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I remember reading this article back in 2019 when it was originally written. Unclear why it is being dusted off now when it is still just as wrong as it was the

by avalys 5y ago

I remember reading this article back in 2019 when it was originally written. Unclear why it is being dusted off now when it is still just as wrong as it was then. Yes, it is probably hard for a large, well-known brand like eBay or Procter & Gamble or Coca-Cola to measure their return from online advertising. If Coca-Cola stopped all advertising for 1 week, would anything really change? Probably not. And it’s not as if anyone is clicking Google search ads for Coca-Cola and ordering a 6-pack right there. This is the same problem that these companies have with TV advertising. But anyone who has ever run a small, consumer-focused startup with low brand recognition can very easily measure their return on ad spend, and will spend a lot of time doing this. You can easily tell which specific ad referred someone to your website, and how much money they spent once they got there. If they’re not convinced by this data, at some point most startups will find the opportunity to simply turn off all advertising for a week for one reason or another. And can usually see the drop in revenue immediately. I was involved in a consumer hardware startup where our COO shared granular ROAS numbers in our all-hands every week for Google, Facebook, TV advertising across multiple networks, etc. They regularly A/B tested different advertisements and messages across different media and directly optimized for revenue. It was clear beyond a doubt that this advertising worked. The company would not have been viable without it. The fact that this proof is easily and readily available from small, lesser-known companies is part of why large companies continue to spend money on advertising despite the benefits being much harder to measure.

GeneralMayhem 5y ago
To be fair, the point of the article is that ROAS is not a very good metric, and while most of the article is wrong in that it effectively calls all advertising worthless as a result, it's not wrong about that one methodological point. What matters is incremental ROAS - not the conversions following exposure, but rather the conversions that would not have happened but for the exposure. For small companies that have no existing awareness, they're close to the same thing. But like you said, it is very hard to measure for the large brand advertisers that are very well-penetrated. If Coke switched off their advertising they would eventually lose market share, but it would take more than one Christmas of not seeing the polar bears. For companies in their position, advertising is about maintaining dominance. Spending on a Superbowl ad is a way for them to say "we're the best, we know it, and you know it, and when you want a drink, you're going to buy Coke, not RC Cola". It takes a long, long time for that indoctrination to wear off, so there's no way to experiment on it - there's no untouched part of the market that's never seen a Coke ad against which you can do an A/B test.
- ashtonkem 5y ago
  It also doesn’t mean that the advertising is money wasted. Coke spends that money to remain the go to brand, and surely values being the cultural default very highly. Saying “Coke would still sell without ads” really misses the point for why Coke advertises. It reminds of car ads. Apparently (correct me if I’m wrong), but OEM ads aren’t about converting new customers, but they’re about trying to convert recent buyers into lifetime buyers. It’s to build in the consumer the attitude of “we’re a Ford household”, not to convince a Chevy driver to buy Ford for the first time.
  - GeneralMayhem 5y ago
    I don't disagree with you. My point wasn't that Coke-style brand advertising was worthless, just that it's extremely difficult to measure without much longer experiments - specifically because it's been so successful.
    - popcube 5y ago
      I remember an experiment about coparing cola and psi, they found advertisement of cola was so successful that people saw a cola bottle will let them feel it more delicious. I assume they want to keep this advantage in internet era
      - GhettoComputers 5y ago
        Wouldn’t it be better just to have it as product placement rather than advertising? Warren Buffet makes it look great, 5 cans a day. With his longevity and investments he’s great for them.
        GeneralMayhem 5y ago
        Product placement is a subset of advertising, not a different thing.
  - a4isms 5y ago
tcmart14 5y ago
I think with a company like Coca-cola, it is a little bit of a different approach. Taking Coca-cola as the example. My money is their ads are not placed there to get you to buy a 6-pack online. It is so when you see it, you go, 'damn a coke actually sounds really good right now.' And then you proceed to walk tot he fridge for one or next time your out and about buy one. However I would say that a product such as coke is a specific case. Some ads are for targeting people to go to their online store, then I am sure ones like coke exist to put the idea in your mind next time you stop for gas.
- pm90 5y ago
  For commodity products, It’s all about creating a subconscious association so eg when you’re at the store you choose coke because you’re heard/seen it so many times it seems “familiar”.
ZhangSWEFAANG 5y ago
What's the concept called when something persists even as it scales?
AussieWog93 5y ago
This rings true completely from my experience. I run an eBay store that has pretty decent revenues but no brand recognition, and we make pretty heavy use of their Promoted Listings function. We've generally found for competitive items that sacrificing 5% to ad spend allows us to increase the price of the item by 20% without experiencing any reduction in sales. There is no way to fake that. For my other business, though, (Low-cost USB Oscilloscopes) I found Google, Facebook and Amazon ads to be completely useless. Even then, though, it didn't cost a lot of money or take a whole lot of time to get a definitive answer and cancel the campaign.
- tonyedgecombe 5y ago
  I think the audience makes a huge difference. I mainly sell to a technical audience and Adwords stopped being effective for me years ago.
MarkMc 5y ago
> And it’s not as if anyone is clicking Google search ads for Coca-Cola and ordering a 6-pack right there. This is the same problem that these companies have with TV advertising. Supermarkets already have a loyalty card program where you receive a small discount and in return you agree to receive targeted advertising based on your purchases. Why don't these loyalty programs add a clause saying that they may also share your personal information with Google? That would mean Coca-Cola or Proctor and Gamble could see how much they spent on advertising to a particular person, and how much that person spent in buying the company's products.
- the-dude 5y ago
  Just some anecdata : AFAIK this is not allowed in The Netherlands. Retailers are not allowed to mine purchasing data on an individual level.
tonyedgecombe 5y ago
I have a suspicion that the great majority of businesses have no idea whether their advertising is effective or not. Of course this is encouraged by all the dark patterns you see in the Adwords control panel.
amelius 5y ago
> You can easily tell which specific ad referred someone to your website, and how much money they spent once they got there. This is how Google and other advertising companies leak data. If I target an ad about Y to a group X, then I know that someone who clicked it is in X. For any Y.
satellite2 5y ago
Even for seemingly obvious things this article is wrong. Maybe in 2009, when the market was playing ball, was it okay not to buy your own brand (eBay) as a keyword, as this is an audience that already want to go to your site. Now all your competitors are buying your brand and you'll end up in fourth or fifth position with your own audience if you don't buy it. And while most will still scroll it through, you will end up losing a small but consistent share of clicks to competitors time to time. And if they manage to make their service slightly more sticky than yours, you'll end up losing small market shares over time.
firecall 5y ago
I've worked with and for brands with multi million dollar budgets. My general advice, which I borrwed from somewhere... Advertising is like an Aircraft. You power up, use a lot fuel(budget) and you get airborn! Then you cut the engines (reduce budget) and you start gliding and you think, well OK, everthing seems fine! I dont need to keep burning fuel! And then all of sudden you either smash into the ground or you have to use that rapid fuel burn all over again to get back on top! YMMV! On the flip side, I've cut Google Ad spend for a large tourism brand and traffic to the website continued to grow even 24 months later. Traffic is one metric of course.... Marketing and Advertising are complicated and hard! It requires nerves of steal and it really helps when it's someone else's budget! :-)
theyx 5y ago
Not providing proof and just anecdotal experiences won’t do your argument any good. Especially because that’s exactly how Ad companies/agencies got here in the first place, by saying it works without clear, verifiable ways to prove it: “yeah, it works, trust us, but we won’t let you see the data”
throwawaylift 5y ago
The first thing one has to face when considering such experiments is that they fundamentally have an inherent cost. Because in order to get that measurement accurate, quite a lot of your ad impressions have to be withheld. This is a cost, a cost of the lost opportunity. (provided that the actual impact of the ad campaign is positive, that is). So, as an advertiser, you end up coming up with some meta-strategy: when to perform those experiments and when to forgo them and rely on your educated guess. Google, Facebook and alike developed support for performing such experiments throughout the last decade. But this meta-strategy kind of judgment is firmly in the department of advertisers. Certainly not a new dot com bubble as the title suggests, and the article even mentions Randall Lewis, so I guess it's just the style of journalism these days...
deleted 5y ago
[deleted]

by avalys 5y ago

GeneralMayhem 5y ago

To be fair, the point of the article is that ROAS is not a very good metric, and while most of the article is wrong in that it effectively calls all advertising worthless as a result, it's not wrong about that one methodological point. What matters is incremental ROAS - not the conversions following exposure, but rather the conversions that would not have happened but for the exposure. For small companies that have no existing awareness, they're close to the same thing. But like you said, it is very hard to measure for the large brand advertisers that are very well-penetrated. If Coke switched off their advertising they would eventually lose market share, but it would take more than one Christmas of not seeing the polar bears. For companies in their position, advertising is about maintaining dominance. Spending on a Superbowl ad is a way for them to say "we're the best, we know it, and you know it, and when you want a drink, you're going to buy Coke, not RC Cola". It takes a long, long time for that indoctrination to wear off, so there's no way to experiment on it - there's no untouched part of the market that's never seen a Coke ad against which you can do an A/B test.

ashtonkem 5y ago
It also doesn’t mean that the advertising is money wasted. Coke spends that money to remain the go to brand, and surely values being the cultural default very highly. Saying “Coke would still sell without ads” really misses the point for why Coke advertises. It reminds of car ads. Apparently (correct me if I’m wrong), but OEM ads aren’t about converting new customers, but they’re about trying to convert recent buyers into lifetime buyers. It’s to build in the consumer the attitude of “we’re a Ford household”, not to convince a Chevy driver to buy Ford for the first time.
- GeneralMayhem 5y ago
  I don't disagree with you. My point wasn't that Coke-style brand advertising was worthless, just that it's extremely difficult to measure without much longer experiments - specifically because it's been so successful.
  - popcube 5y ago
    I remember an experiment about coparing cola and psi, they found advertisement of cola was so successful that people saw a cola bottle will let them feel it more delicious. I assume they want to keep this advantage in internet era
    - GhettoComputers 5y ago
      Wouldn’t it be better just to have it as product placement rather than advertising? Warren Buffet makes it look great, 5 cans a day. With his longevity and investments he’s great for them.
      - GeneralMayhem 5y ago
        Product placement is a subset of advertising, not a different thing.
- a4isms 5y ago

tcmart14 5y ago

I think with a company like Coca-cola, it is a little bit of a different approach. Taking Coca-cola as the example. My money is their ads are not placed there to get you to buy a 6-pack online. It is so when you see it, you go, 'damn a coke actually sounds really good right now.' And then you proceed to walk tot he fridge for one or next time your out and about buy one. However I would say that a product such as coke is a specific case. Some ads are for targeting people to go to their online store, then I am sure ones like coke exist to put the idea in your mind next time you stop for gas.

pm90 5y ago
For commodity products, It’s all about creating a subconscious association so eg when you’re at the store you choose coke because you’re heard/seen it so many times it seems “familiar”.

ZhangSWEFAANG 5y ago

What's the concept called when something persists even as it scales?

AussieWog93 5y ago

This rings true completely from my experience. I run an eBay store that has pretty decent revenues but no brand recognition, and we make pretty heavy use of their Promoted Listings function. We've generally found for competitive items that sacrificing 5% to ad spend allows us to increase the price of the item by 20% without experiencing any reduction in sales. There is no way to fake that. For my other business, though, (Low-cost USB Oscilloscopes) I found Google, Facebook and Amazon ads to be completely useless. Even then, though, it didn't cost a lot of money or take a whole lot of time to get a definitive answer and cancel the campaign.

tonyedgecombe 5y ago
I think the audience makes a huge difference. I mainly sell to a technical audience and Adwords stopped being effective for me years ago.

MarkMc 5y ago

> And it’s not as if anyone is clicking Google search ads for Coca-Cola and ordering a 6-pack right there. This is the same problem that these companies have with TV advertising. Supermarkets already have a loyalty card program where you receive a small discount and in return you agree to receive targeted advertising based on your purchases. Why don't these loyalty programs add a clause saying that they may also share your personal information with Google? That would mean Coca-Cola or Proctor and Gamble could see how much they spent on advertising to a particular person, and how much that person spent in buying the company's products.

the-dude 5y ago
Just some anecdata : AFAIK this is not allowed in The Netherlands. Retailers are not allowed to mine purchasing data on an individual level.

tonyedgecombe 5y ago

I have a suspicion that the great majority of businesses have no idea whether their advertising is effective or not. Of course this is encouraged by all the dark patterns you see in the Adwords control panel.

amelius 5y ago

> You can easily tell which specific ad referred someone to your website, and how much money they spent once they got there. This is how Google and other advertising companies leak data. If I target an ad about Y to a group X, then I know that someone who clicked it is in X. For any Y.

satellite2 5y ago

Even for seemingly obvious things this article is wrong. Maybe in 2009, when the market was playing ball, was it okay not to buy your own brand (eBay) as a keyword, as this is an audience that already want to go to your site. Now all your competitors are buying your brand and you'll end up in fourth or fifth position with your own audience if you don't buy it. And while most will still scroll it through, you will end up losing a small but consistent share of clicks to competitors time to time. And if they manage to make their service slightly more sticky than yours, you'll end up losing small market shares over time.

firecall 5y ago

I've worked with and for brands with multi million dollar budgets. My general advice, which I borrwed from somewhere... Advertising is like an Aircraft. You power up, use a lot fuel(budget) and you get airborn! Then you cut the engines (reduce budget) and you start gliding and you think, well OK, everthing seems fine! I dont need to keep burning fuel! And then all of sudden you either smash into the ground or you have to use that rapid fuel burn all over again to get back on top! YMMV! On the flip side, I've cut Google Ad spend for a large tourism brand and traffic to the website continued to grow even 24 months later. Traffic is one metric of course.... Marketing and Advertising are complicated and hard! It requires nerves of steal and it really helps when it's someone else's budget! :-)

theyx 5y ago

Not providing proof and just anecdotal experiences won’t do your argument any good. Especially because that’s exactly how Ad companies/agencies got here in the first place, by saying it works without clear, verifiable ways to prove it: “yeah, it works, trust us, but we won’t let you see the data”

throwawaylift 5y ago

The first thing one has to face when considering such experiments is that they fundamentally have an inherent cost. Because in order to get that measurement accurate, quite a lot of your ad impressions have to be withheld. This is a cost, a cost of the lost opportunity. (provided that the actual impact of the ad campaign is positive, that is). So, as an advertiser, you end up coming up with some meta-strategy: when to perform those experiments and when to forgo them and rely on your educated guess. Google, Facebook and alike developed support for performing such experiments throughout the last decade. But this meta-strategy kind of judgment is firmly in the department of advertisers. Certainly not a new dot com bubble as the title suggests, and the article even mentions Randall Lewis, so I guess it's just the style of journalism these days...

deleted 5y ago

[deleted]