4 ms·

I wonder if the only tangible value in advertisement isn't to increase your revenue by convincing consumers to buy your product, but to decrease your competitor

by qppo 6y ago

I wonder if the only tangible value in advertisement isn't to increase your revenue by convincing consumers to buy your product, but to decrease your competitors' by convincing consumers they don't exist.

Nasrudith 6y ago
Advertising spending is already recognized as sort of a prisoner's dilemma so even if not literally true the effect are similar. Barring existing infamy or a backfire that makes them worse than generic like say Evony a sole advertising party would be priveledged in name recognition but if everyone does it is just an expense boost to enter in the red queen's race.
wastedhours 6y ago
That's the case for a lot of FMCG marketing - the aim isn't to drive immediate conversion, but to be so pervasive you take up all of the possible mental capacity a user has for (example) a "cola brand".
jlbnjmn 6y ago
A lot of people use Google to find things. A lot of those people click the first search result that matches what they're looking for (low cost, certain feature, prestige, there's no right answer, just right answer for them). Some of those clicks are for products and services with short buying/lead gen cycles. Once they've clicked, many are only going back if they don't like what they find. The value of search ads is being the link they clicked. You can buy that click. You can literally insert your website into a demand/supply match. If you don't mess it up after they click, those clicks become transactions. In dollars. Oil changes are a great example. Some of the people who type "oil change near me" in maps don't really care about the brand. They click the top result, schedule an appointment, and get their oil changed. If the click was $3 and it took 10 people/bots clicking to set one appointment, that's $30. Now let's say the oil change is $39 so profit is ($39 - oil $7, - filter $3, - labor $5, - ads $30) = -$6 before the cost of skilled advertiser. Are those ads profitable? It depends. If you can upsell 1/10 on replacing a cabin air filter for 10x cost, then yes. Every other upsell becomes profit. Also, at a car dealership you can sell 3-5% a car while they're there for a nice $1700-$3200 profit, which nicely covers the cost of the skilled advertiser.
- qppo 6y ago
  A huge point of the article is that valuing search ads like that is highly susceptible to selection bias. My point was that the value of an ad is to displace other ads, in other words the measurement you look for isn't how many people click through to your site for an oil change but how many do so instead of the next guy.
donclark 6y ago
Wouldnt this further a problem? Or at best this is a one-sided solution.

by qppo 6y ago

Nasrudith 6y ago

Advertising spending is already recognized as sort of a prisoner's dilemma so even if not literally true the effect are similar. Barring existing infamy or a backfire that makes them worse than generic like say Evony a sole advertising party would be priveledged in name recognition but if everyone does it is just an expense boost to enter in the red queen's race.

wastedhours 6y ago

That's the case for a lot of FMCG marketing - the aim isn't to drive immediate conversion, but to be so pervasive you take up all of the possible mental capacity a user has for (example) a "cola brand".

jlbnjmn 6y ago

A lot of people use Google to find things. A lot of those people click the first search result that matches what they're looking for (low cost, certain feature, prestige, there's no right answer, just right answer for them). Some of those clicks are for products and services with short buying/lead gen cycles. Once they've clicked, many are only going back if they don't like what they find. The value of search ads is being the link they clicked. You can buy that click. You can literally insert your website into a demand/supply match. If you don't mess it up after they click, those clicks become transactions. In dollars. Oil changes are a great example. Some of the people who type "oil change near me" in maps don't really care about the brand. They click the top result, schedule an appointment, and get their oil changed. If the click was $3 and it took 10 people/bots clicking to set one appointment, that's $30. Now let's say the oil change is $39 so profit is ($39 - oil $7, - filter $3, - labor $5, - ads $30) = -$6 before the cost of skilled advertiser. Are those ads profitable? It depends. If you can upsell 1/10 on replacing a cabin air filter for 10x cost, then yes. Every other upsell becomes profit. Also, at a car dealership you can sell 3-5% a car while they're there for a nice $1700-$3200 profit, which nicely covers the cost of the skilled advertiser.

qppo 6y ago
A huge point of the article is that valuing search ads like that is highly susceptible to selection bias. My point was that the value of an ad is to displace other ads, in other words the measurement you look for isn't how many people click through to your site for an oil change but how many do so instead of the next guy.

donclark 6y ago

Wouldnt this further a problem? Or at best this is a one-sided solution.