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> Does it not follow then that advertisers are saving billions of dollars? No — if the targeting is less effective, the advertisers are not getting the same in

> Does it not follow then that advertisers are saving billions of dollars? No — if the targeting is less effective, the advertisers are not getting the same incremental value from the ads. The ads are cheap, but draw in less total revenue for the company, saving nothing. The bid prices are just lower on untargeted ad slots, adjusting to the lower CPM / lower lift. Edit: Truly, the best part of HN are the Dunning-Kruger programmers who once read a substack post about advertising, and now believe they have deep hidden insight that a hundred thousand marketing professionals, running marketing campaigns as their job, every day, have not figured out — aha, internet advertising doesn't work!

thehours 5y ago
Given how rampant ad fraud is in programmatic, I wonder how much revenue actually drops for these companies, relative to the decreased ad spend. Uber’s [1] experience is one example: “We turned off two thirds of our ad spend – $100m out of annual spend of $150m – and basically saw no change in our number of rider app installs. What we saw is a lot of installs we thought had come through paid channels suddenly came through organic.” [1] https://mackgrenfell.com/blog/how-did-uber-waste-so-much-ad-money https://mackgrenfell.com/blog/how-did-uber-waste-so-much-ad-...
- toast0 5y ago
  Even without ad fraud, you have things like user wants to install Uber, so searches for Uber in a web search. First link on the page is an ad to install Uber, maybe a couple more ads, then first organic search result is a link to the Uber home page, and maybe the second result is to install it. If the ad weren't there, the user would probably install organically, but since it's there and at the top of the page, it's likely to get clicked and cost money.
  - xuki 5y ago
    The ad in that case is to prevent Lyft from getting that ad spot. Fucked up, I know.
    - JohnJamesRambo 5y ago
      The google shakedown- "It'd be terrible if ya know Lyft, got that top spot..."
    - xxpor 5y ago
      How is that fucked up? There's a certain number of slots, and someone is going to fill them. It's like in a grocery store. If Kellogg's doesn't offer Kroger a price they like, they'll just stock General Mills instead... that's just business.
chmod775 5y ago
> No — if the targeting is less effective, the advertisers are not getting the same incremental value from the ads. I mean... No again. Kinda. Advertising isn't magically gonna make money appear in the pockets of your customers. Advertising influences how people distribute their income, influencing them this way or that (at least that's the goal). If advertising becomes worse for everyone, which it did, those weights are just scaled by a fixed amount, arriving at the same end result. The only winners are those who didn't advertise at all and only competed only on value. Those may see an uptick.
- dividedbyzero 5y ago
  Not sure; targeted ads can work pretty well for small niche businesses, getting the same amount of conversions through untargeted ads may not be feasible. I could imagine those getting hit harder by this change than, say, Uber, so probably not quite the same end result.
  - chmod775 5y ago
    I could see that. But you can still effectively target niches with contextual ads.
    - dividedbyzero 5y ago
      Definitely. Is that something you can buy right now? I was under the impression there was little to nothing substantial in between untargeted and programmatic these days
      - morelisp 5y ago
        We've been slowly refactoring our products to offer more contextual possibilities (building more aggregations by domains, keywords, etc. instead of audiences). No one is interested in buying.
        tormeh 5y ago
danShumway 5y ago
Maybe you're right. But if less advertising means that less money is going into businesses, then ads don't make products free, because they increase consumer spending and decrease the efficiency of consumer spending. If what you're saying is true, then advertising has a tangible cost for consumers. There are three possible theories about how advertising works: A) Advertising increases consumer spending and makes consumers spend dollars less efficiently based on attributes like branding that are unrelated to quality. In which case, all of this "advertising makes apps free" talk has been really deceptive, because consumers who are viewing ads are spending more money for worse/inflated products to compensate. In this world, it's worth asking what the costs of advertising are and whether we want it to be the primary way of funding the Internet. OR B) Consumer spending/efficiency doesn't change, consumers are smart enough to buy the best product anyway, and the only thing that changes is which companies get that money and have brand recognition. In which case, it starts to become difficult to argue that consumers opting out of ads they don't want to see is particularly harmful. In the world where advertising is just making people aware of new information and helping them make informed purchasing choices, then it's probably a good thing that across the board everyone is being forced to cut down on the pointless noise that amounts to companies trying to scream over each other and increasingly hyper-target people in creepy ways. If advertising does not increase consumer spending, and if everyone is reducing spending and effectiveness by the same amount on iOS, then this should be good for advertisers -- they'll spend less money on ads, and consumers will still spend the same amount of money themselves. The only reason that wouldn't be the case is if highly targeted ads actually changes consumer behavior and spending habits in meaningful ways -- but if we admit that, we need to admit that the advertising industry is a lot more problematic and a lot less "free" for consumers than it likes to claim. OR C) Advertising is a public good, and consumers actually want to know about these products, and ultimately people want targeted ads. But this is obviously not the case for the majority of advertising. If it was the case, than iOS's changes wouldn't be a big deal. If consumers want targeted ads, they have the option to keep allowing them in iOS. The whole reason we're in this situation is because consumers have overwhelmingly demonstrated that they do not want targeted ads. So at best, the advertising industry can position itself as a kind of metaphorical "vegetable", claiming that everyone hates them but ultimately the world would be better if more things were commercialized. But it's just not a realistic theory, the data is pretty clear that consumers don't like ads and it's very hard to argue that unrestrained commercialism and forced targeting is good for society. There are more efficient ways we could be doing this if our goal was really just to make it easier for people to compare products and learn about new solutions to their problems.
stingraycharles 5y ago
On the other hand, for the publishers this may be a net win. I’ve always argued that very narrow targeting mostly benefits the advertisers, and the publishers are left with a very small audience that yields a lot, and a very large audience that is difficult to sell. Of course, this may not be the case for Facebook et al, but it’s definitely the case for a lot of apps and websites that live off advertising. Now, without super narrow targeting, they are suddenly able to sell a lot more inventory.
- gleb 5y ago
  Unlikely. You make more money by breaking a beef into multiple cuts for different customers than grinding the whole thing and selling burgers only.
  - thebean11 5y ago
    Assuming you can find a buyer for enough of those individual cuts yes. If most of them have no buyers you're better off selling burgers which I think was the point.

thehours 5y ago

Given how rampant ad fraud is in programmatic, I wonder how much revenue actually drops for these companies, relative to the decreased ad spend. Uber’s [1] experience is one example: “We turned off two thirds of our ad spend – $100m out of annual spend of $150m – and basically saw no change in our number of rider app installs. What we saw is a lot of installs we thought had come through paid channels suddenly came through organic.” [1] https://mackgrenfell.com/blog/how-did-uber-waste-so-much-ad-money https://mackgrenfell.com/blog/how-did-uber-waste-so-much-ad-...

toast0 5y ago
Even without ad fraud, you have things like user wants to install Uber, so searches for Uber in a web search. First link on the page is an ad to install Uber, maybe a couple more ads, then first organic search result is a link to the Uber home page, and maybe the second result is to install it. If the ad weren't there, the user would probably install organically, but since it's there and at the top of the page, it's likely to get clicked and cost money.
- xuki 5y ago
  The ad in that case is to prevent Lyft from getting that ad spot. Fucked up, I know.
  - JohnJamesRambo 5y ago
    The google shakedown- "It'd be terrible if ya know Lyft, got that top spot..."
  - xxpor 5y ago
    How is that fucked up? There's a certain number of slots, and someone is going to fill them. It's like in a grocery store. If Kellogg's doesn't offer Kroger a price they like, they'll just stock General Mills instead... that's just business.

chmod775 5y ago

> No — if the targeting is less effective, the advertisers are not getting the same incremental value from the ads. I mean... No again. Kinda. Advertising isn't magically gonna make money appear in the pockets of your customers. Advertising influences how people distribute their income, influencing them this way or that (at least that's the goal). If advertising becomes worse for everyone, which it did, those weights are just scaled by a fixed amount, arriving at the same end result. The only winners are those who didn't advertise at all and only competed only on value. Those may see an uptick.

dividedbyzero 5y ago
Not sure; targeted ads can work pretty well for small niche businesses, getting the same amount of conversions through untargeted ads may not be feasible. I could imagine those getting hit harder by this change than, say, Uber, so probably not quite the same end result.
- chmod775 5y ago
  I could see that. But you can still effectively target niches with contextual ads.
  - dividedbyzero 5y ago
    Definitely. Is that something you can buy right now? I was under the impression there was little to nothing substantial in between untargeted and programmatic these days
    - morelisp 5y ago
      We've been slowly refactoring our products to offer more contextual possibilities (building more aggregations by domains, keywords, etc. instead of audiences). No one is interested in buying.
      - tormeh 5y ago

danShumway 5y ago

Maybe you're right. But if less advertising means that less money is going into businesses, then ads don't make products free, because they increase consumer spending and decrease the efficiency of consumer spending. If what you're saying is true, then advertising has a tangible cost for consumers. There are three possible theories about how advertising works: A) Advertising increases consumer spending and makes consumers spend dollars less efficiently based on attributes like branding that are unrelated to quality. In which case, all of this "advertising makes apps free" talk has been really deceptive, because consumers who are viewing ads are spending more money for worse/inflated products to compensate. In this world, it's worth asking what the costs of advertising are and whether we want it to be the primary way of funding the Internet. OR B) Consumer spending/efficiency doesn't change, consumers are smart enough to buy the best product anyway, and the only thing that changes is which companies get that money and have brand recognition. In which case, it starts to become difficult to argue that consumers opting out of ads they don't want to see is particularly harmful. In the world where advertising is just making people aware of new information and helping them make informed purchasing choices, then it's probably a good thing that across the board everyone is being forced to cut down on the pointless noise that amounts to companies trying to scream over each other and increasingly hyper-target people in creepy ways. If advertising does not increase consumer spending, and if everyone is reducing spending and effectiveness by the same amount on iOS, then this should be good for advertisers -- they'll spend less money on ads, and consumers will still spend the same amount of money themselves. The only reason that wouldn't be the case is if highly targeted ads actually changes consumer behavior and spending habits in meaningful ways -- but if we admit that, we need to admit that the advertising industry is a lot more problematic and a lot less "free" for consumers than it likes to claim. OR C) Advertising is a public good, and consumers actually want to know about these products, and ultimately people want targeted ads. But this is obviously not the case for the majority of advertising. If it was the case, than iOS's changes wouldn't be a big deal. If consumers want targeted ads, they have the option to keep allowing them in iOS. The whole reason we're in this situation is because consumers have overwhelmingly demonstrated that they do not want targeted ads. So at best, the advertising industry can position itself as a kind of metaphorical "vegetable", claiming that everyone hates them but ultimately the world would be better if more things were commercialized. But it's just not a realistic theory, the data is pretty clear that consumers don't like ads and it's very hard to argue that unrestrained commercialism and forced targeting is good for society. There are more efficient ways we could be doing this if our goal was really just to make it easier for people to compare products and learn about new solutions to their problems.

stingraycharles 5y ago

On the other hand, for the publishers this may be a net win. I’ve always argued that very narrow targeting mostly benefits the advertisers, and the publishers are left with a very small audience that yields a lot, and a very large audience that is difficult to sell. Of course, this may not be the case for Facebook et al, but it’s definitely the case for a lot of apps and websites that live off advertising. Now, without super narrow targeting, they are suddenly able to sell a lot more inventory.

gleb 5y ago
Unlikely. You make more money by breaking a beef into multiple cuts for different customers than grinding the whole thing and selling burgers only.
- thebean11 5y ago
  Assuming you can find a buyer for enough of those individual cuts yes. If most of them have no buyers you're better off selling burgers which I think was the point.