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> As impressive as these examples might seem, we have to consider the fact that no company would ever publicise their results had they observed the opposite. No

> As impressive as these examples might seem, we have to consider the fact that no company would ever publicise their results had they observed the opposite. No CMO is going to go on Medium and write an article called We dropped our spend by X%, and saw our volume drop by X%. Even if they did write such a case study, it's unimaginable that it should become part of modern marketing folklore in the way that Airbnb and Ebay's experiments have In other words: Survivorship bias is the driver of these anecdotes. Obviously no company is going to brag publicly about shooting themselves in the foot by reducing advertising spend, so the only possible anecdotes that can exist publicly are positive ones. Also: Most companies aren't established, household brand names like AirBnB or Uber or eBay. Those companies have built enough of a reputation and have enough word of mouth momentum that advertising campaigns aren't going to move the needle much. I agree with much of this article. The original claims that performance advertising is a "scam" is playing to general distrust of marketers or a dislike of advertising. Any small companies trying to ditch advertising because AirBnB did it (after they were established and had saturated the market) are making their decisions for the wrong reasons.

giaour 5y ago
I don’t understand the survivorship bias argument. If any company tried to follow in AirBnB’s footsteps and saw their revenue decline as ad spend went down, wouldn’t they widely publicize this fact? “Hey! AirBnB is wrong, and following their advice nearly destroyed my small business” would be a compelling read and get a lot of traction. I find it hard to believe that such a demonstration of the value of marketing wouldn’t be immediately shouted from the rooftops by CMOs everywhere and find its way into marketing textbooks.
- eatonphil 5y ago
  I agree. People publish post-mortems all the time. I don't think it's obvious good companies/organizations would be incentivized to keep a negative learning experience hidden.
- mattnewton 5y ago
  Of course people would be hesitant to widely publicize a failure of your strategy like that.
- doctor_eval 5y ago
  If advertising drives sales then you will see a decline really quickly if you cut spending. You’ll likely see this decline within hours. In order to restore sales the first thing you’ll do is restore spending. You’re not going to wait to collect a bunch of data in order to be able to roll it up into meaningful research for a blog post because those lost sales are real money that you’re losing. The thing is, it’s in AirBNBs interest to discredit advertising because they have a huge organic advantage over their competition. If I want to rent a holiday place somewhere, I’m going to search AirBNB first. Only if it doesn’t work out will I try a broader search, and be exposed to AirBNBs competitors. Competitors won’t want to publicise the fact that ad spending is important because it gives them an advantage over those who believe AirBNBs argument.
  - MomoXenosaga 5y ago
    This is interesting, maybe cutting all your ad spending is one of those things you can't really test? Because the consequences if you get it wrong are potentially devastating.
  - mkmk 5y ago
    >If advertising drives sales then you will see a decline really quickly if you cut spending. You’ll likely see this decline within hours. In order to restore sales the first thing you’ll do is restore spending. True for digital, but not for TV, podcast, and OOH. On those channels, it’s common to see a multi-week long tail of performance even after spend stops. Very annoying for testing.
    - human 5y ago
      I’ve always pictured branding like a flywheel. Advertising adds momentum. If you cut spending it will take a while before you see it slow down. And by the time you notice a real slow down it takes months to build it back up.
    - doctor_eval 5y ago
      But this article is specifically addressing performance advertising where the advert is intended to directly influence sales through conversions. Awareness advertising, like TV and billboards, is presumably coated separately. (I admit I wasn’t clear about that in my post but it was my intent)
- YetAnotherNick 5y ago
  And their post would get 0 views and comments like isn't this obvious
- geoduck14 5y ago
  10 years ago, I worked in mail-based marketing and we saw improvements when we did a better job of targeting our mail. I've never written about it. But now I am. AirBnB is totally wrong because of my 10 year old anecdote
- PragmaticPulp 5y ago
  > If any company tried to follow in AirBnB’s footsteps and saw their revenue decline as ad spend went down, wouldn’t they widely publicize this fact? In the real world, a CMO who stopped advertising and suffered the predictable outcome would likely be removed from their job ASAP. Not boasting about shooting their company in the foot in a blog. > I find it hard to believe that such a demonstration of the value of marketing wouldn’t be immediately shouted from the rooftops by CMOs everywhere and find its way into marketing textbooks. I don't understand why you think these examples don't exist. It's marketing 101. Professional marketers (the real ones at big companies) are doing extensive measurements around their advertising value and customer acquisition costs. Small businesses do it, too. It's really trivial stuff to do basic analytics on where your customers are coming from when they arrive at a website and it's not hard to see which ones are arriving because they clicked on ads and which of those translate into purchases. I think this idea that all advertising people have no idea what they're doing and are unable to quantify their results is a weird HN bubble thing.
  - allendoerfer 5y ago
    > It's really trivial stuff to do basic analytics on where your customers are coming from when they arrive at a website and it's not hard to see which ones are arriving because they clicked on ads and which of those translate into purchases. No it is not. If a customer came from brand bidding, you do not know if he would not have come to your website even without the campaign. How do you calculate where a customer originated from, if he visited the site multiple times, sometimes through paid and sometimes through free channels? You cannot blindly trust their claim that they are creating value - even advertisers from your own company are in on it. I am speaking from my own experience working at analytics tools for a corporation, which has a monopoly. The product name is our brand. We are the only ones selling it. Every child knows it. Think public utility. These people will still do brand bidding.
    - rightbyte 5y ago
      > I am speaking from my own experience working at analytics tools for a corporation, which has a monopoly. The product name is our brand. We are the only ones selling it. Every child knows it. Think public utility. > These people will still do brand bidding. Ooh this pisses me off so much. My IT consulting employee bids on their unique name. I guess the marketing department use it to fudge conversation rate of their ad spend. A scam. Unless you are a dropshipper the value of Google traffic is way lower than appearant since people use Google as a address bar nowadays. And showing ads for people that already are considering to buy your product ... that is the worst kind of statistical causality poisoning.
- human 5y ago
  Let me go try with my business. If we crash and burn at least people on HN will read my blog post (maybe).
- zaptheimpaler 5y ago
  Yes because every CMO knows getting a blog post to the top of HN is easily worth losing a few weeks/months worth of leads..
naravara 5y ago
> Obviously no company is going to brag publicly about shooting themselves in the foot by reducing advertising spend, so the only possible anecdotes that can exist publicly are positive ones. Coca-cola did just that, testing the impact of reduced ad spend in various media markets. They noticed reduced market share as a result and publicized it. Information is valuable. If you’re doing a test presumably it’s worth whatever you’re wagering to get it. The supposition that it’s “obvious” that nobody would publicize this assumes everyone’s pathologically fixated on saving face and not, like truth or information.
- unclebucknasty 5y ago
  And there may be a number of other incentives for publishing the data, including being a publicly traded company that needs to explain blips on a quarterly report. Not to mention there's always a way to spin it: "experimentation with our channel priorities resulted in a temporary decline that validated our channel focus, blah, blah, blah". Likewise, several years ago a few large companies (IIRC, GM was one), announced that they were suspending millions of dollars of ad spend on FB because they weren't certain it was effective. I don't know what the net outcome of that was, but it seems not very different to admit, "we were spending millions, possibly with no results" than it is to admit a reduction in ad spend resulted in revenue losses. Point being, companies talk about this stuff all the time.
firecall 5y ago
I've been responsible for large 7 figure budgets in Australia. And I have anecdotal data that showed that we reduced spend, and business kept on keeping on! Some key points though: * It can be hard to understand the reason for your growth Unless it's an explosively popular new product line! * Sometimes you grow the business because you are riding on the back of a popularity wave, external incentives, or you are have organic viral growth power! A tourism destination that is suddenly cool, government incentives to renovate your home, or you are Tesla! * If we hadn't of cut spending, would we have grown more? FOMO is strong in advertising! Could you have accelerated capture of market share during overall market growth? * Budgets are power in corporations! The bigger your budget, the more power you have! There are not many marketing managers that will want to admit to needing less budget! The more budget you have, the more important you are!
LongTimeAnon 5y ago
Proctor and Gamble dropped digital ad spend by... .. oh who the fuck cares, EntrenchedNews algos already blocked this reply so you can feel important.
cblconfederate 5y ago
> Survivorship bias is the driver of these anecdotes. Also all the articles of "We increased our ad spending by 50% and sales went up 50%" are survivorship bias. This does not (dis)prove anything

giaour 5y ago

I don’t understand the survivorship bias argument. If any company tried to follow in AirBnB’s footsteps and saw their revenue decline as ad spend went down, wouldn’t they widely publicize this fact? “Hey! AirBnB is wrong, and following their advice nearly destroyed my small business” would be a compelling read and get a lot of traction. I find it hard to believe that such a demonstration of the value of marketing wouldn’t be immediately shouted from the rooftops by CMOs everywhere and find its way into marketing textbooks.

eatonphil 5y ago
I agree. People publish post-mortems all the time. I don't think it's obvious good companies/organizations would be incentivized to keep a negative learning experience hidden.
mattnewton 5y ago
Of course people would be hesitant to widely publicize a failure of your strategy like that.
doctor_eval 5y ago
If advertising drives sales then you will see a decline really quickly if you cut spending. You’ll likely see this decline within hours. In order to restore sales the first thing you’ll do is restore spending. You’re not going to wait to collect a bunch of data in order to be able to roll it up into meaningful research for a blog post because those lost sales are real money that you’re losing. The thing is, it’s in AirBNBs interest to discredit advertising because they have a huge organic advantage over their competition. If I want to rent a holiday place somewhere, I’m going to search AirBNB first. Only if it doesn’t work out will I try a broader search, and be exposed to AirBNBs competitors. Competitors won’t want to publicise the fact that ad spending is important because it gives them an advantage over those who believe AirBNBs argument.
- MomoXenosaga 5y ago
  This is interesting, maybe cutting all your ad spending is one of those things you can't really test? Because the consequences if you get it wrong are potentially devastating.
- mkmk 5y ago
  >If advertising drives sales then you will see a decline really quickly if you cut spending. You’ll likely see this decline within hours. In order to restore sales the first thing you’ll do is restore spending. True for digital, but not for TV, podcast, and OOH. On those channels, it’s common to see a multi-week long tail of performance even after spend stops. Very annoying for testing.
  - human 5y ago
    I’ve always pictured branding like a flywheel. Advertising adds momentum. If you cut spending it will take a while before you see it slow down. And by the time you notice a real slow down it takes months to build it back up.
  - doctor_eval 5y ago
    But this article is specifically addressing performance advertising where the advert is intended to directly influence sales through conversions. Awareness advertising, like TV and billboards, is presumably coated separately. (I admit I wasn’t clear about that in my post but it was my intent)
YetAnotherNick 5y ago
And their post would get 0 views and comments like isn't this obvious
geoduck14 5y ago
10 years ago, I worked in mail-based marketing and we saw improvements when we did a better job of targeting our mail. I've never written about it. But now I am. AirBnB is totally wrong because of my 10 year old anecdote
PragmaticPulp 5y ago
> If any company tried to follow in AirBnB’s footsteps and saw their revenue decline as ad spend went down, wouldn’t they widely publicize this fact? In the real world, a CMO who stopped advertising and suffered the predictable outcome would likely be removed from their job ASAP. Not boasting about shooting their company in the foot in a blog. > I find it hard to believe that such a demonstration of the value of marketing wouldn’t be immediately shouted from the rooftops by CMOs everywhere and find its way into marketing textbooks. I don't understand why you think these examples don't exist. It's marketing 101. Professional marketers (the real ones at big companies) are doing extensive measurements around their advertising value and customer acquisition costs. Small businesses do it, too. It's really trivial stuff to do basic analytics on where your customers are coming from when they arrive at a website and it's not hard to see which ones are arriving because they clicked on ads and which of those translate into purchases. I think this idea that all advertising people have no idea what they're doing and are unable to quantify their results is a weird HN bubble thing.
- allendoerfer 5y ago
  > It's really trivial stuff to do basic analytics on where your customers are coming from when they arrive at a website and it's not hard to see which ones are arriving because they clicked on ads and which of those translate into purchases. No it is not. If a customer came from brand bidding, you do not know if he would not have come to your website even without the campaign. How do you calculate where a customer originated from, if he visited the site multiple times, sometimes through paid and sometimes through free channels? You cannot blindly trust their claim that they are creating value - even advertisers from your own company are in on it. I am speaking from my own experience working at analytics tools for a corporation, which has a monopoly. The product name is our brand. We are the only ones selling it. Every child knows it. Think public utility. These people will still do brand bidding.
  - rightbyte 5y ago
    > I am speaking from my own experience working at analytics tools for a corporation, which has a monopoly. The product name is our brand. We are the only ones selling it. Every child knows it. Think public utility. > These people will still do brand bidding. Ooh this pisses me off so much. My IT consulting employee bids on their unique name. I guess the marketing department use it to fudge conversation rate of their ad spend. A scam. Unless you are a dropshipper the value of Google traffic is way lower than appearant since people use Google as a address bar nowadays. And showing ads for people that already are considering to buy your product ... that is the worst kind of statistical causality poisoning.
human 5y ago
Let me go try with my business. If we crash and burn at least people on HN will read my blog post (maybe).
zaptheimpaler 5y ago
Yes because every CMO knows getting a blog post to the top of HN is easily worth losing a few weeks/months worth of leads..

naravara 5y ago

> Obviously no company is going to brag publicly about shooting themselves in the foot by reducing advertising spend, so the only possible anecdotes that can exist publicly are positive ones. Coca-cola did just that, testing the impact of reduced ad spend in various media markets. They noticed reduced market share as a result and publicized it. Information is valuable. If you’re doing a test presumably it’s worth whatever you’re wagering to get it. The supposition that it’s “obvious” that nobody would publicize this assumes everyone’s pathologically fixated on saving face and not, like truth or information.

unclebucknasty 5y ago
And there may be a number of other incentives for publishing the data, including being a publicly traded company that needs to explain blips on a quarterly report. Not to mention there's always a way to spin it: "experimentation with our channel priorities resulted in a temporary decline that validated our channel focus, blah, blah, blah". Likewise, several years ago a few large companies (IIRC, GM was one), announced that they were suspending millions of dollars of ad spend on FB because they weren't certain it was effective. I don't know what the net outcome of that was, but it seems not very different to admit, "we were spending millions, possibly with no results" than it is to admit a reduction in ad spend resulted in revenue losses. Point being, companies talk about this stuff all the time.

firecall 5y ago

I've been responsible for large 7 figure budgets in Australia. And I have anecdotal data that showed that we reduced spend, and business kept on keeping on! Some key points though: * It can be hard to understand the reason for your growth Unless it's an explosively popular new product line! * Sometimes you grow the business because you are riding on the back of a popularity wave, external incentives, or you are have organic viral growth power! A tourism destination that is suddenly cool, government incentives to renovate your home, or you are Tesla! * If we hadn't of cut spending, would we have grown more? FOMO is strong in advertising! Could you have accelerated capture of market share during overall market growth? * Budgets are power in corporations! The bigger your budget, the more power you have! There are not many marketing managers that will want to admit to needing less budget! The more budget you have, the more important you are!

LongTimeAnon 5y ago

Proctor and Gamble dropped digital ad spend by... .. oh who the fuck cares, EntrenchedNews algos already blocked this reply so you can feel important.

cblconfederate 5y ago

> Survivorship bias is the driver of these anecdotes. Also all the articles of "We increased our ad spending by 50% and sales went up 50%" are survivorship bias. This does not (dis)prove anything