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points by devmor 2 days ago | 0 comments

The secret that most people in business don’t want to admit is that the vast majority of internet/media advertising is not worth the cost.

They are throwing many different strategies out there through many different avenues and banking one the one that just happens to pull in a new chunk of buyers. It’s like lower-stakes gambling.

[–] JambalayaJimbo 2 days ago

What do you even consider advertising?

If I make let's say a children's toy, how am I supposed to let people know that this new type of toy even exists? That WHOLE process is advertising, no? Whether I give these toys away for free at a Santa Clause parade, pay department stores to put my toy in prominent shelves, or buy space on Cartoon Network.

How do you get even a single buyer without advertising?

[–] autoexec 2 days ago

Only a very small part of advertising is actually product promotion. Coca-cola spends $4 billion a year on ads, do you think it's because otherwise no one would know that coke exists?

It's true that advertising is a great way to promote a product, but its far from the only way. For many years now I've done what I can to cut all advertising out of my life and yet I still buy lots of things, including things I've never seen a single ad for.

[–] kuratkull 2 days ago

If Coca Cola stopped advertising for a year, their sales would surely start trending down.

[–] preg_match 2 days ago

Yes, but not because advertising lets people know about Coke. The people who still know about Coke would be the same after a year, I imagine.

The mechanism of how advertising works seems to be not that. I think repeatedly brand exposure does something to the brain and decision making that we don’t fully understand.

[–] ThunderSizzle 2 days ago

Familiarity, I think.

Exposure breeds familiarity, which breeds desire, I think.

Even if all you hear is an occasional ad about the company, you might get curious and research them yourself.

[–] autoexec 2 days ago

If you drink it now, would you stop? Would you forget that it exists even though it's on store shelves, in vending machines, and pushed at several restaurants? Who would stop?

[–] d1sxeyes 2 days ago

Almost no-one can honestly answer this for themselves. I think the truth is likely: 'no, I'd still order a coke at McDonald's, I'd still pick a coke up from a vending machine if I'm thirsty. But if I'm buying a takeaway sandwich, I might not also get the drink. Or if I'm in the supermarket, I might just skip that aisle.'

I'm sure it's almost completely subconscious.

[–] rerdavies 2 days ago

Marketing. Advertising is only one of the strategies that get used to market a product.

[–] devmor 2 days ago

I was referring to internet advertising, I should have made that more clear.

[–] IAmBroom 2 days ago

But it's the dirty little secret of most advertising: there's no voluntary feedback to prove (consistently, objectively) how effective your $$ are being spent.

The last thing a marketing company or media provider wants to admit is that any of their services are underperforming, or worse, turning off buyers.

[–] d1sxeyes 2 days ago

It's partly true, but only if no-one advertises. If I don't advertise but a competitor does, then I start to lose market share. So although the cost may not justify itself independently, in the face of my competitors' marketing budget, it does.

[–] khafra 2 days ago

That reminds me of one of my idiosyncratic policy wishes: An enormous pigouvian tax on any advertising beyond a spreadsheet listing quantitative technical data about the product. Companies don't lose anything, since the relative spend and impact remains the same; consumers gain a lot of information and public funding, and lose daily aggravation.

[–] cousin_it 2 days ago

Pigovian taxes were invented to compensate for externalities. Where's the externality here? You go to a website. The website owner says "watch this ad to access my content". It's a free agreement (or disagreement) between you and the website owner, nobody else is harmed.

[–] khafra 2 days ago

Since advertising spending is largely zero-sum, additional spending on advertising may shift market share, but it does so without delivering new factual utility or consumer surplus. The fact that there's a pareto-superior equilibrium makes it a symmetric reciprocal externality: Robert H. Frank showed, in "Positional Externalities Cause Large and Preventable Welfare Losses" (2005) that positional arms races are shaped exactly like environmental pollution.

But, even if there's a better equilibrium, isn't loading a website crammed with obtrusive ads still a coasean bargain between two parties? Simon P. Anderson and Stephen Coate studied this question in "Market Provision of Broadcasting: A Welfare Analysis" (2005). They identified unpriced externalities like the common-pool attention tragedy, as has been raised in other comments here, and asymmetric information & hold-up, which increase transaction costs.

Divide advertising spend into two components: Informative specs, and persuasive/obtrusive spend. The margial external cost is the sum of profits foregone by rival businesses, and aggregate viewer nuisance. A pigouvian tax with an exemption threshold for factual spreadsheets and apunitive rate on expenditure above that (or visual intrusion metrics) both prices the cognitive nuisance imposed on readers, and collapses the positional arms race between rival firms; transforming the industry from a high-waste prisoner's dilemma to a low-cost, high-information pareto optimum.

Obviously, you still have to watch out for firms goodharting the spreadsheet metric, but that's both a partially solvable problem, and a much better situation than the current nash equilibrium.

[–] cousin_it 1 day ago

Ai;dr

[–] minraws 2 days ago

This isn't true in the general sense, for new products with no distribution or customer awareness it's very important to advertise how else will anyone know about it.

[–] brainwad 2 days ago

Paid promotion in publications is a much more gentler way to advertise though compared to modern internet advertising. Back in the day I'd buy computer magazines - basically the whole point of which was to make me aware of new products. But the articles were at least somewhat at arm's length and not pure ad copy.

[–] minraws 2 days ago

Yeah you can still buy subscriptions to substacks where people recommend you products to buy in certain categories, the entire Semianalysis thing is substack about which GPU/AI Accelerator to buy.

This doesn't in the slightest replace ads though. Before modern internet advertising we had advertising in whatever else had your attention. Ads were meant as we way to simplify and ease distribution.

It's a horrible business in terms of user experience but it's purpose isn't user experience it's meant for businesses to be able to streamline their outreach for much cheaper than the alternatives, imagine cold calls, emails, door knocks, door to door sales has died for this very reason.

I am not trying to explain away the issues and societal problems but they have value of companies otherwise they wouldn't exist. However much people would like to pretend CEOs and founders aren't completely retared.

For initial distribution spikes Ads are the best possible solution, very expensive yes, but if your goal is growth Ads are the most efficient solution since they almost linearly convert spending into visibility in turn producing growth.

Horrible way to do stuff but it's what it is.

[–] asdff 2 days ago

Most new products don’t get advertised. That happens later after they’ve made some initial sales. Those initial sales often happen from just placing it on some shelf space, real or virtual, where relevant consumers are liable to find it.

[–] minraws 1 day ago

Have you ever built or sold products, worked in a startup? I have worked in several many tried the if we build it they will come strat and it fell flat.

The only companies that have made any real money have had to use Ads from the very start.

You can catch lightining in a bottle but exceptions here prove the rule.

It's absurd to think anyone will care about your product if you don't.

[–] asdff 21 hours ago

This isnt if you build it thehy will come. It is about placing it on shelves where your customers already are. Most products I buy are exactly this.

[–] autoexec 2 days ago

Word of mouth is one of the the oldest ways and it can still be very useful. It tends to work best when your product is actually any good though. If you have a product that really is amazing you won't have to manipulate people into paying for it, and you won't be able to stop people from telling others about how great it is.

[–] cowlevel 2 days ago

chess.com and lichess

Despite lichess being better in every way except marketing, it's still #2.

It's very impressive word of mouth got it to #2, but marketing experts are marketing experts.

[–] rationalist 1 day ago

The "lichess" name is terrible, the way the word itself looks is off-putting.

It's like why they use sharp points in the hazmat symbol, it just looks bad even if you don't know what it means.

[–] countWSS 2 days ago

the name matters, chess.com= automatically associates with something central about chess. (dot com) lich-ess can be read as lich-chess or leeches, both leave repulsive associations, effectively sub-conscious anti-marketing.

[–] cowlevel 1 day ago

So it's all about who has millions of dollars to buy common word domain names from scalpers. That's a marketing expense.

[–] devmor 2 days ago

That's a fair point, I wasn't really accounting for new products/services in that statement.

[–] aprilthird2021 2 days ago

Absolutely untrue by any metrics or semblance of study. People overestimate how unsusceptible they are to marketing. Marketing doesn't only work if you see an ad and click on it. It's after seeing hundreds of ads, that you start internally building a perception of a brand as whatever they market as (expensive, value oriented, fun, serious, luxurious, splurge material, etc.) Then the next time, maybe months after you've seen any such ad, you need to buy an expensive, splurge type gift for someone. If you remember the brand then, the marketing has worked.

That kind of stuff is absolutely worth the cost of ad spend online

[–] devmor 2 days ago

That is a great example of the impossible to prove woo that advertisers pay for studies to convince clients of.