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A very easy way to break this argument is to not look at huge known companies like eBay and Amazon, but brand new companies 1-2 years old that have grown almost

A very easy way to break this argument is to not look at huge known companies like eBay and Amazon, but brand new companies 1-2 years old that have grown almost entirely by online ads. Eventually word of mouth kicks in, but there are plenty of smart operators that built their entire brand and revenue off of ads. Works best in online direct to consumer brands.

onion2k 7y ago
...there are plenty of smart operators that built their entire brand and revenue off of ads. Can you name one? I find it very hard to believe there are any companies that have scaled up only using online adverts. Why would the founders of a business do that when they can grow in their local market by talking to people as well as buying online ads for wider reach?
- jefftk 7y ago
  Here's one I worked on when I was at CogoLabs: https://venturefizz.com/deals/autotegrity-acquired-adp https://venturefizz.com/deals/autotegrity-acquired-adp
- robryan 7y ago
  This wouldn't be too uncommon in branded ecommerce. If you are selling well known brands it is going to be very hard to get decent organic search rankings for them in the short term.
- niknikson 7y ago
  Wayfair - you can listen to the NPR podcast "How I built this" where they talk about building their entire business around domain names and pay-per-click advertising (7 billion market cap).
- josephjrobison 7y ago
  MVMT Watches, Boll & Branch, Casper, so many DTCs. Yes at some point word of mouth kicks in!
kposehn 7y ago
Reliably someone comes along every few months to question digital ads. I always come back to analyses of incrementality as the real proof. Take an audience of X people. Divide them in two. Show ads to your test group, don't show to control. Watch your business grow and gauge the lift between the two audiences. The companies that know how to advertise at scale do this constantly and can gauge the real effect of their ad dollars. Facebook, Google and others make these tests possible in their platforms, while other software suites such as Impact Altitude and VisualIQ allow you to do this kind of analysis and testing as well. In the end, most of it proves out to be incremental. There are notable exceptions of course, but when are there not?
- matheusmoreira 7y ago
  > Take an audience of X people. Divide them in two. Show ads to your test group, don't show to control. Watch your business grow and gauge the lift between the two audiences. So advertising industries use people as guinea pigs to study the "real effect of their ad dollars". No ethics committee, no informed consent, nothing. Yet another reason to block all ads.
  - ryan93 7y ago
    Hyperbolic.
  - jefftk 7y ago
    If you can ethically do something (show ads) or not do something (not show ads) it's equally ethical to run an experiment where you do the thing some of the time and measure the effect. Internet companies run A/B tests all the time, and it's not controversial.
- switzer 7y ago
  Agree. I have used the term "incrementality" to communicate the incremental benefit of a given ad compared to a control whereas the article uses "advertising effect". Measurement is also difficult because every ad platform grades their own homework (they each have analytics that attributes sales to their platforms liberally). It is important for a brand to have their own attribution platform that measures incrementality as well as the relative contribution each ad exposure makes toward a given sale. Both of these things are possible to measure. The problem is that the band of users that display positive ROI (when incrementality is measured) is so small that people don't believe the data. Additionally, brand exposure is hard to measure and almost completely ignored in digital advertising. Over time I imagine that there will be more research in this area (beyond just measuring an in-view ad impression)
H8crilA 7y ago
Yeah the golden egg may be in long term influence of advertising, which is super hard to measure.
nopriorarrests 7y ago
This is a very interesting point, which in fact plays in defense of original article. Bob Hoffmann, very influential figure in advertising (http://adcontrarian.blogspot.com/ http://adcontrarian.blogspot.com/) likes to point out that there were not that many companies which built their strong brand with online advertising only. OK, he is old and grumpy dude and he dislikes online ads, but this is a fair point. Once company becomes big enough, it strives to buy a Super Bowl ad spot. And we are well into 10 years of internet being mainstream media, but how many brands were built online only? Not that much, and I'm saying it as "online ads work", kind of guy.
- Supermancho 7y ago
  I can name a handful that I've never seen an ad for on TV or in print (or maybe 3 or 4 years after using them). Twitter, DoorDash, Lyft...compared to SkipTheDishes in Canada, which has commercials on during SNL but maybe it's already hit peak internet marketing there, or maybe more appropriately GoDaddy which wasn't much until their Superbowl ad.
  - hgskncrimcss 7y ago
    Google Twitter, DoorDash, and Lyft + billboard. Just one example, they all do plenty of non-online advertising.
buboard 7y ago
the article isnt making the point that there is no value in advertising, but that it's highly overstated. One really needs ads - the 're a very effective way to reach users. But after that initial push, does spending more really return more?
- bigger_cheese 7y ago
  One thing I've always thought about ads is the subconscious impact that they have of building brand recognition and awareness. Especially for something which would typically be purchased infrequently or irregularly. I might be at a grocery store and I need to purchase something like dishwashing liquid. If I'm staring at two brands on the shelf priced identically (or near enough) I'm more likely to purchase the brand I recognize over a brand I've never heard of. How do I recognize the brand - from advertising. That is not something you can measure with tracking metrics embedded into a banner ad. I'm sure there must be studies on impact this has. The other thing I suspect online advertising works very well for is service based businesses, the kinds of things you used to look up in a phonebook. The last time I needed to find a plumber I typed my suburb name + plumber into search engine I imagine a lot of people do similar.
  - mehh 7y ago
    This is exactly why TV advertising is still important to those brands!
sfifs 7y ago
Another thing marketers in US and to a certain extent Europe fail to see is how digital has evolved in Asia and think through what it means for their own work. The same marketing giants which spend 90% of the hundreds of millions of dollars per brand per year on TV in the US spend 90% in digital in China and are increasingly shifting in other Asia markets. This reflects shifting consumer time spent on vehicle. Now big company marketers are used to thinking of US as a homogeneous market for efficiency reasons and so TV still works in US if your target audience claims a broad demographic. However, they're beginning to learn that you'll simply not reach enough consumers if your target demographic is say young adults in the West coast if you do a TV heavy plan. US in general lags China in media landscape shift but the media behavior of the more valuable demographics are actually much closer to China than averages tell you.

onion2k 7y ago

...there are plenty of smart operators that built their entire brand and revenue off of ads. Can you name one? I find it very hard to believe there are any companies that have scaled up only using online adverts. Why would the founders of a business do that when they can grow in their local market by talking to people as well as buying online ads for wider reach?

jefftk 7y ago
Here's one I worked on when I was at CogoLabs: https://venturefizz.com/deals/autotegrity-acquired-adp https://venturefizz.com/deals/autotegrity-acquired-adp
robryan 7y ago
This wouldn't be too uncommon in branded ecommerce. If you are selling well known brands it is going to be very hard to get decent organic search rankings for them in the short term.
niknikson 7y ago
Wayfair - you can listen to the NPR podcast "How I built this" where they talk about building their entire business around domain names and pay-per-click advertising (7 billion market cap).
josephjrobison 7y ago
MVMT Watches, Boll & Branch, Casper, so many DTCs. Yes at some point word of mouth kicks in!

kposehn 7y ago

Reliably someone comes along every few months to question digital ads. I always come back to analyses of incrementality as the real proof. Take an audience of X people. Divide them in two. Show ads to your test group, don't show to control. Watch your business grow and gauge the lift between the two audiences. The companies that know how to advertise at scale do this constantly and can gauge the real effect of their ad dollars. Facebook, Google and others make these tests possible in their platforms, while other software suites such as Impact Altitude and VisualIQ allow you to do this kind of analysis and testing as well. In the end, most of it proves out to be incremental. There are notable exceptions of course, but when are there not?

matheusmoreira 7y ago
> Take an audience of X people. Divide them in two. Show ads to your test group, don't show to control. Watch your business grow and gauge the lift between the two audiences. So advertising industries use people as guinea pigs to study the "real effect of their ad dollars". No ethics committee, no informed consent, nothing. Yet another reason to block all ads.
- ryan93 7y ago
  Hyperbolic.
- jefftk 7y ago
  If you can ethically do something (show ads) or not do something (not show ads) it's equally ethical to run an experiment where you do the thing some of the time and measure the effect. Internet companies run A/B tests all the time, and it's not controversial.
switzer 7y ago
Agree. I have used the term "incrementality" to communicate the incremental benefit of a given ad compared to a control whereas the article uses "advertising effect". Measurement is also difficult because every ad platform grades their own homework (they each have analytics that attributes sales to their platforms liberally). It is important for a brand to have their own attribution platform that measures incrementality as well as the relative contribution each ad exposure makes toward a given sale. Both of these things are possible to measure. The problem is that the band of users that display positive ROI (when incrementality is measured) is so small that people don't believe the data. Additionally, brand exposure is hard to measure and almost completely ignored in digital advertising. Over time I imagine that there will be more research in this area (beyond just measuring an in-view ad impression)

H8crilA 7y ago

Yeah the golden egg may be in long term influence of advertising, which is super hard to measure.

nopriorarrests 7y ago

This is a very interesting point, which in fact plays in defense of original article. Bob Hoffmann, very influential figure in advertising (http://adcontrarian.blogspot.com/ http://adcontrarian.blogspot.com/) likes to point out that there were not that many companies which built their strong brand with online advertising only. OK, he is old and grumpy dude and he dislikes online ads, but this is a fair point. Once company becomes big enough, it strives to buy a Super Bowl ad spot. And we are well into 10 years of internet being mainstream media, but how many brands were built online only? Not that much, and I'm saying it as "online ads work", kind of guy.

Supermancho 7y ago
I can name a handful that I've never seen an ad for on TV or in print (or maybe 3 or 4 years after using them). Twitter, DoorDash, Lyft...compared to SkipTheDishes in Canada, which has commercials on during SNL but maybe it's already hit peak internet marketing there, or maybe more appropriately GoDaddy which wasn't much until their Superbowl ad.
- hgskncrimcss 7y ago
  Google Twitter, DoorDash, and Lyft + billboard. Just one example, they all do plenty of non-online advertising.

buboard 7y ago

the article isnt making the point that there is no value in advertising, but that it's highly overstated. One really needs ads - the 're a very effective way to reach users. But after that initial push, does spending more really return more?

bigger_cheese 7y ago
One thing I've always thought about ads is the subconscious impact that they have of building brand recognition and awareness. Especially for something which would typically be purchased infrequently or irregularly. I might be at a grocery store and I need to purchase something like dishwashing liquid. If I'm staring at two brands on the shelf priced identically (or near enough) I'm more likely to purchase the brand I recognize over a brand I've never heard of. How do I recognize the brand - from advertising. That is not something you can measure with tracking metrics embedded into a banner ad. I'm sure there must be studies on impact this has. The other thing I suspect online advertising works very well for is service based businesses, the kinds of things you used to look up in a phonebook. The last time I needed to find a plumber I typed my suburb name + plumber into search engine I imagine a lot of people do similar.
- mehh 7y ago
  This is exactly why TV advertising is still important to those brands!

sfifs 7y ago

Another thing marketers in US and to a certain extent Europe fail to see is how digital has evolved in Asia and think through what it means for their own work. The same marketing giants which spend 90% of the hundreds of millions of dollars per brand per year on TV in the US spend 90% in digital in China and are increasingly shifting in other Asia markets. This reflects shifting consumer time spent on vehicle. Now big company marketers are used to thinking of US as a homogeneous market for efficiency reasons and so TV still works in US if your target audience claims a broad demographic. However, they're beginning to learn that you'll simply not reach enough consumers if your target demographic is say young adults in the West coast if you do a TV heavy plan. US in general lags China in media landscape shift but the media behavior of the more valuable demographics are actually much closer to China than averages tell you.