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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) business

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
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- 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.
  - mattkrause 6y ago
    You pointed out a niche where internet ads apparently worked well (though isn’t some of that just survivorship bias?) I found the eBay data interesting because AI had assumed that they would have a fairly sophisticated online operation, and yet neither the branded nor non-brand ads really helped (for the latter, removing ads led to -40% on clicks, but -2% on sales). I can’t imagine that the neighborhood pizza place is really doing a top-notch job on ad attribution; it seems a heck of a lot more likely that they throw a few ads up because everyone else does too.
    - jamiequint 6y ago
      That “niche” is the reason Shopify is a 100+ billion dollar company. With respect to eBay, proving someone sucks at running ads isn’t the same as proving ads suck. (also it matters a lot more what % of sales the ads in this case represented, rather than just the absolute change in sales). I agree with you about the neighborhood businesses fwiw.

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.
- mattkrause 6y ago
  You pointed out a niche where internet ads apparently worked well (though isn’t some of that just survivorship bias?) I found the eBay data interesting because AI had assumed that they would have a fairly sophisticated online operation, and yet neither the branded nor non-brand ads really helped (for the latter, removing ads led to -40% on clicks, but -2% on sales). I can’t imagine that the neighborhood pizza place is really doing a top-notch job on ad attribution; it seems a heck of a lot more likely that they throw a few ads up because everyone else does too.
  - jamiequint 6y ago
    That “niche” is the reason Shopify is a 100+ billion dollar company. With respect to eBay, proving someone sucks at running ads isn’t the same as proving ads suck. (also it matters a lot more what % of sales the ads in this case represented, rather than just the absolute change in sales). I agree with you about the neighborhood businesses fwiw.