It is entirely possible that large corporations measure the effectiveness of their advertising by comparing it to sales, and are confusing correlation with causation on a massive scale. They spend more on advertising, and point to sales in the same time frame, as a cause, even if reality disagrees.
There are zero incentives for anyone to figure this out and fix it within corporate structures. I'd be thankful it makes advertising easy to spot, and less effective in real life. ;-)
Imagine if you're in the middle management of Google and you realize that target ads don't work, and the results to this point are just luck. You'd want to do something like "Improve your advertising spend" by making the ads "more efficient", and selling targeted ads to people that you know have already purchased, but the advertiser doesn't.
Eventually you could advertise that your ads are measured to be more than 80% correlated with a rise in sales. (Leaving out the reversed causality).
If this IS the case... shhhhhh... don't tell anyone. It would crash Google's stock price. Nah, who am I kidding, the market stays irrational for decades. ;-)
Never attribute to malice, that which can be explained by incompetence.
The VP of marketing of ebay realized that the keyword for which they spent the most money was "eBay". He thought this was nonsense and that people who looked for eBay should know how to get to their website, so he decided to save some marketing money and stopped putting money on they keyword. Result: no changes in the amount of visit to the website. However, the click-through rate, which is the metric by which marketing department was measured, decreased significantly. So the VP was fired and they even increased the money spent on the keyword.
And never attribute to incompetence that which can be explained by hundreds of individually intelligent people optimizing for their own short term benefit (ie career growth).
We see this in the software industry all the time. Large organizations act inefficiently or against their own interests because large organizations don't actually have consciousness, instead their decisions emerge from the sum of a lot of little decisions and actions, each of which might be individually reasonable.
As an aside, I believe that's how large organizations can come to be evil even if the vast majority of members are not evil.
You clearly have no idea what you are talking about. Entire business are built on testing the effectiveness of online advertising, and providing that as a consulting device to brands. Do you think Nike would be happy if their vendor just said, “yeah everything drives positive lift”.
Nobody is confusing correlation and causation. These are rigorous studies completed by literal data scientists and statisticians. They are employed by neutral third parties who make money regardless of the outcome of the study, and showing positive outcomes where they do not occur would be hugely detrimental to their business.
And to your point, realizing advertising does not work happens all the fucking time. I see it literally all the time. It’s why you run studies. Then you take your budget, move it somewhere else, and run a test to see if it’s effective. Every major brand does it this way.
This is not completely accurate in my experience. Some brands do, particularly emerging brands.
However, I can assure you there are a few major established brands that I could drop on here (but cannot due to NDAs) that everybody on HN regardless of their location worldwide would recognize. If I was to tell you the inner workings their marketing operations you would be surprised at the lack of measurement and analysis they actually perform on campaigns. The words “indiscriminate carpet bombing and assume the enemies are dead” are probably the best analogy I can think of to describe their efforts.
Honestly I think after you reach a certain point of brand awareness your marketing becomes just about maintaining name saturation and letting brand loyalty and affinity do it’s thing. Watching it in action is strange to people like me that put a great deal of value into measuring campaign value.
As much as I am critical of the approach, I can’t really says it’s a bad strategy, as these are brands that had worldwide reputations long before I became involved and most of my involvement was pretty narrow to a specific product or product vertical.
It's true. At some point you do hit the maximum brand awareness, and after that point, you're just paying to stop your competitors from doing the same.
And then there's the example of P&G, or Unilever or some other FCMG company that stopped advertising and saw no change in their business
Bob Hoffman's take on advertising e.g. Advertising for Skeptics, is well worth reading - he's an ex-adman who thinks the ad industry and particularly the personalised ad industry is full of shit
When you look at the online ad industry it's reasonably clear that the people who are making the money are the ad tech companies and not the advertisers
The basis for every DTC brand is paid advertising. Advertising definitely works, especially in B2B contexts when you can directly track activity to a sale. But there's definitely marginal returns on it once you saturate your market.
> Do you think Nike would be happy if their vendor just said, “yeah everything drives positive lift”.
It's fairly known in the industry (worked in a range of different ad-tech/marketing companies for around a decade), that more or less this is what makes Nike happy.
> They are employed by neutral third parties who make money regardless of the outcome of the study.
This is a bit naive. Same is true for home appraisers, funny how it always works out that the house appraised for just over what you offered (even in insane markets).
This issue is you might get paid this time for being honest, but you won't get paid again.
> completed by literal data scientists and statisticians.
I'm both of these. Saying that "adtech is bullshit" is absolutely too reductionist but you are wildly too naive about the reality of the industry.
Take A/B testing as an example. I've helped people run A/B tests for many years. I establish rigorous testing setups, make sure people understand confidence in the results, distribution of possible outcomes, etc. I'm honest in my work and so are the people running the tests.
But the truth is that A/B test on customer populations are not controlled experiments. One thing that literally no one in the industry does is go back and review the results of the past years A/B tests. The reason why? People don't really want to know. However, it's obvious these results can't be quite right because teams will run 10 A/B tests in a year, each claiming a 5% improvement in conversion, but clearly you don't see this cumulative impact of a >60% increase in conversion over time.
No one want to know this though, because knowing this helps nobody. Nobody is outright lying, but nobody wants to ask. The one time I worked outside of adtech but saw a problem where model results were almost entirely random noise I got in huge trouble for pointing this out.
Same is true across the board in the adtech world.
Someone else recommended "Subprime Attention Crisis by Tim Hwang" and I very strongly recommend that you read this. It's very well researched and was so inline with my experience that I found it so obvious as to almost be dull.
You seem really defensive about all this. The question at the top of the thread was a little too binary. But the notion that advertising is overvalued would not surprise me at all, nor would it surprise me that many in here depend for their livelihoods on it continuing to be overvalued.
Honestly, after lifetime of working in companies on capitalist market, the theory that they/we make decisions based on rigorous studies strikes me as unplausible. So does the idea of effective neutral third party. I have seen how consultants work too.
There are zero incentives for anyone to figure this out and fix it within corporate structures. I'd be thankful it makes advertising easy to spot, and less effective in real life. ;-)
Imagine if you're in the middle management of Google and you realize that target ads don't work, and the results to this point are just luck. You'd want to do something like "Improve your advertising spend" by making the ads "more efficient", and selling targeted ads to people that you know have already purchased, but the advertiser doesn't.
Eventually you could advertise that your ads are measured to be more than 80% correlated with a rise in sales. (Leaving out the reversed causality).
If this IS the case... shhhhhh... don't tell anyone. It would crash Google's stock price. Nah, who am I kidding, the market stays irrational for decades. ;-)
Never attribute to malice, that which can be explained by incompetence.