6 ms·

This presupposes that this tracking heavy targeted advertising has positive ROI for these small businesses. Is there any evidence this is actually true?

by m-ee 6y ago

manigandham 6y ago
Yes. This question seems to come up constantly as if advertising is still some arcane art. Facebook and Google are incredibly good at this and have the valuations to show for it. Highly targeted advertising can produce great results and there was a time where Facebook was basically a money-printing machine for affiliate and ecommerce because it was so good at finding and reaching the perfect customer. This has become saturated and results have dissipated somewhat but it's still very strong.
- newfeatureok 6y ago
  I'd love to see some research about this from an unbiased source showing that targeted advertising produces great results in small businesses (<100 employees, or <5M revenue yearly).
  - ta1234567890 6y ago
    It would also be important to know, not if ads can produce great results, but how many companies do they provide great results for? Even better, what percentage of all business that run online ads get a positive return on their investment, and what is the average of that return. My personal experience is that it is pretty hard to get consistently good performance running campaigns on FB or Google. It requires a lot of learning and a lot of trial and error. On top of that, they constantly push you to spend more by giving you dubious recommendations on how to “improve” your campaigns. Very hard to believe that the average small business is actually capable of running good campaigns and consistently make money from them.
  - aardvarkr 6y ago
    Anecdotal but I’ve always heard from marketing friends that Facebook ads are hands down the best ads and yield many multiples of the cost of the ads
  - manigandham 6y ago
    What about all the actual small businesses that have positive ROAS? There are millions of them on Facebook's platform. What kind of other research are you looking for?
    - newfeatureok 6y ago
      Sure I'd love to see something concrete about the "actual small businesses that have positive ROAS." You have any research to cite? Keep in mind I'm talking about targeted advertising, not advertising in general.
- Retric 6y ago
  Small business are well known for making very poor decisions on average. Just look at Groupon and Food Delivery App XYZ. Moving lots of inventory at negative margins is much easier than doing so profitability, which is one of the reasons they so frequently fail.
  - manigandham 6y ago
    Sure, nothing prevents a business from making poor decisions that puts them out of business. Why is that specific to ads?
    - deleted 6y ago
      [deleted]
    - Retric 6y ago
      It was a question of ROI, and targeted ads are simply more difficult to use well. Putting up a large sign outside convince store is going to target people in the area well enough. Giant companies like Disney can easily produce different ads to target individual slices of the population for similar results. But, how well can a small river rafting company for example leverage demographics data? Meanwhile because some companies find this data useful they suddenly need to pay a premium, which just doesn’t seem likely to pay off on average.
      - manigandham 6y ago
        Ads aren't magic. When and how you use them has a significant impact on actual ROI, just like anything else in business. Part of the value of these adtech companies is that they can do most of the heavy lifting for you, so even small businesses can target and optimize without a large team. If you want to target river rafters then you can just target people with "river rafting, outdoors, adventurer, travel" interests, or followers of your page, or upload emails of existing customers. Then let Facebook find similar people automatically. It's that easy. Everything else being equal, targeted ads still do better than non-targeted ads. I don't see how this is so controversial.
- mattkrause 6y ago
  I'm not sure that answers the question. It's not impossible that Facebook and Google capture all of the value--or more--that their clients generate by running ads: Bob's Burgers runs $500/mo worth of ads, only generates $400 in (new) profit from them, but is afraid to stop because Paul's Pizza is also running ads and they might lose even more marketshare.
  - jamiequint 6y ago
    That's theoretically true but not true in reality, ask one of any of the thousands of new (in the last ~8 years, since FB launched lookalike targeting) businesses that grew to millions of dollars of revenue off of FB ads. I personally know at least 10 whose primary early growth mechanism was Facebook ads. They work.
    - mattkrause 6y ago
      As a counterpoint, you may be interested in this 2015 paper by Blake, Nosko, and Taldelis: https://www.nber.org/system/files/working_papers/w20171/w20171.pdf https://www.nber.org/system/files/working_papers/w20171/w201... They found that paid (i.e., ads) and unpaid traffic were nearly perfect substitutes for brand names: people will either to get to eBay. For non-brands, clicks go down, but sales don’t; ads are mostly attracting “browsers”, rather than buyers. The real answer is that it probably depends a lot on the industry, market, and individual business.
      - deleted 6y ago
        [deleted]
      - jamiequint 6y ago
        That paper is mostly referencing brand search at large companies which is completely different than lookalike ads for small, unknown companies. I'm not really sure how the comparison is relevant. If your point is that effective advertising strategies vary by company then I agree, but that is a tangential and meaningless point in the context of the above conversation.
llbeansandrice 6y ago
Yes. I know someone who runs a blog that shows ads. Since Google adwords/sense and modern targeted ads became a thing their revenue from the business has basically doubled if not more.
mattkrause 6y ago
ITT: Ad-tech people, talking up their own book.

This presupposes that this tracking heavy targeted advertising has positive ROI for these small businesses. Is there any evidence this is actually true?

by m-ee 6y ago

This presupposes that this tracking heavy targeted advertising has positive ROI for these small businesses. Is there any evidence this is actually true?

manigandham 6y ago

Yes. This question seems to come up constantly as if advertising is still some arcane art. Facebook and Google are incredibly good at this and have the valuations to show for it. Highly targeted advertising can produce great results and there was a time where Facebook was basically a money-printing machine for affiliate and ecommerce because it was so good at finding and reaching the perfect customer. This has become saturated and results have dissipated somewhat but it's still very strong.

newfeatureok 6y ago
I'd love to see some research about this from an unbiased source showing that targeted advertising produces great results in small businesses (<100 employees, or <5M revenue yearly).
- ta1234567890 6y ago
  It would also be important to know, not if ads can produce great results, but how many companies do they provide great results for? Even better, what percentage of all business that run online ads get a positive return on their investment, and what is the average of that return. My personal experience is that it is pretty hard to get consistently good performance running campaigns on FB or Google. It requires a lot of learning and a lot of trial and error. On top of that, they constantly push you to spend more by giving you dubious recommendations on how to “improve” your campaigns. Very hard to believe that the average small business is actually capable of running good campaigns and consistently make money from them.
- aardvarkr 6y ago
  Anecdotal but I’ve always heard from marketing friends that Facebook ads are hands down the best ads and yield many multiples of the cost of the ads
- manigandham 6y ago
  What about all the actual small businesses that have positive ROAS? There are millions of them on Facebook's platform. What kind of other research are you looking for?
  - newfeatureok 6y ago
    Sure I'd love to see something concrete about the "actual small businesses that have positive ROAS." You have any research to cite? Keep in mind I'm talking about targeted advertising, not advertising in general.
Retric 6y ago
Small business are well known for making very poor decisions on average. Just look at Groupon and Food Delivery App XYZ. Moving lots of inventory at negative margins is much easier than doing so profitability, which is one of the reasons they so frequently fail.
- manigandham 6y ago
  Sure, nothing prevents a business from making poor decisions that puts them out of business. Why is that specific to ads?
  - deleted 6y ago
    [deleted]
  - Retric 6y ago
    It was a question of ROI, and targeted ads are simply more difficult to use well. Putting up a large sign outside convince store is going to target people in the area well enough. Giant companies like Disney can easily produce different ads to target individual slices of the population for similar results. But, how well can a small river rafting company for example leverage demographics data? Meanwhile because some companies find this data useful they suddenly need to pay a premium, which just doesn’t seem likely to pay off on average.
    - manigandham 6y ago
      Ads aren't magic. When and how you use them has a significant impact on actual ROI, just like anything else in business. Part of the value of these adtech companies is that they can do most of the heavy lifting for you, so even small businesses can target and optimize without a large team. If you want to target river rafters then you can just target people with "river rafting, outdoors, adventurer, travel" interests, or followers of your page, or upload emails of existing customers. Then let Facebook find similar people automatically. It's that easy. Everything else being equal, targeted ads still do better than non-targeted ads. I don't see how this is so controversial.
mattkrause 6y ago
I'm not sure that answers the question. It's not impossible that Facebook and Google capture all of the value--or more--that their clients generate by running ads: Bob's Burgers runs $500/mo worth of ads, only generates $400 in (new) profit from them, but is afraid to stop because Paul's Pizza is also running ads and they might lose even more marketshare.
- jamiequint 6y ago
  That's theoretically true but not true in reality, ask one of any of the thousands of new (in the last ~8 years, since FB launched lookalike targeting) businesses that grew to millions of dollars of revenue off of FB ads. I personally know at least 10 whose primary early growth mechanism was Facebook ads. They work.
  - mattkrause 6y ago
    As a counterpoint, you may be interested in this 2015 paper by Blake, Nosko, and Taldelis: https://www.nber.org/system/files/working_papers/w20171/w20171.pdf https://www.nber.org/system/files/working_papers/w20171/w201... They found that paid (i.e., ads) and unpaid traffic were nearly perfect substitutes for brand names: people will either to get to eBay. For non-brands, clicks go down, but sales don’t; ads are mostly attracting “browsers”, rather than buyers. The real answer is that it probably depends a lot on the industry, market, and individual business.
    - deleted 6y ago
      [deleted]
    - jamiequint 6y ago
      That paper is mostly referencing brand search at large companies which is completely different than lookalike ads for small, unknown companies. I'm not really sure how the comparison is relevant. If your point is that effective advertising strategies vary by company then I agree, but that is a tangential and meaningless point in the context of the above conversation.

llbeansandrice 6y ago

Yes. I know someone who runs a blog that shows ads. Since Google adwords/sense and modern targeted ads became a thing their revenue from the business has basically doubled if not more.

mattkrause 6y ago

ITT: Ad-tech people, talking up their own book.