Digital Advertising: It's WORTHLESS
The Market Ticker - Commentary on The Capital Markets
2017-07-06 14:54 by Karl Denninger
in Technology , 368 references Ignore this thread
Digital Advertising: It's WORTHLESS
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This is an interesting article sent to me by a reader; it's ~6 months old, but there's a hell of a lot of truth in there.

So, at the end if the line, on average, it looks like you are probably getting somewhere about 3¢ worth of actual ads seen by actual people for every dollar you spend on display advertising.

The funny part of this analysis (read the whole thing; it's amusing) is that the overhead is utterly ridiculous.  Sixty percent is "absorbed" before a single pixel reaches a single screen.

You know a so-called "industry" is nothing other than a giant fraud-filled theft ring when that sort of number shows up.  Nobody gets away with absorbing 60% off the top without either using a gun or a scam somewhere -- usually both.

I used to oversee the entire ad budget at MCSNet; one of the pleasures of being a reasonably-small corporation is that the CEO sees basically everything that gets spent and someone has to justify that spend to said CEO before it happens -- without exception.

Further, we basically never dealt with any sort of "agency."  There were a few exceptions, but not many.  I recognized those as pure overhead, of course, as they didn't get me anything for the money spent.  The only argument you could make to me as such an agency was that you'd save one of my people (perhaps me) a great deal of time -- which has value, of course.  Few were able to make that pitch work.

Here's what I found from my years in the Internet business: Radio, carefully targeted, worked and was worth the money spent.  Local shows of any sort were usually worth the money spent (and thus we did a lot of them.)  Virtually nothing else returned enough on a provable basis to be worth the investment notwithstanding the claims of all the people trying to get us to buy ad space in their media.

I suspect when you get down to it essentially all video ads are worth zero on an ROI basis.  They cost too much to produce and run, never returning enough in profit (not sales) to cover their expense.  "Display" ads (e.g. through things like adsense) work in some cases.  Any sort of "aggressive" advertising does not work at all (e.g. pop-unders, pop-ups, etc) and pisses off more customers than it gains by a good margin, so it actually does you harm to use them or be associated with any property on the web that does.

This leaves aside the utterly-insane claims of what counts as a "viewed impression", which I found shocking.  50% of the pixels in view for one second counts as an "impression"?  Since when can you identify a specific product and/or brand in 1 second with half of whatever image obscured, and what would lead anyone to conclude that you should pay for such an "impression"?

You gotta be kidding me.

So why does a company like Facebook, which exists only because it claims such "ads" have value, in fact exist?  Well, to be blunt, there are a lot of suckers in the corporate world.

They "believe" that if their competitors buy an "ad" on a platform like this they have to as well.

For..... what, exactly?

See, my philosophy as a marketer is that if someone else wants to waste millions of dollars on a thing that gets them no sales (and certainly not enough profit to make back the millions of dollars they spend) I should let them do it and tattoo them with my materially lower cost of operation, which means I can beat them on price, the quality of what I sell or the Holy Grail of business: BOTH.

It stuns me that this hasn't sunk into the consciousness of marketing managers at our nation's businesses, both large and small.  Advertising that cannot provably bring in more gross profit than it costs to run with all costs accounted for is idiotic to purchase and further when it comes to being a Board Member or executive buying same violates your fiduciary duty to the firm's shareholders!

It's one thing to experiment with various forms of marketing -- you have to do that.  The world is always changing and so is the media.  What works in one place or on one day may not in a different place or on a different day.  But the numbers put forward in this link are damning, and the overhead alone makes the overall picture essentially impossible to pencil out.

Ever.

In short these digital media systems appear to exist simply to justify their own existence; the fact that they deliver alleged "advertising" is not the point, it's a side effect that just happens to be necessary to justify being there while grabbing 60 cents of every dollar off the top.

When you boil it all down the entire so-called "internet ad ecosystem" is a scam and thus all the firms that are connected to and dependent on it have an actual intrinsic value of zero.

We'll see how long it takes before all the modern-day Pets.coms have their moment of market recognition.

Good luck Zuckerpig and friends.  You're gonna need it.

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Jack_crabb
Posts: 5226
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Peoples' Republik of Maryland
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**** 'em all and let Satan sort them out.

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Molon Labe
Where is Henry Bowman when you need him?
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Lobo
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Quote:
Advertising that cannot provably bring in more gross profit than it costs to run with all costs accounted for is idiotic to purchase and further when it comes to being a Board Member or executive buying same violates your fiduciary duty to the firm's shareholders!


That is something that I have wondered about. How does a firm prove that the advertising they are doing provably brings in more gross profit than it costs. It applies to a lot of areas, but I'm thinking specifically about racing sponsorships. You pay to get your logo on the car and/or the driver's suit. How do you measure the change in gross profit given the fluctuation that normally occurs during a year? Focus groups and questionnaires?

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Village Idiot
Tickerguy
Posts: 149209
Incept: 2007-06-26
A True American Patriot!
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Well if you don't measure it somehow and aren't confident in the results you're an idiot.

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Winding it down.
Elkad
Posts: 289
Incept: 2009-09-04

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Paying for actual clickthroughs from an IP in a region you serve kinda makes sense. Impressions? Hell no.
Bhami
Posts: 57
Incept: 2009-03-12

Salt Lake City, UT
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There have long been companies that do just fine with no major advertising. Two examples: Hershey Chocolate decades ago, and Trader Joe's today (just their own ~monthly bulk-mail flyers).
Bagbalm
Posts: 5253
Incept: 2009-03-19

Just North of Detroit
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To show how little action you get here are the numbers on an ad campaign I'm running. This is on one book out of seventeen I'm offering right now.
It took 214,000 impressions to get 171 clicks.
Average cost per click was 16 cents. Right now I am running behind a bit.
I've spent $27.68 to get $24.95 in direct sales. I do get some lending of my books from the ads but there is no way to know how much, but it wouldn't take much to put me in the black. I generally make half of my income on books from lending fees instead of straight sales. This is typical. It has no significant effect on my volume. I pretty much don't bother anymore and kill the campaign if it falls behind.
Flappingeagle
Posts: 2621
Incept: 2011-04-14

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I have noticed that the ads I have been seeing seem to more and more be from marginal vendors instead of the big retailers. Perhaps the big boys are already figuring this out and abandoning Internet advertising.

Flap

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Roy
Posts: 1
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Peoples Commonwealth of Pennsylvania
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There are three levels of marketing:

Level 1 I just happen to be selling that which I have determined you need.

Level 2 I just happen to be selling that which the Government has mandated you must buy.

Level 3 I have an exclusive Government franchise to sell that which the Government has mandated must buy.

Level 3 is showing the greatest growth has no need for advertising.
Orionrising
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Incept: 2017-01-26

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I have always wondered about this in general, things like say coke vs pepsi. What actual effect does megabucks of advertising have on a low value bulk product that everyone already knows about and has tried.

as for internet advertising I have been seeing lots of full screen popovers.... that load slow... so they are up for a number of seconds... sure, but could I tell you what even one of them was for>? hell no, the only focus is finding and hitting the X...

I do see more sponsorships and free stuff going to youtube channels, especially new people they see potential in...
Ktrosper
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ft collins co
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TG wrote..
I should let them do it and tattoo them with mymaterially lower cost of operation
exactly. That which isn't economically viable won't last right? I'm anticipating the day that this online BS all but disappears.

Here is the Ad that Walmart is wasting on me - it's showing up when I hit drudge.. A couple of weeks ago I spent about 20 minutes searching out the specs on a faux fireplace - that I then went and bought it from my neighbor (still boxed) for $50 at his garage sale. I also googled around for how people are removing old faded decals from cars (learned about the eraser attachment for drill or grinder) and I then drove 2 blocks to Napa and asked for a "decal eraser" - I have no clue what brand I bought, All I can say is that it wasn't 3M and it wasn't from Walmart...

Here I am 2 weeks later and still seeing these worthless ads? Ha! Spectacular failure, IMO.




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The unexamined life is not worth living.-Socrates
The only stable state is the one in which all men are equal before the law.-Aristotle
Liberty exists now in the spaces government has not yet chosen to occupy.-Doc Zero
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Gantww
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Nashville, TN
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Looks like games are being played with TV advertisers as well....

https://www.cnet.com/news/report-tv-netw....


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Aztrader
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Scottsdale, AZ
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With margins so thin today, how can anyone make money this way.
Dudefish
Posts: 122
Incept: 2010-02-20

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Not to mention, a lot of ad revenue is from garbage like Stephen Hawking's amazing pill that will triple your IQ.
Ktrosper
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Incept: 2010-04-06

ft collins co
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Aztrader wrote..
With margins so thin today, how can anyone make money this way.
One things for sure, don't partake in BS/worthless ad campaigns so your costs remain lower than your idiot competitors who do.



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The unexamined life is not worth living.-Socrates
The only stable state is the one in which all men are equal before the law.-Aristotle
Liberty exists now in the spaces government has not yet chosen to occupy.-Doc Zero
I anticipate that 10 Dallas Cowboys Cheerleaders will blow me this evening.-K.D
Whitehat
Posts: 38
Incept: 2017-06-27

New York City
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In the mainstream business world you often track your advertising effectiveness by linking the particular ad venue to a discount such as a coupon or some other unique offer. This gives concrete measure of sales linked to the particular campaign. Radio ads often direct potential customers to a unique telephone number to call or a unique website to visit or least effectively a mention this offer or code number, whatever.

I have no competency to speak technically as to how to do this, but an online ad company or network that wanted to show its effectiveness would have a system in place to develop accurate metrics as to number of clicks to the client business and resulting sales. If you cannot measure it, you cannot manage it.

Whenever salesmen would offer my business some promotion and that it would generate such and such visibility I always demanded to know what kind of program that we were setting up to monitor the resulting visibility or business. I would rather pay them a commission per individual result rather than subscribe to something that might work. The ones with something to offer could always point to verifiable results with other businesses. A lot of my competitors paid for a lot of stuff that did not work as well as simply cold calling prospects.

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