Ad-tech as a bubble overdue for a bursting

Tadelis designed another experiment and found that these ads were actually responsible for 0.5% of [eBay's] revenue – an order of magnitude less than their estimate – and that every $1 they spent generated $0.60 in losses. They cut $100m from their ad-spending.

But despite publication of these findings, the world increased its ad-tech spending. Tadelis attributes this to the fact that the major players in ad-tech are all incentivized to repeat the unsubstantiated tale of ad-tech's efficacy.

Ad-tech companies, publishers, and ad-tech buying consultancies are all compromised and unable to objectively assess whether ads work (cue Upton Sinclair: "It's difficult to get a man to understand something when his salary depends on his not understanding it").

HN discussion:

Freakonomics: Does Advertising Actually Work? (Part 2: Digital) (Ep. 441)

Google and Facebook are worth a combined $2 trillion, with the vast majority of their revenue coming from advertising. In our previous episode, we learned that TV advertising is much less effective than the industry says. Is digital any better? Some say yes, some say no — and some say we’re in a full-blown digital-ad bubble. ...

Freakonomics: Does Advertising Actually Work? (Part 1: TV) (Ep. 440)

Companies around the world spend more than half-a-trillion dollars each year on ads. The ad industry swears by its efficacy — but a massive new study tells a different story. ...

@dredmorbius while I generally agree, the examples are not great. eBay and P&G have spent decades advertising. Dropping advertising for a month will not reduce mindshare much. Better examples would have been testing with small companies who are not well known and only use online ads.

@1ll173r47 I tend to agree with that: brand awareness is built over years and decades, and decays slowly.

Bubble ... When's the last time you clicked on a sponsored ad? And don't count the times you did it by mistake.

@cebadams Personal anecdote is a very poor tell. There are billions of peope in the world. I am but one of them.

This has been pointed out before:

Recall that advertising is when someone pays you to tell your users they'll be happy if they buy a product or service.

Yahoo is an example of a company that runs on advertising. Gawker is a company that runs on advertising.

Investor storytime is when someone pays you to tell them how rich they'll get when you finally put ads on your site.

Pinterest is a site that runs on investor storytime.

And it seems rather relevant that of the to companies mentioned which "run on advertising" one is dead and the other is bought out.

Thia lecture is gold

These really pissed me off, not because I have a problem with Zipcar, but because they showed me the algorithm wasn't even trying.

It's one thing to get the targeting wrong, but the ad engine can't even decide if I have a car or not! You just showed me five ads for car insurance. You don't care that you're mathematically certain to be wasting my time.

I thing what it boils down to is the adtech companies aren't dumb, they're screwing the advertisers.

@dredmorbius I'm reminded of the famous statement by John Wanamaker that half of his ad spending was wasted, he just didn't know which half.

@dredmorbius For small to medium companies that have a focusable ad spend, PPC / online advertising is actually an effective model. In fact, for a startup, it is one of the few effective ways to drive revenue.

What would be great is if this could be done ethically, affordably and without privacy infringement and creepy demographic profiling.

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