is much more measurable than for other medias

"Last year, a group of economists working with eBay’s internal research lab issued a massive experimental study with a simple, startling conclusion: For a large, well-known brand, search ads are probably worthless."

Once again: "For a large, well-known brand"

Well, so do you mean that pumping ads for something everybody already knows (and already gets massive advertisement everywhere else) doesn't work? Color me shocked.

omonra2• 12 years ago

The point of the article is that the sale would happen regardless of the ad.

Ie showing an ad on Google to someone who types 'Ebay' in the search string is a waste of money - since Ebay shows up as the first natural result anyways.

droopyEyelids• 12 years ago

However, this leads to the other flaw in the argument, where eBay has been the company most famous for abusing Google's ads, and using them in a completely nonsensical way.

http://www.searchenginejournal.com/how-not-to-run-a-ppc-camp...

I'm sure you've noticed that a search for any noun called forth an ad for eBay. You're enticed to "buy Dog Vomit on eBay" when your dog is sick. And then, even if it was something eBay plausibly sold, when you clicked through it'd take you to a generic eBay search page or, often, a landing page that was not useful at all.

paulgb• 12 years ago

It's worth noting that display advertisers can and do account for this by running a control group that sees public service announcements instead of the ads they'd normally run.

rumcajz• 12 years ago

Isn't it a way to prevent eBay's competition to show ads on 'eBay' keyword?

mcfunley2• 12 years ago

Exactly right. If search ads don't work for this kind of activity, we only know that because online ads allow measurement. If your takeaway from the article is that you should go back to buying billboard space instead, you're an idiot.

Search ads DO work for plenty of use cases for less-omnipresent companies. And they would probably start working a lot better if the Amazons and Ebays stopped bidding.

xux• 12 years ago

The thing with big brand advertising is that they aren't trying to gain new customers. They're cementing their place in existing industry.

Coca Cola pretty much captured as much market as possible. Yet they still advertise to refresh their image.

"Even a great brand needs investment and caring to maintain its relevance and vitality." - Jobs

cbsmith7• 12 years ago

You can use web analytics to measure a conversion rate from ads. Hence user clicks ad -> sales happens (in the best cases). That's Internet Ads 101.

As the article pointed out though, the ad conversion rate is so low, it is very difficult to separate the signal from the noise, particularly for smaller campaigns. There is also the additional issue that the ad itself doesn't necessarily directly lead to a simple click->convert cycle. Having worked in the industry for the better part of the decade, I can tell you that separating the signal from all the noise absolutely does require a ton of data. There's a reason why "Big Data" rose to prominence in the advertising world.

markowenh• 12 years ago

Just because something cannot be quantified DOES not mean it does not work....Marketing is often UNQUANTIFYABLE...but almost always effective.

room271• 12 years ago

I think people are being harsh in the down-votes here.

I suspect most people (HN people) hold pretty strongly the belief that everything can be quantified. However, within reasonable limits and current stats and science, lots of things in practice cannot - yet at least.

A lot of advertising probably falls under this. To verify effectiveness we'd need, as the article notes, to control for so many other factors that it would often be too difficult.

So we often guess, or leverage past knowledge and apply it to what we hope are similar circumstances.

If you take the point to be that marketing is not a hard-science, than it's true. Some cases sure, but plenty not.

cbsmith7• 12 years ago

Marketing is often UNQUANTIFYABLE...but almost always effective.

That last part is the part you can't say definitively unless you have a lot of data, which is the point of the article.

michh3• 12 years ago

I remember reading the tobacco industry was actually secretly grateful when the EU banned them from advertising.

As I remember it, they were in a stale-mate. The market was pretty much divided up. Most people were loyal to their brand and that was that. Despite that, they were spending a massive amount of money on advertising even though their market shares remained unchanged.

The reason was that if one of them stopped funnelling massive amounts of cash into advertising, they would lose a big chunk of their market share to the others. So they were all paying mostly to maintain the status quo.

With the ban on advertising, the amount of money saved greatly outweighed the revenue lost as others couldn't advertise either so it really only affected new smokers rather than convince current smokers to switch brands.

I see a similar thing happening in my line of work. In our niche of e-commerce every player of importance works with the same online marketing networks and paying rather a lot per sale or click.

There's a whole lot of sites out there which basically exist to infest organic search results, send traffic to us and our competitors and collect their referral fee from the advertising network. They add no value[1]. Without them, the customer would have been similarly divided amongst the competition as well without having to pay for it. Yet, if we stop paying them, we'll lose a lot of business as our competitors will continue to do so.

Disclaimer: this is all as I understand it and in no way my employers opinion or persepctive ;)

1) Some do, by providing extra information or ranking the shops by what's best for the consumer (price, reviews) rather than the most cash-per-click.

unclebucknasty3• 12 years ago

Interesting. I understand if you don't want to name your company, but can you share the niche?

michh3• 12 years ago

Cell plans and phones, but I suspect it's a plague in more markets than just ours.

tobinfricke• 12 years ago

NB, while tobacco ads are banned from TV, they are still everywhere on outdoor advertising, at least here in Germany. Actually, I went on a "street art tour" that turned out to be sponsored by a cigarette company, and they were handing out free cigarettes. So: tobacco advertising is alive and well in Germany.

michh3• 12 years ago

Oh, over here that's been banned as well. I thought it was an EU thing but I guess it was our government. They're even banned from sponsoring events.

hornetblack• 12 years ago

Australia is very different from that. They banned advertising to consumers in most ways. They still can put ads in magazines for retailers (because they aren't the end user).

Now we also have "plain packaging laws" which means packets cannot have the Tobacco companies design on it. They must be olive green and have government anti-smoking ads, and the product name in plaintext.

moconnor• 12 years ago

Germany was referred to the EU court of justice for non-compliance with the advertising ban:

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/0...

Germany also unsuccessfully tried to disarm the ban itself:

http://curia.europa.eu/juris/showPdf.jsf?text=&docid=66366&p...

hessenwolf• 12 years ago

Basically only here in Germany. I was so confused to see a cowboy ad at a metro stop.

davemel375• 12 years ago

In the branding world, the general philosphy is that PR and word of mouth build brands and advertising defends brands and market share.

In your theory, if advertising stopped existing the world would save a ton of money and everyone would maintain market share... but since brands are built on PR and Word of Mouth, brands will always be at risk if they can't advertise and keep you on the forefront of their mind.

They might not lose market share to other big brands, but new brands with a fresh positioning will be able to uproot their position.

electromagnetic2• 12 years ago

Advertising creates a disincentive for trying unknown products. Combine this with brand loyalty from good PR, and you keep control of your market share.

This is well illustrated with Ironbru in Scotland. Lucozade and Tango in the UK in general. The introduction of Fanta into the North American market too, I knew it from the UK and one of the last flavours introduced was actually Fanta Orange (the most popular one in the UK, direct rival with Tango) due to the saturated market for that type of drink.

Theodores• 12 years ago

Tobacco advertising was never about trying to persuade existing smokers to switch brands - that was the 'cover story'. In reality it was about trying to persuade young people to smoke their brand rather than some other brand. By young people < 21 years old - people do not start smoking once they get past those formative years. Sure the marketing message was different to what Kellogg's have for Coco Pops, however, the 'sophistication' of the imagery was very much targeted at young people wanting to be 'adult'.

Everything tobacco is controversial, however, how does this relate to online advertising for regular things? The only people who haven't heard of eBay will be people too young to have seen the adverts already. Same with every other brand. Everyone will know you can get everything and anything from Amazon. But there will always be this new supply of kids getting old enough to have their own debit card, they will also have impressionable minds and not have their habits cast in stone. Therefore the high pay per sale per click is actually about getting new life-long customers, in much the same way as it was for Big Tobacco.

The tobacco adverts appeared to be about persuading existing smokers to switch brands yet they had this secret darkside 'get em young' agenda. With online adverts there may be genuine 'switch brands' thinking to it yet in reality all that is effective is 'get em young', where this 'get em young' idea is not even being thought about or being looked for in the analytics.

rdtsc2• 12 years ago

I think they do a good job via product placement in movies and shows. Sometimes they are in "historic" or period pieces. I mean the ones create today by portraying historical periods. Sometimes there is what seems like a deliberate advertising or showing off someone lighting up. Sometimes it is cool villains so it works on a more subtle level "Oh see we are only show bad guys smoking, so we are dissuading young people to smoke".

rdtsc2• 12 years ago

That also describes presence at trade shows and conferences.

Quite often those are useless and costly in time and money. Yet companies do it because if they don't and the competitors do then everyone will ask "How come so and so wasn't at the show? Are they have financial issues?" and so on.

So companies spend money on booths and talks without getting much back except to stave off the appearance that something might be wrong.

gregpilling2• 12 years ago

This has happened to me. We decided last year to take our tradeshow budget and spend it on "point of purchase" materials for our resellers. This has worked well, sales are up 20% this year.

ghaff• 12 years ago

There's also often a quid pro quo with partners. At a long ago employer, I remember when we decided to drop out of a show put on by a large ISV who was important to some big accounts but certainly wasn't a source for new business, our CEO got a call from their CEO and pretty much was told to get on board if we wanted the partnership to continue.

I've also seen big shows that creaked along for years until one or two major vendors in the space decided to stop exhibiting. Suddenly the emperor had no clothes and the show didn't last much longer.

(There's also just a lot of momentum and interest behind the status quo. Mind you, there can be a lot of value in sessions for attendees and, generally, just getting people together in one place. But a lot of money also goes into staging trade shows that's arguably not really necessary except for appearances sake.)

pretzel• 12 years ago

There are ads and then there are ads. One of the things that the company I work for, Qubit, does is to validate that the tracking tags that vendors put on people's websites drive an uplift. We talk about one of our clients doing it here [1]

While blindly targeting people using search engine "promoted searches" may not work for every impression, this does not take into account the ads that you see on other 3rd party sites - which is probably what people think of when they talk about "ads". Google's version of this is AdSense (as opposed to AdWords).

This is something that is quite easy to test, and we have seen that some really do work and some not so much.

But driving someone back to a website with an offer on something that they have added to their basket but not purchased, is one way to be sure that you are getting people buying after seeing your content. The problem then is to make sure you aren't cutting into your margins too much...

[1] http://www.qubitproducts.com/content/video/arcadia-video-cas...

cbsmith7• 12 years ago

As per the article, there is more than a bit of "post hoc ergo propter hoc" reasoning in the above. Just because you seeing "people buying after seeing your content" doesn't mean the ads are working.

frik• 12 years ago

But driving someone back to a website with an offer on something that they have added to their basket but not purchased, [...]

People like useful recommender engines (e.g. Amazon.com).

But not so personalized smart ads that follow them on every website the visit. What's wrong with the static ads that fit the targeted website category?

ComputerGuru• 12 years ago

It certainly works out to the benefit of the advertising companies, the media companies, and Google, though...

bowlofpetunias• 12 years ago

Discuss advertising with anybody and you'll come to the conclusion that apparently advertising works on other people.

Who those "other people" are, no idea. I strongly suspect some people really are just statistics.

Gustomaximus• 12 years ago

Other people here. I've been working in online advertising for 10 odd years and have seen advertising working and not.

This Ebay example was great showing both sides; bidding for their brand term was a waste of money as they are a brand leader not in a defensive strategy. Finding new customers was profitable. It seems they let the former get out of hand and dominate their spend mix.

I see similar situations of excessive wasted spend all the time as companies target the wrong metrics (note: there always is some). Until this study I would bet my house the PPC team at eBay were being largely judged by 'CPA' type metrics. Every year they would have tighter goals in a market that is getting more competitive so they go for cheap wins that look good on paper i.e.grab customers already coming in as you know they will convert. I see this at almost every company.

Profitable advertising absolutely does exist but like anything, you need smart people running the program and you can't surround them with targets that make them go for the wins that look good in the short-term reports. As much as we monitor more advertising remains part art, part science. And I say that as a guy that likes his data more than most.

Anyway, if you're being told ads only work for other people you're talking to the wrong people. I love my marketing and what it can do for a company when run well. If you have any questions I'll happily talk your ear off.

davemel375• 12 years ago

There are media productivity companies, like MarketShare that cost a boat load but accurately track every possible interaction with an ad and brand to see what actually works.

If you use a company like this and a DMP (data management platform) you can track ads and measure on a scale this article doesn't seem to even know exists...

It might cost you a few million to close the feedback loop accurately but there are companies that can correlate an unclicked banner impression to an in store offline purchase...

jebblue• 12 years ago

I read some of the comments and decided to go read the article, click the link, up pops a massive ad window for Slate. :-)

petercooper• 12 years ago

Well, sort of. It's funny because it really proves the headline right. Slate are trying to get you to sign up for their subscription package because I guess the ads aren't entirely cutting the mustard money-wise ;-)

nyrulez• 12 years ago

Ebay is known for very ineffective campaigns, which they tried to justify by publishing "papers". They basically claimed that the fact that search results exist, makes the advertising next to them mostly ineffective. There are so many issues with this argument, it is not even worth starting. But yeah this circle jerk has been going for a while. Also to claim that if it did not work them, it won't work for anyone else is a bit of an over generalization.

You will also find papers stating the exact opposite and how to get great returns and stuff. Everyone it seems gets a different experience from the same platform and then they justify it by publishing white papers. Just like anything else, it is never black and white. But black folks want everything to be black while white folks make fun of the black.

Also check this more detailed analysis that goes a bit deeper: http://www.wordstream.com/blog/ws/2013/03/13/dear-ebay-its-n...

wildwood• 12 years ago

They're a bit vague when describing the "I-was-going-to-buy-it-anyway" problem, but it sounds like they're mainly talking about PPC ads on search engines stealing from SEO links on the same pages. (Some of it seems to be talking about stealing sales from the direct channel, which I have no idea how to handle.)

If your website is already tracking ad performance on a per-ad basis (i.e., tracking all the clicks on that ad, and keeping what you pay per click below what you're getting per click), then optimizing for only the paid search traffic that's incremental, and not cannibalistic, is pretty straight-forward, conceptually.

For a given ad's keyword, instead of optimizing only for the results you get from PPC traffic, you treat your PPC bid as an input that affects sales across PPC and SEO traffic for that keyword, and optimize accordingly.

There are a few extra steps and decisions that need to be made before full implementation, but this is the basic idea. It's actually not too bad to account for.

davemel375• 12 years ago

There are other reasons to advertise in search engines on your branded keywords.

For starters, you have account wide and campaign wide quality scores which impact how much you pay per click across your entire account. Having branded keywords which will have high quality scores can help lower all your costs.

Secondly, your competitors can advertise on your brand even if its trademarked. Owning the top position is cheaper for you and a good idea.

Third of all, You would think a brand would want to own as much of the search results page as possible. It will drive up clicks even on your organic listings.

There are also many case studies that show paid search for branded keywords getting more traffic than just organic listings.

I'll search for a product and amazon all the time. I would just easily buy that same product from Walmart if they had it for less.

Branded search does not mean they will buy from you anyway. It could mean that, but it certainly doesn't guarantee that.

davemel375• 12 years ago

Advertising by definition is Arbitrage. Leveraging a disconnect between the value of the audience and the cost to reach and engage them with content. Efficient Markets dictates that over time advertising will become less effective. It is the natural progression of all advertising.

Here's an article I wrote a while ago about how content marketing and native advertising are the same thing converging on a point where modern day advertising stops working... http://www.adotas.com/2014/05/surviving-the-adpocalypse-what...

gerbal5• 12 years ago

One of the flaws of many advertising strategies is that it assumes the main flaw of the market is imperfect information. However that requires a rational consumer. And Consumers are not rational. Selling ideas is as important as the good itself.

Take most car advertising for example. A significant portion of the ads are from dealers advertising sales. Those are classic attempts to correct for imperfect information on the part of the consumer. But the other portion of the ads are all about how you should feel in a given car.

When you see an add for a luxury sedan combined with platitudes about performance, speed, and engineering or a truck and cliches about America, the goal isn't to sell you on the merits of the vehicle, but to sell you on a concept of a brand. The ideal targets for these ads aren't actually consumers currently in the market for a new car, but the people who just bought a new car. The people for whom the shine is starting to come off the rose. If you sell someone the idea that yes their purchase makes them special, then they are more likely to be happy with their decision, more likely to repeat that decision later, more likely to be a unwitting brand ambassador.

Spooky232• 12 years ago

That's the thing I always saw as lacking with online advertising -- there's no brand placement.

Online ads always seem to me to be focused on transactional response "Wow, I can use this weird trick to buy a vitamin, sign me up!"

Billboard/display advertising is really effective at this. I happen to know that a particular orthopedic medical practice that I wasn't familiar with has a walk in clinic until 10PM every day to fix broken bones, etc. That's effective advertising!

In contrast, I've been a heavy internet user since 1994. The only product I can think of that I actually learned of via online advertising is those X10 video cameras that dominated pop-up/under advertising a decade ago. That's pretty sad for advertisers!

egypturnash2• 12 years ago

We have no idea if online ads actually work at the scale of huge corporate brands competing for mindshare. I'm pretty sure it works for smaller outfits - every time I find an appropriate place to run an ad campaign, I see a permanant uptick in readers of my web comic. Eventually I'll have gotten everyone in that place who's going to be interested in my stuff, and I move on.

julespitt2• 12 years ago

Willing to share where you advertise and why? I've got lots of friends and relatives doing comics online, would love to have a little specialist knowledge to help them out.

egypturnash2• 12 years ago

Mostly just Project Wonderful, an ad network that mostly sells ads on web comics. It's pretty easy to drop a couple hundred into a broad campaign, dink around in your analytics to see what sources give you engaged traffic, and drop some more money onto those specific places.

Also your friends and relatives may want to check out webcomics.com; I don't agree with everything Brad says about Making Comics On The Web but for the most part his site is full of a ton of great advice that's well worth the yearly fee.

cbsmith7• 12 years ago

Actually, per the article... its actually harder to know with certainty that ads are working for smaller outfits. Large campaigns are the one case where you might accumulate enough data to know.

klunger• 12 years ago

I would really like to see a similar study done with less well known brands, to see if it makes a difference in cases with non-household names.

cm20122• 12 years ago

As someone responsible for $xxxxxx monthly spend in online advertising, it clearly works. We measure it pretty much from end to end.

hackuser2• 12 years ago

As someone responsible for $xxxxxx monthly spend in online advertising, it clearly works. We measure it pretty much from end to end.

Do you know how much profit you would have earned without the advertising? How do you determine that (if you can say)?

That is, without the ads, some customers would purchase more or more profitable products; some would purchase the same, and some would purchase less. But how would it net out -- and more interesting to me, how do you measure that?

cm20122• 12 years ago

Yes. If we stop advertising we stop getting sales proportional to the advertising spend. Most people arent coca cola.

chmullig• 12 years ago

It's very frequently measured with pretty standard experimental designs involving treatment and control groups. Track sales to each group, and you can easily figure out the return on ad spend.

BrandonM• 12 years ago

This topic came up in a month-old submission about why eBay lost many of its organic rankings in Google's Panda 4.0 release. Some of the comments from that discussion seem quite relevant to this one.

http://news.ycombinator.com/item?id=7788804

When Slate refers to eBay research, is it based on methods that allowed ads like this gem?

    Vomit sale
    New & used Vomit.
    Check out the deals now!
    www.ebay.com

(http://www.wordstream.com/images/panda-4-ebay-2.jpg)

If so, can we really take their findings seriously?

Shivetya• 12 years ago

Well far too many online ads do the exact opposite with me, as in I tend to avoid the advertiser and/or their product. This usually only occurs when the ad is presented in some fashion which inconveniences me in the task I am using the site for.

Unobtrusive ads, more power to you. Pop up on me, find ways to circumvent blockers against such, or hide parts of the article I want to read, you get mentally flagged.

danmaz74• 12 years ago

There is one very important point that I didn't see in the article, nor the comments. By not advertising in search, incumbents would make it less expensive for newcomers to put their offer in front of the incumbent's customers. This can be very risky.

programminggeek• 12 years ago

Search ads don't work. Please everybody stop spending money on ads... (so I can have them all to myself.)

autokad2• 12 years ago

I had guest lecturers from chief data scientists of companies that purchase these adds for companies targeted to users. I was told most companies do not want to pay for the controlled experiments, and many times even when they are run for 'free' they do not want to know the answer. i was surprised at the latter

cbsmith7• 12 years ago

It's incredibly infuriating but makes perfect sense once you understand the motivations of all the parties involved.

marincounty• 12 years ago

I think some idiotic consumer products will always require advertising--like soda, candy bars, figh fashion, etc.?

There are some industries like auto insurance where I think it's a waste of time. Every year I call around and get the cheapest insurance. I face had good luck with Mercury(last 4 years). Esurance only quotes for 6 months--that's why they seem cheap.

As to Internet advertising; my biggest grip lately is having to watch a ad video before the intended video.(I turn down the volume and look away for 20 seconds).

I have a feeling Google tracking works too well. I am waiting for the day DuckDuckgo is King. I don't like to be tracked. I don't like my house photographed.(Google put up previously requested blurred homes, cars, persons without any notice. If you think you have a blurred out house--check again.)

dcnstrct• 12 years ago

As someone who leads an analytics team in the advertising industry I have to say this title and the studies they are referencing are not accurate to the entire industry at all.

Advertising absolutely works when done right. The effect on brand consideration, shopping behavior, and incremental purchase value can be quantified. The most sophisticated advertisers spend a lot of money to accurately track and ensure their campaigns are lifting their desires metrics.

Now to the eBay study they reference. That study is specific to eBay, a large brand that has spent hundreds of millions a year on advertising for many years and is a top web property visited by a significant percent of the online audience. For eBay it turns out brand search marketing largely does not have a contribution as most of their shoppers are likely going to buy anyway.

Trying to generalize that to a brand that did not have the amount of equity, natural SEO rankings, and established shopping behaviors would be foolhardy. Additionally if you dig deeper into the eBay study they did find a positive effect for the small percent of users that are new shoppers to eBay. They just happen to be a relatively small percent of the audience reached with the spend given the large size of eBay.

In the digital space there is a huge variability in performance based on the type of ad, the nature of the targeting, the product being advertised, the creative message, etc. Trying to generalize to all online advertising without controlling for the kind of brand, product being sold, current marketing positioning, and campaign objective seems a bit naive.

In our work we find huge variability in performance even within the same web property dependent on the placement of the ad within the site and the unit being served. We measure how long the ad was on the page, how many users actually hovered over it in view, and then the incremental lift of exposed users compared to control group. Turns out if you properly optimize to maximize true ad viewing and engagement you will see lifts in brand response, digital visitation, and shopping metrics compared to the control.

In fact I'd much rather have money for digital advertising any day over old fashioned ads with the limited tracking possible. I know how many people saw our spot on the YouTube home page, how long they spent interacting with it, and can tell you exactly what they were interested in. For that TV spot I don't know if you were watching, skipping, going to the bathroom, looking at your phone, or any number of other factors which could diminish effectiveness.

TLDR; online advertising works when done correctly and absolutely can be measured

alphapapa• 12 years ago

No advertising "absolutely can be measured" because no one has access to time machines nor alternate universes to see what a consumer would have done without the advertising. This is a simple fact. Of course, when you can invent your own criteria ("brand consideration," "shopping behavior," "incremental purchase value,"), you can't be wrong.

kitsune_• 12 years ago

I've said this before on here, but online advertising is incredibly dumb. If you consider all the info Google and Facebook have on me, it's a really sad state of affairs.

I bought a new bicycle and religiously researched this topic and consumed a ton of cycling videos. What ads do I see on YouTube? Cars. I don't have a driver's license.

I once bought a NI Maschine Midi Controller. YouTube then showed me video ads for the NI Maschine Midi Controller for over a year after the purchase. Great business for Google, not so much for Native Instruments.

During a vacation in South Korea, I had logged into Facebook to post a picture. Facebook then showed me Korean ads in Hangul for over a month after my return. They have all the info on me, where I was born, what language I speak, where I live, where I work. Hilariously bad.

And so on.

corin_2• 12 years ago

It's a game of averages - what you're doing is watching a blackjack game and saying "why on earth didn't you double down on that 18, the next card was a 3!"

Sure there's a lot of errors in advert targeting, but they don't need 100% accuracy to see results, and on a scale from "just chuck adverts at everyone, some will be relevant" to "let's have people manually look into every user to profile them and know exactly what to target them with" there has to be a point where it's not cost-effective to make things even more accurate.

chupy• 12 years ago

Those three can be explained easily:

1.If you have never visited a car company's website then it's just that Google categorized your profile wrongly and only the car companies are bidding for you when it comes to show an ad. 2. Just a company wrongly retargeting converters (people who have bought a product) with the same product that they have bought. 3. In Real Time Bidding [1] for Facebook, their information about the user is very much lacking [2] so depending on the advertiser that bids you might get very bad ads.

[1] http://en.wikipedia.org/wiki/Real-time_bidding

[2] https://developers.facebook.com/docs/reference/ads-api/rtb/#...

je42• 12 years ago

One of the corner stones of their article is that in order to measure the lift on the ROI of an ad the sample sizes need to be incredible large - mainly due to noise and large variances. The metrics/measure you mention are helpful but very limited. Since, IMHO the ROI is the most important metric for an advertiser.

wz1000• 12 years ago

This is a classical example of a Prisoner's Dilemma [0] The conclusions drawn by the author don't seem to consider the fact that if Ebay doesn't buy ads next to it's own name, Amazon would. As with a Prisoner's Dilemma situation, if all parties(In this case companies with substantial recognition and brand loyalty) stop buying ads, they would stand to make the maximum profit. However, this opens them up to the possibility of losing clicks to a 'cheating' competitor, thus driving them into essentially an 'ad war'. [0] http://en.wikipedia.org/wiki/Prisoner's_dilemma#In_economics

johnsteve• 12 years ago

Why cannot they? Online ads usually work and they benefit the company as well as the individual users in the long run as well as the short run Ever heard of Google AdSense? That is the most common way to make the online ads work

tauslu2• 12 years ago

Since Google does not have vast majority (more than 90%) market share in the US and it is possible to do geo-location based advertising (location based on IP information is largely accurate), they were able to test it out. Well, this shows that being a monopoly helps a lot with monetization when there are few technical possibilities to test . The slate article puts it very nicely. "Art was far more profitable than science."

tragomaskhalos• 12 years ago

How sophisticated is click-tracking these days? Is a click on an advertising link always billed, or are there other qualifying criteria in play? I ask because the only time I ever click on an ad link is by mistake (typically when Safari is busy jiggling about with the page layout so that my finger hits the wrong target), and wonder if this is actually costing the company concerned.

tauslu2• 12 years ago

How does one know that a keyword is a brand or not? If the click through rate is above 30% (people really searched for the term) and there is some normal conversion after clicking (meaning that people really search for the relevant keyword, they do not mistake it with something else), then the keyword is a brand.

We Have No Idea If Online Ads Work

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