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This is a rather unimpressive article. Yes, brand advertising is a disaster, just like it has always been. But to say that all digital advertising has unknown

by tacon 7y ago

This is a rather unimpressive article. Yes, brand advertising is a disaster, just like it has always been. But to say that all digital advertising has unknown ROI is ridiculous. Digital direct response advertising allows very accurate ROI calculations. (Admittedly, a lot of advertisers are not applying the tools to their advantage. They call that the "Google stupid tax". Ditto these days on Facebook.) And direct response advertising is nothing new. Mail order guys were cleaning up by running early (expensive!) experiments that showed if they were going to go out of business. Oddly enough, when you have skin in the game, you follow the money much more closely. Who knew? The fact that golf course brand advertising deals don't pay off is not news. They never have much. The bad news for digital direct response advertising is that the platforms are starting to remove the knobs that actually let people determine and optimize their ROI. Google is in the process of actively removing ad functionality and data that has, historically, been crucial to ad profitability. Google claims their machine learning can see much more of the data available, so "trust us." Perry Marshall, Google ads guru, has recently held several webinars about "Why Google is Objectively Evil."[0] Not pretty. [0] https://www.perrymarshall.com/60-second/gama-replay/ https://www.perrymarshall.com/60-second/gama-replay/

jessefrederik 7y ago
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 distributed by this particular kid. The other two can’t make any sense of it: how does he do it? When they ask him, he explains: "I stand in the waiting area of the pizzeria." It’s plain to see that junior’s no marketing whiz. Pizzerias do not attract more customers by giving coupons to people already planning to order a quattro stagioni five minutes from now." It's the same in online marketing, you often target people who are searching for say a pair of shoes. People who are searching for shoes have way higher baseline probabilities of ending up buying a pair of Nikes, whether you show them a Nike ad or not. So if you do not correct for this 'selection bias', you have no idea what your ad did. The research I describe in the article clearly shows (and please look it up yourself, the links are all there) that selection bias is HUGE, and that it's hard to know ROI, because true advertising effects are tiny if you measure them in an experiment.
- PetahNZ 7y ago
  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.
  - zwaps 7y ago
    Really not that easy, except if you can everything the same, aka go back in time. Otherwise, causal inference is sadly not easy.
    - DoctorOetker 7y ago
      thats why seller should modulate buying ads with a random stream of bits, such that the impulse response (of linearized approximation in tangent space for sales / advertising dollar) can be estimated. of course if the advertisement platform is simultaneously a dominant search engine, they can simply choose to directly modulate your discoverability through the search engine, in which case it is closer to extortion as others point out. as a potential buyer, I'd much rather have (economical) censorship free decentralized platform where every manufacturer / seller can advertise products / parts with relevant specifications / metrics. Think DigiKey, but without a central arbiter. Obviously a lot of products that are actually superior are superior because they have a better understanding of what people need than what conventional metrics show (say not just the cheapest capacitor, but perhaps the cheapest capacitance divided by electric series resistance or whatever, for a certain niche use). This would result in placing the burden of comparing products among the manufacturers, who will also make up original but useless metric formulas with the sole purpouse of making their product rank highest. So instead of having to browse products, people are browsing metrics, and it's up to both manufacturers and end users to communicate the utility of each end metric. Something I don't like about the parts selectors like DigiKey et al, is that I can filter and rank according to proposed properties / columns, but I can't enter a formula in terms of properties, to show me the highest ranking. I always end up having to download and scrape the full list of parts so I can perform this ranking in a spreadsheet... If their search fields allowed formulas, and if people were logged in, the manufacturers / resellers could contact you to find out what made you formulate this specific metric or loss function, which gives feedback to the manufacturers what buyers are interested in. It would also give the sellers opportunity to correct the buyer that in his or her design the buyers' metric is faulty, and point out why...
ACow_Adonis 7y ago
By my reading, direct marketing was LITERALLY the example used in the article that showed some of the dodgy reasoning/metrics behind common measurements of marketing success :/
buboard 7y ago
> Digital direct response advertising allows very accurate ROI calculations How many ads are direct response? How many are simply clicked because they are just above the same website's entry in search results (i.e. users were already heading to that site, the ad was just there as google tax)? How many legitimate clicks on an ad that did not led to sale are discarded by google as "invalid clicks" (my adsense report has 20% invalid clicks) ? It's kind of shocking that the internet's most lucrative market does not answer those
- dorgo 7y ago
  >(i.e. users were already heading to that site, the ad was just there as google tax)? I saw research which indicates that it is a good idea to pay the google tax. Users heading to your site may get distracted by your competitors or other stuff. The more ads are shown the less organic results (which are not easy to control) are visible without scrolling. In best case, the search results are showing your ad immadiately followed by your organic result, making up the whole screen real estate. Wherever the user clicks, he ends up on your site. Also, cost per click tends to be lower for brand search terms.
mochomocha 7y ago
Google removes targeting knobs because despite what marketers think, humans consistently underperform algorithms when it comes to targeting. Typically, the people tweaking the knobs have reverse incentives because they don't want their jobs to be automated so they love these knobs. But they are just constraints on the bidding systems that end up delivering poorer performance of the campaigns. YMMV but for the vast majority of campaigns, the algorithm does know better. Disclaimer: I've built bidding systems for multiple ad companies, so I'm surely biased towards "the algorithm knows better".
- dorgo 7y ago
  I think it's not about whether algorithms are better than humans. It's about whose profits these algorithms optimize. Google's algorithms tend to optimize Google's profits. Advertisers utilize algorithms too. But it gets more difficult when Google removes/limits access to information and knobs.
  - mochomocha 7y ago
    I agree. Third party ad companies bidding on behalf of advertisers for the best inventory have incentives more aligned with advertisers IMO (as opposed to Google and FB who tend to side with publishers since they control inventory). The main caveat is that it comes at a privacy cost (broadcasting cookie information on ad exchanges).

by tacon 7y ago

jessefrederik 7y ago

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 distributed by this particular kid. The other two can’t make any sense of it: how does he do it? When they ask him, he explains: "I stand in the waiting area of the pizzeria." It’s plain to see that junior’s no marketing whiz. Pizzerias do not attract more customers by giving coupons to people already planning to order a quattro stagioni five minutes from now." It's the same in online marketing, you often target people who are searching for say a pair of shoes. People who are searching for shoes have way higher baseline probabilities of ending up buying a pair of Nikes, whether you show them a Nike ad or not. So if you do not correct for this 'selection bias', you have no idea what your ad did. The research I describe in the article clearly shows (and please look it up yourself, the links are all there) that selection bias is HUGE, and that it's hard to know ROI, because true advertising effects are tiny if you measure them in an experiment.

PetahNZ 7y ago
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.
- zwaps 7y ago
  Really not that easy, except if you can everything the same, aka go back in time. Otherwise, causal inference is sadly not easy.
  - DoctorOetker 7y ago
    thats why seller should modulate buying ads with a random stream of bits, such that the impulse response (of linearized approximation in tangent space for sales / advertising dollar) can be estimated. of course if the advertisement platform is simultaneously a dominant search engine, they can simply choose to directly modulate your discoverability through the search engine, in which case it is closer to extortion as others point out. as a potential buyer, I'd much rather have (economical) censorship free decentralized platform where every manufacturer / seller can advertise products / parts with relevant specifications / metrics. Think DigiKey, but without a central arbiter. Obviously a lot of products that are actually superior are superior because they have a better understanding of what people need than what conventional metrics show (say not just the cheapest capacitor, but perhaps the cheapest capacitance divided by electric series resistance or whatever, for a certain niche use). This would result in placing the burden of comparing products among the manufacturers, who will also make up original but useless metric formulas with the sole purpouse of making their product rank highest. So instead of having to browse products, people are browsing metrics, and it's up to both manufacturers and end users to communicate the utility of each end metric. Something I don't like about the parts selectors like DigiKey et al, is that I can filter and rank according to proposed properties / columns, but I can't enter a formula in terms of properties, to show me the highest ranking. I always end up having to download and scrape the full list of parts so I can perform this ranking in a spreadsheet... If their search fields allowed formulas, and if people were logged in, the manufacturers / resellers could contact you to find out what made you formulate this specific metric or loss function, which gives feedback to the manufacturers what buyers are interested in. It would also give the sellers opportunity to correct the buyer that in his or her design the buyers' metric is faulty, and point out why...

ACow_Adonis 7y ago

By my reading, direct marketing was LITERALLY the example used in the article that showed some of the dodgy reasoning/metrics behind common measurements of marketing success :/

buboard 7y ago

> Digital direct response advertising allows very accurate ROI calculations How many ads are direct response? How many are simply clicked because they are just above the same website's entry in search results (i.e. users were already heading to that site, the ad was just there as google tax)? How many legitimate clicks on an ad that did not led to sale are discarded by google as "invalid clicks" (my adsense report has 20% invalid clicks) ? It's kind of shocking that the internet's most lucrative market does not answer those

dorgo 7y ago
>(i.e. users were already heading to that site, the ad was just there as google tax)? I saw research which indicates that it is a good idea to pay the google tax. Users heading to your site may get distracted by your competitors or other stuff. The more ads are shown the less organic results (which are not easy to control) are visible without scrolling. In best case, the search results are showing your ad immadiately followed by your organic result, making up the whole screen real estate. Wherever the user clicks, he ends up on your site. Also, cost per click tends to be lower for brand search terms.

mochomocha 7y ago

Google removes targeting knobs because despite what marketers think, humans consistently underperform algorithms when it comes to targeting. Typically, the people tweaking the knobs have reverse incentives because they don't want their jobs to be automated so they love these knobs. But they are just constraints on the bidding systems that end up delivering poorer performance of the campaigns. YMMV but for the vast majority of campaigns, the algorithm does know better. Disclaimer: I've built bidding systems for multiple ad companies, so I'm surely biased towards "the algorithm knows better".

dorgo 7y ago
I think it's not about whether algorithms are better than humans. It's about whose profits these algorithms optimize. Google's algorithms tend to optimize Google's profits. Advertisers utilize algorithms too. But it gets more difficult when Google removes/limits access to information and knobs.
- mochomocha 7y ago
  I agree. Third party ad companies bidding on behalf of advertisers for the best inventory have incentives more aligned with advertisers IMO (as opposed to Google and FB who tend to side with publishers since they control inventory). The main caveat is that it comes at a privacy cost (broadcasting cookie information on ad exchanges).