[HN Gopher] TV Advertising Effectiveness and Profitability
       ___________________________________________________________________
        
       TV Advertising Effectiveness and Profitability
        
       Author : yodon
       Score  : 177 points
       Date   : 2021-07-27 18:05 UTC (4 hours ago)
        
 (HTM) web link (onlinelibrary.wiley.com)
 (TXT) w3m dump (onlinelibrary.wiley.com)
        
       | Niglodonicus wrote:
       | Imagine how low it would be if all internet users actually
       | employed ad-blocking of some sort. Honestly remarkable how many
       | people, faced with the prospect of sitting through extremely
       | annoying video ads, or having their search results and webpages
       | cluttered with useless ads, do nothing instead of spending one
       | minute to install the appropriate blocker. Obviously not everyone
       | is aware these exist, but you would think their curiosity would
       | lead them to find out once they get fed up with having their time
       | wasted by having their activities interrupted constantly and
       | having manure shoved down their throat.
        
         | EForEndeavour wrote:
         | In the USA, adblocking penetration has been rising for years,
         | but looks to be plateauing; this estimate says that a bit over
         | a quarter of all internet users block advertising on their
         | connected devices:
         | https://www.statista.com/statistics/804008/ad-blocking-reach...
        
       | paxys wrote:
       | Advertising is at its core a prisoner's dilemma. If every
       | competitor in a certain space puts in $100 in advertising, they
       | can all expect $0 in returns. However if a single company put in
       | nothing they would be in a worse place because their competitors'
       | returns would automatically become higher.
        
         | yardie wrote:
         | I feel that there is different types of advertisement. Brand
         | advertising isn't so much about acquiring new customers but
         | about reassuring existing ones. Like I honestly feel car makers
         | don't need to advertise on the web or TV, yet they do it
         | anyway. I have the car I have and I'm not looking to buy
         | another for 5-7 years, yet Toyota and Ford will advertise to me
         | as if to say "I'm still here in case you change your mind." I
         | can't imagine the ROI is particularly high, yet not doing would
         | be worse since competitors would silence you out. At the same
         | time M-B isn't advertising to sell you a car but to sell you
         | the exciting lifestyle you're going to have in their car. You
         | already bought or planned to buy their car they are only
         | reassuring your decision.
        
           | bluGill wrote:
           | While you personally are not buying a car, every day there
           | are hundreds of people in any small city who buy a car, so it
           | is important to advertise to them. You personally might never
           | buy a car, but they don't know how to target people who are
           | not buying a car "soon".
        
         | mdoms wrote:
         | This only holds if advertising can't grow the market, which it
         | absolutely can and does.
        
           | Scene_Cast2 wrote:
           | Well, if you broaden the scope, you're effectively fighting
           | again other (completely unrelated) purchases and a person's
           | wallet.
        
         | DSingularity wrote:
         | Ouch. Never thought of it this way. I know it's borderline
         | anti-American -- but when you have such compelling incentive
         | structures at what point should we demand government
         | regulation? If 80% of advertising is not helping consumers
         | discover products -- arguably the primary functional purpose of
         | advertising -- then isn't this in a way an economic sickness
         | wasting the resources and stifling innovation?
        
           | paxys wrote:
           | It's bizarre to me that the government hasn't stepped in to
           | regulate/ban medical advertising in America. Nobody wants it
           | - not consumers, not doctors, not even the drug manufacturers
           | themselves.
        
             | retzkek wrote:
             | There's at least one group that likes drug ads: the
             | advertising industry. High-dollar clients with long
             | commercials (to fit in all their required disclaimers), and
             | they're probably the ones with the connections to the
             | appropriate regulators.
             | 
             | Personally I absolutely despise drug commercials, there's
             | not much that will make me change the channel, mute, or
             | turn off the TV faster. Is there a more blatant display of
             | the faults of capitalism?
        
               | rhizome wrote:
               | It's not even attributable to "capitalism," per se,
               | because the US and New Zealand are the only places on
               | Earth where they are legal. I may be blinkered as to
               | global laws, so maybe I'll just say the Western Earth.
        
               | retzkek wrote:
               | Sure, that's fair, I suppose I was specifically thinking
               | of US-flavored capitalism, which is undoubtedly its own
               | beast.
        
               | DaveExeter wrote:
               | >There's at least one group that likes drug ads: the
               | advertising industry.
               | 
               | There's another group that likes drug ads: media
               | corporations! Part of the reason big pham spends
               | $billions on ads is to buy the support of the media
               | giants.
        
           | [deleted]
        
         | 1123581321 wrote:
         | It's partially a prisoner's dilemma. Advertising reduces search
         | costs for buyers to a certain point, after which it raises them
         | again due to a glut of similar messaging. There is a moderate
         | point at which buyers are hearing about enough potential
         | options and are able to conduct a more effective search for
         | products/vendors/sellers, and the cost is reasonable for the
         | sellers (it reduces their sales costs, gets their economy of
         | scale beyond the threshold needed to viable produce and serve
         | customers.)
         | 
         | Beyond that moderate point is where the dilemma sets in as each
         | company wants to increase advertising until the additional
         | return is no longer positive---but if every company pushes to
         | the same point, the additional return at that stopping point
         | becomes negative.
        
         | human wrote:
         | That might be true for products or services that people need
         | and know. But what about new or less known ones? For example, I
         | will buy a car and one car only. All the advertising is not
         | going to make me buy two. However, for electronics, I might buy
         | an additional TV or another tablet, or gaming console.
        
         | yosito wrote:
         | Your logic doesn't add up.
        
           | vikramkr wrote:
           | How exactly does their logic not add up? This is actually a
           | specific example of a prisoners dilemma taught in some intro
           | to game theory classes, with the classic example being the
           | tobacco companies
        
             | yosito wrote:
             | > If every competitor in a certain space puts in $100 in
             | advertising, they can all expect $0 in returns. However if
             | a single company put in nothing they would be in a worse
             | place because their competitors' returns would
             | automatically become higher.
             | 
             | Assume competitors A, B and C and all put $100 each into
             | advertising. That's $300 spent on advertising. Each
             | competitor only has to earn $101 in sales to get > $0
             | returns. There is no theoretical limit on how much each
             | competitor can earn in sales. Let's randomly say each
             | company makes $500 in sales. That's a return of $400 per
             | company. If a single company puts in nothing, they may
             | likely earn less in sales, so let's say company A spends
             | nothing on advertising but still earns $450 in sales,
             | meanwhile B and C spend $150 on advertising and make $475
             | in sales. Company A gets a return of $450, and companies B
             | and C get a return of $325 each.
             | 
             | Anyway, all this math is irrelevant. OP said each company
             | should expect $0 in returns. Where does that $0 come from?
             | There is no rule that says they will earn $0 in returns.
             | 
             | > This is actually a specific example of a prisoners
             | dilemma taught in some intro to game theory classes
             | 
             | You are correct that prisoner's dilemma is taught in intro
             | to game theory, but you are not correct that this is an
             | example of it.
        
             | fighterpilot wrote:
             | Well it assumes a zero-sum game from the perspective of the
             | competitors. The combined advertising effort of all
             | competitors could grow the entire pie that they each share.
             | Even though their percentage of the pie stays the same, the
             | magnitude of the slice could be bigger, and that
             | improvement in magnitude could outstrip the advertising
             | cost, thus making it worthwhile.
        
               | vikramkr wrote:
               | In heavily saturated markets (notably cigarettes as the
               | main well known case study), advertising can be more zero
               | sum than not. No model is perfect, but the prisoners
               | dilemma model for advertising is at least useful in a
               | couple well known cases.
        
               | fighterpilot wrote:
               | The assumption being made here is that the market will
               | remain saturated even if all advertising is pulled.
        
         | fighterpilot wrote:
         | If this is true, wouldn't it show up in the study as a positive
         | ROI?
        
           | marcosdumay wrote:
           | This has no relation with the number on the headline.
        
           | [deleted]
        
         | handmodel wrote:
         | I think this still only covers half of it.
         | 
         | If neither Pepsi or Coca-Cola advertised I think its plausible
         | their positions in the market relative to each other could be
         | the same proportion they are now. However, it would make it
         | easier for restaurants, grocery stores, etc. to go with non-
         | brand sodas (that also don't advertise).
        
         | mbesto wrote:
         | You mean zero-sum. Advertising is a zero sum game.
         | 
         | I can't find the tweet but someone referenced the fact that if
         | you lump traditional and digital media together, the TAM of
         | advertising has basically been stagnate for decades. We just
         | think its grown because FB/Google/etc have gobbled it all up.
        
           | morei wrote:
           | It's not quite true that advertising is a zero-sum game.
           | There are economic benefits from increased competition, and
           | from improvements in presented choice.
           | 
           | It is definitely true that the economic benefits don't accrue
           | to the advertiser! And it's also true that the economic
           | benefits decrease as advertising saturates. But it's still
           | not zero.
        
         | matsemann wrote:
         | A guy doing marketing for a travel company once told me they
         | had to spend an enormous amount of money on Google, _for their
         | own brand_. People would search  "brand cityA cityB", but a
         | competitor would buy the top spot. How much were the competitor
         | willing to spend? Basically their whole margin for that sale,
         | as it was still better than nothing. So this company had to
         | match that.
         | 
         | So in the end Google makes more profit per ticket than the
         | companies delivering the service itself.
        
           | solumos wrote:
           | You pay less than your competitors for your branded ads via
           | quality score. But yeah, it gets competitive.
           | 
           | You should see how much PI lawyers pay for AdWords - it's
           | bonkers. Hundreds of dollars per click.
        
       | whoisjuan wrote:
       | Isn't Credit Karma's accelerated growth attributed to TV Ads?
       | 
       | I wonder why something like CK can benefit so drastically from TV
       | Ads while others are not even close to breaking even on that
       | investment.
       | 
       | Is it the quality of the ads or the nature of the product?
        
         | captaincaveman wrote:
         | Certain demographics are cheaper, less demand high supply,
         | daytime TV audiences ... so yeah maybe a sweet spot!
        
       | human wrote:
       | I am the marketing director at a professional service firm. We
       | started advertising on radio and tv about 7 years ago. The first
       | campaign we did generated clients at a cost of about $10,000
       | each. That was very expensive and we were disappointed. We kept
       | going and we've seen the cost per acquisition go lower every
       | year. After 7 years we are around 750$. Brand advertising is like
       | a flywheel: you keep fueling it and it takes a while before it's
       | actually spinning. I really don't think you can measure ROI.
       | Especially since it helps your business in other ways too. Since
       | we have been advertising it's actually been easier for us to
       | attract talent. Having a known brand is immensely powerful.
        
       | dougSF70 wrote:
       | I have not read the paper but I have done extensive ad
       | effectiveness analysis and the one thing most papers ignore is
       | that having your product listed in a store is a given. More often
       | advertising is protecting your product's listing in a store. Ad
       | spending isn't just about boosting your own sales, but those of
       | the category and adjacent categories. If those 80% of brands
       | stopped advertising to prevent $1mn of negative ROI but then were
       | dropped by the store, causing $100mn of negative ROI.
        
       | maweki wrote:
       | Reminds me of the John Wanamaker quote: 'Half the money I spend
       | on advertising is wasted; the trouble is I don't know which
       | half.'
        
       | hammock wrote:
       | There is a fundamental misunderstanding (intentional or not) with
       | these types of studies and claims.
       | 
       | Limited-time promotions, e.g. a 10% off sale, work on short
       | timescales that are easily measured. You can easily say what the
       | ROI is of an advertised promotion, and it is often positive.
       | (Side note, these promotions have a more-difficult-to-measure
       | detrimental effect on your long-term profitability, closely
       | related to the point I am about to make below)
       | 
       | Brand advertising, in contrast, works on a spread-out scale of
       | years or decades. When Coca-Cola runs a polar bear ad at
       | Christmastime they don't do it to increase sales of Coke that
       | week, nor should it be measured that way.
       | 
       | The actual effect that a brand advertisement has, is to add
       | PENNIES (not dollars) to their sales every day, for the next 100
       | YEARS. It's a long-term investment. And for these reasons hard if
       | not impossible to measure or control for confounders - but that
       | doesn't mean it doesn't work!!
       | 
       | And without that brand investment, their brand value is
       | continuously eroding away, at a rate of pennies (or more) per
       | day.
       | 
       | Source: Been on the leading edge of marketing and advertising for
       | over 12 years
        
         | ohuf wrote:
         | ... which is pretty convenient for you and guys, because if you
         | look at it that long-term way, nobody can tell that your whole
         | product is a useless scam
        
         | ksec wrote:
         | Very rare high quality comments on Ads.
         | 
         | Do you ever find annoying that the current narrative on the
         | internet ( and on HN ) that _All_ advertisement are bad?
         | Approaching to the point of finding people working inside Ads
         | industry as witch hunt?
        
         | rangersanger wrote:
         | Okay, I agree with everything you've said. In a "Data driven"
         | organization, how do you prove that your brand marketing is
         | working in order to protect it? A new leader comes in and says
         | "this isn't adding value, you cant prove it's adding value, I'm
         | cutting it unless you can prove it." What's your response?
        
           | tehjoker wrote:
           | A data driven organization is too short sighted to value
           | things that aren't easily measured.
        
         | dec0dedab0de wrote:
         | And this is the best argument to bring back old school banner
         | ads that were just an image without any third party js, or
         | tracking. Advertisements don't have to work _NOW_ they have to
         | work eventually.
         | 
         | At least it's the best argument from the advertisers side.
        
         | MuffinFlavored wrote:
         | > is to add PENNIES (not dollars) to their sales every day
         | 
         | How much growth has Coca-Cola seen on their specific "Coke"
         | line of products? How many people who don't already drink Coke,
         | Coke Zero, or Diet Coke are going to be influenced by a
         | (probably very expensive) TV advertisement reminding them that
         | Coke as a brand of sugary drink exists?
         | 
         | I feel like if they ever wanted to save millions and millions
         | of dollars, they could just stop advertising.
         | 
         | Something something Sriracha
        
           | TremendousJudge wrote:
           | They have to keep up the appearance that they are pretty much
           | the only cola drink you ever want to buy. If they stop all
           | their advertising, people would start seeing other brands
           | (and I don't mean just Pepsi, all the other lesser known
           | local brands as well) as viable options.
           | 
           | At least I think that's their logic.
        
           | cbsks wrote:
           | You and I certainly do not need to see any more Coca-Cola
           | advertisements to remember that the brand exists when we are
           | choosing what drink to buy. But there are hundreds of
           | thousands of people born every day. If Coca-Cola stops
           | advertising it may not impact their sales for years, but
           | eventually they could fade away.
        
           | bluGill wrote:
           | The ketchup industry stopped advertising, and over the next
           | 50 years their market share went down. Nobody knows for sure
           | how much was stopping advertising, but nobody wants to take a
           | chance.
        
         | wisemanwillhear wrote:
         | > Brand advertising, in contrast, works on a spread-out scale
         | of years or decades. When Coca-Cola runs a polar bear ad at
         | Christmastime they don't do it to increase sales of Coke that
         | week, nor should it be measured that way.
         | 
         | Curious... A year ago, an older lady gave our daughter a little
         | Coca-cola polar bear stuffed animal. It seems their advertising
         | dollars are still having an "influence".
        
         | jmann99999 wrote:
         | I agree with you on large national/international brands;
         | however most of the brands that I see on cable TV in the U.S.
         | aren't similar to Coca Cola. They are a fitness device that I
         | have never heard of. They are a dry good that I didn't know
         | existed. I would love to provide an example, but I can't
         | remember any of those brands.
         | 
         | The study cited by the OP has an interesting appendix [0]. It
         | shows the depths they went to in order to conduct the study.
         | The level of ads are also dissected into national, regional,
         | and local ads. If you look at the final table in the study
         | which shows all the categories of brands examined, I would
         | challenge anyone to remember a brand or product they saw on TV
         | related to many of them. Dough products? Eggs?
         | 
         | Maybe I have seen an add for a paper product (top category of
         | advertising), but I can't remember who that would be. Bounty...
         | maybe?
         | 
         | [0]
         | https://onlinelibrary.wiley.com/action/downloadSupplement?do...
        
         | btilly wrote:
         | And how do you measure the value delivered?
         | 
         | If you're not measuring value delivered, how do you know that
         | you're actually delivering value? Remember, you're the person
         | that you can most easily fool.
         | 
         | Fields as diverse as active fund management and psychic
         | readings have been filled with practitioners who were wrong
         | about the value that they thought that they were delivering. I
         | have no particular reason to believe that brand management
         | isn't another.
        
         | mihaaly wrote:
         | If you cannot measure then you are just bluffing that it works!
         | You cannot know yourself for god's sake!
         | 
         | "Been on the leading edge of marketing and advertising for over
         | 12 years "
         | 
         | Aaaaaah, I see! It is your personal interest to be payed very
         | well for unsubstantiated claims! Fishing in troubled waters. We
         | will consider your !!opinion!! accordingly....
        
         | floxy wrote:
         | Thoughts on this take about luxury branding?
         | 
         | https://thelastpsychiatrist.com/2011/11/luxury_branding_the_...
        
           | avidiax wrote:
           | Overly long, a bit smarmy. The main points, that the audience
           | for that ad aspires to be old money while at best being
           | nouveau riche, and ads that appear to be for women but are
           | placed in a men's magazine are actually for men both seem
           | accurate to me.
        
         | yKnoTho wrote:
         | I mean, you pretty much just validated it's all "manufactured
         | consent".
         | 
         | Spending money to chant a specific message to tune brain
         | chemistry, awareness, and memory, lest they die out.
        
         | fukmbas wrote:
         | Both are an absolutely useless waste of resources for society
        
         | slg wrote:
         | >Brand advertising, in contrast, works on a spread-out scale of
         | years or decades...The actual effect that a brand advertisement
         | has, is to add PENNIES (not dollars) to their sales every day,
         | for the next 100 YEARS. It's a long-term investment. And for
         | these reasons hard if not impossible to measure or control for
         | confounders - but that doesn't mean it doesn't work!!
         | 
         | Car brands are the obvious example of brand advertising. They
         | are among the most common TV advertisers but they don't expect
         | people to immediately go out and spend $50k on a new Mercedes-
         | Benz after watching a 30 second commercial. They just want to
         | establish Mercedes-Benz as a brand of luxury, performance,
         | technology, etc. That way the next time you are in the market
         | to buy a car you already have an ingrained positive perception
         | of Mercedes-Benz that might help sway your decision.
        
           | petercooper wrote:
           | I love Mercedes, yet what got me to buy two cars in
           | particular were YouTube videos by _other owners_ showing just
           | how fun they were.
        
             | nirushiv wrote:
             | It's possible the TV ads influenced your watching of those
             | videos :)
        
           | reader_mode wrote:
           | And yet the most valuable car company in the world (for
           | whatever that's worth) spends 0 on advertising and sells
           | everything they can produce.
        
             | tayo42 wrote:
             | Based off the comments I guess this is tesla. Isn't this
             | just based off of their inflated stock price. If someone
             | was seriously considering buying the company they wouldn't
             | make an offer based off the stock price?
        
             | dexterdog wrote:
             | The number of companies who could drop their advertising to
             | $0 yesterday and still significantly outsell Tesla can not
             | be counted with my hands.
        
             | potatosaur wrote:
             | When I was small, the same thing was said about Ferrari.
             | Obviously we didn't understand that F1 is marketing as much
             | as magazine ads are. In the same way though, Tesla might
             | not do declarative advertising but things like Musk's
             | appearance on Rick and Morty or favourable media coverage
             | fulfil the exact same role.
        
             | enlyth wrote:
             | They've done something smarter, created a cult of people
             | that do the job for free
        
             | r00fus wrote:
             | Market cap (ie, stock price) is not a good indicator of
             | present value, but perceived future value.
             | 
             | Edit: I also think TSLA isn't a car company. More like a
             | battery company.
        
               | Cincognito wrote:
               | Same goes for app stores, what happens if google and
               | apple ban you for whatever reason? Your company is
               | screwed and you have no appeal or legal safeguards.
               | 
               | <a href="https://businesscutter.com/">https://businesscut
               | ter.com//</a...
        
               | Cincognito wrote:
               | Someone here was arguing that advertising can't be
               | measured only through impact on present sales but "good
               | will and long term value". Tesla seemingly has good will
               | beyond any competitors.https://prickdaily.com/
        
               | Cincognito wrote:
               | We checked her rating and it's 4.5 or so. But it's funny,
               | she looks like a deadbeat here because of more
               | discerning/critical NYC Uber drivers who gave her 4 stars
               | 50% of the time.https://trickynerds.com/
        
               | reader_mode wrote:
               | Someone here was arguing that advertising can't be
               | measured only through impact on present sales but "good
               | will and long term value". Tesla seemingly has good will
               | beyond any competitors.
               | 
               | Also Tesla is buying battery cells, sells cars and
               | expects to have third parties supply batteries long term
               | - how can they be a battery company ?
        
               | r00fus wrote:
               | Same way Apple is a computer company but Foxconn does
               | most of the building of said computers?
        
               | reader_mode wrote:
               | But Apple sells computers ? Tesla is selling some battery
               | installations from what I saw but their core business is
               | cars. You could claim they are valued as a software
               | company because of FSD, but I don't really see the
               | battery angle, they would be not be anywhere close their
               | valuation if they were valued on that angle.
        
             | slg wrote:
             | >sells everything they can produce.
             | 
             | That is the important part. Their production capability is
             | limited to a level that is below current demand. It
             | therefore doesn't make any sense for them to invest in
             | increasing future demand until their production capability
             | consistently exceeds the level of current demand.
        
               | reader_mode wrote:
               | But their supply is constantly expanding and demand is
               | following right up. They have 0 ads and yet everyone
               | knows about Tesla.
        
               | scsilver wrote:
               | Elon is one giant ad, and he has equity. Just because its
               | not defined as traditional advertising, doesnt mean they
               | dont promote the brand. They have physical car showrooms
               | with large tesla logos. They litterally spent millions to
               | put a tesla in space...
        
               | 5tyuft wrote:
               | This was my first thought. Elon is constantly in the news
               | or doing some memorable stunt. Tesla absolutely
               | advertises it's just through Elon.
        
               | username90 wrote:
               | Has anyone calculated how much money he saved on ads
               | doing that? Seems like a huge efficiency advantage
               | compared to competitors.
        
               | reader_mode wrote:
               | But the study is about TV advertising effectiveness, and
               | the OP mentioned it being very valuable in the auto
               | industry. I just pointed out that the hottest brand in
               | auto industry is spending 0 on TV or any ads for that
               | matter.
        
               | slg wrote:
               | What is your point? No one is claiming that advertising
               | is the only way to increase demand. It is simply one
               | option to increase demand, an option that Tesla has no
               | use for at the moment.
        
               | reader_mode wrote:
               | If the hottest company in auto is spending 0 on ads are
               | ads really that valuable to auto industry ?
        
               | slg wrote:
               | If Elon Musk is one of the richest men in the world and
               | draws roughly a minimum wage salary, is salary really
               | that valuable to building personal wealth?
               | 
               | That is the equivalent of what you are asking. Musk has
               | other forms of income and wealth accumulation that other
               | people don't have. Therefore his salary shouldn't be used
               | to compare to people who don't have those other methods
               | of income. Similarly Tesla has other advantages that help
               | increase demand (or limit the upside of further
               | increasing demand). Other companies that don't have those
               | same advantages can still benefit from increasing demand
               | through advertising.
               | 
               | The only conclusion we can draw from Tesla's lack of
               | advertising is that the company leadership feels that it
               | is not the best use of company money. Any attempt to
               | extrapolate that out to the auto industry or advertising
               | in general is making a lot of assumptions.
        
               | Jtsummers wrote:
               | "Lack of advertisement" should be "Lack of conventional
               | advertisement"
               | 
               | Musk is strongly associated with Tesla in many people's
               | minds and he's very capable of keeping himself in the
               | public's focus. Then there's SpaceX which literally
               | launched a Tesla into space. Umm, that launch _was_
               | advertising. Even if it didn 't come out of an
               | "Advertising" budget line. Every manned SpaceX launch
               | uses a Tesla vehicle to get the astronauts to the craft
               | and, in the US at least, SpaceX is _hot_ the past few
               | years.
               | 
               | If Toyota or Ford had a space launch company you could be
               | confident they'd tie their trucks into it, drag the Ford
               | Shuttle S150 out with a fleet of F150s. Who needs
               | conventional advertisement when that's your public image?
               | 
               | Then there's the fact that Tesla's vehicles are still
               | unique in the market place with few direct competitors
               | (though that's changing). There's no need to spend money
               | advertising when you're the only company making status
               | symbol electric vehicles that are (somewhat) affordable.
               | A Honda Fit, not a status symbol even if it is more
               | practical financially. Honda and Toyota's midsize sedans
               | aren't differentiable, not really. They rely on branding
               | and conventional advertising to make people prefer one to
               | the other. All the other auto makers are in that same
               | situation with most of their vehicles.
        
             | 411111111111111 wrote:
             | Toyota doesn't advertise?
        
               | spullara wrote:
               | I think you saw the "brand value" list rather then the
               | valuation of the company list:
               | 
               | https://www.visualcapitalist.com/worlds-top-car-
               | manufacturer...
        
             | samat wrote:
             | I would not call Elon Musks Twitter and other public
             | performances 'no advertising whatsoever'. They don't pay
             | for it cash to adv companies, but they got in hot waters
             | with SEC because of it, for example.
        
               | reader_mode wrote:
               | I didn't say they do no advertising, I said they spend 0
               | on ads.
        
           | MuffinFlavored wrote:
           | > Car brands are the obvious example of brand advertising.
           | 
           | Car commercials crack me up. Nissan is running commercials
           | lately in the US on how dynamic, sporty, and fun to drive
           | reckless/fast their cars are on TV.
        
             | ProfessorLayton wrote:
             | "Boring" utilitarian cars have gotten much, much better
             | over time, and can easily match acceleration times of
             | previous "pony" cars of the 90s and earlier -- cars that
             | were once considered fast, sporty, and fun to drive.
             | 
             | They can do it while being much larger and achieving much
             | better MPG, as well as being a lot safer.
             | 
             | Utilitarian electric vehicles are even better, but not
             | quite commonplace yet.
        
               | MuffinFlavored wrote:
               | > "Boring" utilitarian cars have gotten much, much better
               | over time
               | 
               | I would rather the commercial tell me how purposeful
               | their car is, not how much fun it would be to drive. It's
               | extremely fake/in bad taste/disconnected from reality to
               | try to sell me a Nissan Versa based on how much fun I am
               | going to have in it.
        
         | echelon wrote:
         | > Source: Been on the leading edge of marketing and advertising
         | for over 12 years
         | 
         | Would you say that might be a source of bias?
         | 
         | Look at SpaceX and Tesla. They barely advertise and have huge
         | brand recognition.
         | 
         | I'd buy Sennheiser over Beats. Krispy Kreme over Dunkin.
         | Costco.
         | 
         | My partner loves Zara.
         | 
         | I don't have a high opinion of brands that advertise.
        
           | GuB-42 wrote:
           | SpaceX and Tesla do viral marketing, and they are really good
           | at it.
           | 
           | In a narrow sense, Tesla doesn't advertise: they don't buy ad
           | spots on TV, but they certainly do it in other ways. I mean,
           | SpaceX started because Elon Musk wanted to buy a Russian ICBM
           | to put a small greenhouse on Mars as a publicity stunt,
           | Russians said "WTF lol no", Elon Musk said "Ok, I will make
           | my own rockets". I don't know if it is true but it certainly
           | shows the lengths Elon Musk is ready to go when it comes to
           | marketing.
           | 
           | And you say you'd buy Sennheiser over Beats, but you
           | certainly know about Beats. Everyone knows about Beats. To
           | give an idea of the power of Beats relentless advertising,
           | audiophiles (Beats supposed enemies) make articles like "list
           | of bass heavy headphones that are better and cheaper than
           | Beats" (that are not that much cheaper). It may seem like
           | they are attacking Beats, but instead, they have just set
           | them as a reference. Bass heavy headphones = Beats. They talk
           | smugly about how Beats prioritize form over function
           | (Headphones that look cool = Beats). Guess what someone who
           | wants bass heavy headphones that look cool will buy, even
           | though they Beats is far from the only one offering such
           | products?
           | 
           | You won't buy Beats, they don't care, you are not their
           | target. If they want to capture your market, they will create
           | or buy another brand, and use a different marketing strategy.
        
           | mihaaly wrote:
           | They actually make their products more expensive than
           | necessary by making the client pay for something they have no
           | use for: advertisement - making it less competitive by this
           | extra price. I avoid heavily advertised product when I have a
           | choice (and when not, then it has just no benefit for the
           | company to pay for advertisement: I'd buy it without adverts
           | for the same price.)
        
           | zhdc1 wrote:
           | Academics divide awareness into status (perceived quality)
           | effects and reputation (actual quality) effects. Paid
           | marketing influences both, but there are other ways of
           | getting your name out there, and some companies are better at
           | it than others.
           | 
           | > I'd buy Sennheiser over Beats
           | 
           | Sennheiser has a higher reputational quality than Beats, but
           | most people know of Beats because of Beats' affiliations
           | (status) and their large marketing budget.
        
           | arrosenberg wrote:
           | > They barely advertise and have huge brand recognition.
           | 
           | The show rooms they have at most higher end shopping malls
           | are definitely an advertisement. I'm with you on Sennheiser
           | though.
        
           | handmodel wrote:
           | I think its fair to say that the reasons a rocket company
           | does not need to advertise dont apply to companies that
           | people buy weekly/monthly on a grocery store shelf.
           | 
           | Besides, the advertising budget of other government
           | contractors/satellite companies is also close to zero.
           | 
           | The better question is "If I ran Pepsi today - would I
           | drastically lower the advertising budget". I'm not sure what
           | my move would be but I don't think looking at short term ROI
           | of TV ads would be informative.
        
             | sumtechguy wrote:
             | Also Tesla does not 'need' to advertise, yet.
             | 
             | It is effectively advertised by everyone for Elon for near
             | 0 dollars. Launch a rocket (different company) the article
             | will mention Tesla _for them_. Talk about saving the
             | environment guess who gets mentioned. Talk about power
             | needs, Tesla comes up as cars are becoming a large consumer
             | of electricity, solar, coal, nuke, etc.
             | 
             | His advertising is basically being done for free by
             | companies who do not even really realize it.
        
             | echelon wrote:
             | > rocket company does not need to advertise dont apply to
             | companies that people buy weekly/monthly on a grocery store
             | shelf.
             | 
             | Starlink? That's consumer-facing.
        
               | handmodel wrote:
               | I think if we get to the point where they are trying to
               | get people to switch their cell phone or internet plans -
               | they will do more traditional tv/online advertising.
               | 
               | That being said - I don't think a successful one-time
               | advertising push by a completely new field speaks to the
               | long-term benefits of it once they (presumably) become
               | established.
        
             | btilly wrote:
             | And yet https://cometcleaner.com/ is an enduring consumer
             | brand that has been around for decades and does basically
             | no advertising.
             | 
             | A story that I remember from the 80s is that the brought in
             | a consultant to improve sales. Rather than advertising,
             | they opted to add one more hole to their cans. Sales went
             | up 20%.
        
           | yupper32 wrote:
           | Those aren't great examples.
           | 
           | SpaceX and Tesla absolutely have marketing in the forum of a
           | crazy CEO that makes the news a lot. SpaceX fancy rockets
           | gives him a platform to spew crazy shit all the time and the
           | media loves it.
           | 
           | Beats makes inferior products and yet has twice the revenue
           | of Sennheiser. That's because of marketing.
        
         | andreilys wrote:
         | _And for these reasons hard if not impossible to measure or
         | control for confounders - but that doesn 't mean it doesn't
         | work!!_
         | 
         | One of the ways that advertisers and marketing people stay
         | employed is they say that the output of their effort and money
         | spent is not quantifiable.
        
           | mjburgess wrote:
           | Indeed.
           | 
           | When I walk into the store there are a very limited number of
           | colas on offer: a can of pepsi, a can of coke, etc.
           | 
           | What exactly is the advert _for_? My choice has largely been
           | made.
        
             | hammock wrote:
             | A lot of marketing money is "paid" (simplifying here, but I
             | can expand if desired) to get that shelf space from the
             | store, as well, in ways that you probably didn't
             | know/haven't thought about.
        
               | bluGill wrote:
               | depends on the Store. WalMart doesn't sell shelf space
               | the way most others do. Though WalMart is doing their own
               | something that I don't understand.
        
             | handmodel wrote:
             | I think I have the opposite reaction from the same data.
             | The reason I can't get my own sugar water on a grocery
             | store shelf is because the grocery store doesn't want to
             | give space to something that only sells half as well. And,
             | they are humans too, so I'm sure they are biased by the
             | ads/perception of what they think other people want.
             | 
             | I think a lot of the long-term bonus of ads is to simply
             | build a moat that other competitors find difficult to
             | surmount.
        
               | nickff wrote:
               | I think you're overlooking a couple of grocery-specific
               | issues.
               | 
               | Many major retailers will require that new brands invest
               | a certain amount of money in advertising product to their
               | region/market before stocking the product. It's also
               | common to 'lease' shelf space to manufacturers.
        
               | handmodel wrote:
               | I think we largely agree. I know people who have launched
               | food items (bug snacks) that were piloted in a dozen or
               | so Whole Foods. They didn't sell enough in the trial
               | period that they weren't given offer/lease to return.
               | 
               | It was a super niche product they were making but were up
               | against a couple products that I've at least seen ads for
               | online. I think, theoretically, if those other companies
               | didn't have a brand presence then perhaps my friends
               | snacks would have had a slightly better shot at staying
               | on the shelfs. However, from the other products data they
               | may have seen no short-term gain from their ads.
        
             | edmundsauto wrote:
             | 1. You may already have a brand, but many don't - so they
             | want people to switch.
             | 
             | 2. People who don't drink soda need to get hooked somehow!
             | 
             | 3. Increasing consumption. Think about the "Got Milk?"
             | campaigns of the 90s - they weren't saying "drink XYZ brand
             | milk", they were looking to increase milk consumption.
             | 
             | I think #3 is probably the biggest factor, tbh. That's why
             | you see ads for cotton, milk, beef, avocado, etc.
        
               | bluGill wrote:
               | #3 is because there are middlemen that don't count. The
               | middlemen in dairy want you to buy their brand of milk.
               | However the guy who owns the cows sells to whichever
               | dairy gives the best deal (the big farms all have a
               | contract with one dairy to supply only them, but there
               | are enough small guys who sell to who ever they can). The
               | guy who owns the cows wants you to buy milk and doesn't
               | care what brand it is.
               | 
               | The same applies to the others you named: sure there are
               | brand, but there is something large below the brand that
               | doesn't care what brand, only that you are eating.
        
               | nickff wrote:
               | I think you're missing the biggest reason for product
               | advertising, which is to notify/remind potential
               | users/consumers that the product exists.
               | 
               | Many people are unaware that a given product exists at
               | all, and others are unaware of all its potential uses;
               | even occasional users can sometimes forget that they
               | liked a product or found it useful.
        
             | hogFeast wrote:
             | Exactly. The cost and effectiveness of advertising is why
             | there are a limited number of choices. Your choice has been
             | made for you.
        
           | ghaff wrote:
           | A lot of marketing activity is measured these days. A lot of
           | the measurement ends up being through proxies that may
           | correlate poorly with what you really care about. But you
           | might be surprised at the amount of data associated with
           | marketing campaigns, content marketing, events, and so forth.
           | It's a _lot_ more than used to be the case.
        
           | hogFeast wrote:
           | It clearly is quantifiable. The market is changing but if you
           | capitalize advertising costs in financial results then you
           | see that long-term investment in advertising does produce
           | results, and companies in these industries view this
           | investment as their moat (and btw, if you sell a FMCG into a
           | grocer, they will want to know what you are investing into
           | the brand...they know it works too).
           | 
           | Now, to be clear, this isn't the same thing as saying that
           | all TV advertising has a positive ROI. It doesn't, I would
           | guess that most is negative. But it is also true that there
           | are a small number of firms who have made it work (as in most
           | things, 80/20), and most of this gain is not easily
           | measurable over discrete periods...it is continuous
           | investment over decades.
           | 
           | But the market has clearly changed. People are spending their
           | time doing different things. I think TV advertising time at
           | certain periods is maybe cheap, but almost all the rest is
           | overvalued junk. AdTech online isn't particularly well
           | developed for this kind of campaign, online advertising isn't
           | particularly effective either (the move to intention doesn't
           | fit the long-term strategy that FMCG and similar big buyers
           | of TV ads have) but it is probably more effective. Maybe if
           | TV costs go down this will change, but...I don't know (radio
           | and door-to-door is undervalued imo).
        
           | nemothekid wrote:
           | But it's hard to refute the case that it's not true. I
           | haven't watched TV in years nor have I seen Coca Cola bear in
           | a time longer than that but I'm still acutely aware of Coca
           | Cola's brand.
           | 
           | Another example where this is more clearly felt is consumer
           | goods. I always buy Tide - I couldn't tell you why until
           | someone pointed it out to me. When I went to college and had
           | to buy detergent there was easily 10 brands of detergent and
           | Tide felt the safest. I've been watching Tide ads for the
           | better part of 18 years and I feel that had to have some
           | decision into why I paid a 10% premium for the brand.
        
           | long_time_gone wrote:
           | ==One of the ways that advertisers and marketing people stay
           | employed is they say that the output of their effort and
           | money spent is not quantifiable.==
           | 
           | It gets quantified as "Goodwill" any time a company is valued
           | (acquisition, IPO, investment, etc.) or releases financial
           | statement (it's on the balance sheet).
           | 
           | Coca-Cola is coming up a lot in this discussion. They have
           | Goodwill of $17.7 billion, along with additional intangible
           | assets of $11.2 billion. That $29 billion of Goodwill makes
           | up about 32% of Coke's total assets of $90 billion.
           | 
           | https://finance.yahoo.com/quote/KO/balance-sheet?p=KO
        
             | hengri wrote:
             | I was under the impression that marketing costs fall under
             | a cost of revenue column and goodwill is just a BS account
             | item to account for differences in money spent and 'market
             | value' during m&a.
             | 
             | See https://www.investopedia.com/terms/g/goodwill.asp
        
               | ghaff wrote:
               | Not market value as the term is usually used. Value of
               | assets less liabilities.
        
               | long_time_gone wrote:
               | The third sentence of your link:
               | 
               | "The value of a company's brand name, solid customer
               | base, good customer relations, good employee relations,
               | and proprietary technology represent some reasons why
               | goodwill exists."
               | 
               | The first three are directly tied to advertising and
               | brand-building. You call it "BS" for some reason (you
               | seem not to believe in it), but it is a real thing and we
               | have financial methods to account for it.
        
               | dudeman13 wrote:
               | >we have financial methods to account for it.
               | 
               | Could you go over some of them or point to some resource?
               | I'd love to learn more!
        
               | bokstavkjeks wrote:
               | > You call it "BS" for some reason (you seem not to
               | believe in it)
               | 
               | The balance sheet is typically abbreviated as BS, so a BS
               | account is a balance sheet account.
               | 
               | It's been a while since I've had anything to do with
               | goodwill, but if I remember correctly it's most commonly
               | the difference in the assets net market value and the
               | purchase price of a company. So if company A buys company
               | B, which has assets of $50 for $100, then they'll add $50
               | in goodwill to account for the difference.
               | 
               | This is, of course, a simplification as I'm sure goodwill
               | is regulated under GAAP/IFRS. But it does mean that you
               | can't use goodwill to accurately estimate the effects of
               | brand advertising as there could reasons other than brand
               | marketing for a company being traded above its assets'
               | fair market value at the time of the sale.
        
               | long_time_gone wrote:
               | ==So if company A buys company B, which has assets of $50
               | for $100, then they'll add $50 in goodwill to account for
               | the difference.==
               | 
               | Goodwill is an asset and we frequently see it monetized.
               | It isn't just a made-up number to make things balance, it
               | is a stand-in for particularly "hard-to-value" assets
               | like perception. Ford famously licensed their logo and
               | built a $1 billion business [0]. Prior to the licensing
               | deal, that value would have only been captured as
               | Goodwill on Ford's balance sheet. It is the value of the
               | blue shield that they have built over decades of company
               | performance and advertising.
               | 
               | ==But it does mean that you can't use goodwill to
               | accurately estimate the effects of brand advertising as
               | there could reasons other than brand marketing for a
               | company being traded above its assets' fair market value
               | at the time of the sale.==
               | 
               | Goodwill is a combination of many things, one of the
               | largest pieces being brand value. Publicly traded
               | companies generate a Goodwill number each time they
               | release a financial statement.
               | 
               | [0]
               | https://www.forbes.com/sites/dalebuss/2012/05/24/ford-
               | has-bu...)
        
             | scott00 wrote:
             | Goodwill only ever shows up as the result of an
             | acquisition. If a company with a book value of $1B gets
             | acquired for $10B, the balance sheet of the acquirer will
             | see its goodwill increase by $9B after the acquisition
             | closes. Nobody's doing a bottom up estimate of brand value
             | to come up with that $9B, it's just the fudge factor double
             | entry accounting needs in order to make the Equity =
             | Assests - Liabilities equation continue to hold.
        
               | zeusk wrote:
               | Why not just pare down the assets by $9B to reflect the
               | expenditure of acquisition?
        
               | rmah wrote:
               | I don't know the details, but I'm pretty sure it's tax
               | related. I'll bet companies would _love_ to be able to do
               | that. Because then that company could deduct that capital
               | loss from their income to lower or eliminate their tax
               | burden.
        
         | tlogan wrote:
         | This is exactly the problem: it is impossible to measure how
         | much advertising helps. And maybe there are some measurements
         | but they are not known.
         | 
         | You might be right or you might be wrong. For example, I do not
         | see Tesla commercials on TV so I wonder if they will sell more
         | cars in next decade if they advertise as other car companies?
         | Is Tesla making a mistake?
        
           | captaincaveman wrote:
           | If a competitive alternative cool electric car appears, and
           | they use advertising to steer the opinion of the public of
           | being the best electric cars on the market ... I think Tesla
           | will start advertising!
        
           | bluGill wrote:
           | > it is impossible to measure how much advertising helps
           | 
           | That is false. It is impossible to measure exactly, but
           | statistics can put a range on it, confidence intervals, and
           | other such things (which I've mostly forgotten since school).
           | We can measure all this to close enough.
        
         | nabla9 wrote:
         | > And for these reasons hard if not impossible to measure or
         | control for confounders
         | 
         | Are you saying that you don't know if long term brand
         | advertisement works?
        
           | altdataseller wrote:
           | Absolutely not. It's hard for me to tell how much of an
           | effect exercising will have on my lifespan. Will it add 4.5
           | years? 10 years?
           | 
           | But I know that exercising daily will most likely have a
           | positive effect.
        
             | [deleted]
        
       | Alexss wrote:
       | It's marginal ROI which is negative for 80%. Overall ROI for
       | advertising is negative ROI for 2/3rds of brands (still v. high,
       | obviously).
        
       | modzu wrote:
       | another effective means of increasing sales is to threaten people
       | with violence if they dont purchase your products. of course
       | these days thats not really tolerated. im not sure when, but i
       | hope some day we stop tolerating the pollution of modern
       | advertising
        
       | giantg2 wrote:
       | How do the tax write-offs factor in? It seems almost impossible
       | that advertising doesn't provide benefit when you consider the
       | money would have otherwise gone to taxes.
        
         | weego wrote:
         | That's not how taxes work. It's also kind of damming of the
         | entire industry if that's the fallback excuse for existing.
        
           | giantg2 wrote:
           | I'm wondering if that was a factor in the marginal net
           | negative calculations. That could be enough to switch them
           | positive.
        
         | s1artibartfast wrote:
         | It is not an issue because taxes are on profit, not revenue.
         | Needlessly wasting revenue shrinks profit faster than it
         | shrinks tax liability.
         | 
         | e.g. You don't burn a dollar to save 20 cents on income tax
         | because you are still loosing 80 cents.
        
           | giantg2 wrote:
           | If they can't get 80% back, that's pretty bad. I was
           | wondering how these marginal net negative numbers worked. If
           | they're saying it's 95% back, then that's still higher than
           | 80%.
        
             | s1artibartfast wrote:
             | Think of this way: You have $2 profit. You can take it
             | paying 0.4 in taxes, leaving 1.6 after taxes.
             | 
             | OR
             | 
             | You have $2, reinvest an extra $1 on marketing with 80%
             | return. You now have 1.8 total profit. You pay 0.36 in
             | taxes, leaving 1.46
             | 
             | You will always loose money if the marketing ROI is less
             | than 100%
        
               | malshe wrote:
               | Can you elaborate your calculation more? Are you using $1
               | from the $2 profit to reinvest in advertising? Also are
               | you getting an 80% return on that $1 meaning getting back
               | $1.8? ($1 investment in advertising + $0.8 profit)
        
               | s1artibartfast wrote:
               | In short, %80 return means that if you spend 1.0, you
               | only get back 0.8. You forever lose the $1 spent, but get
               | more sales and worth $0.8 after costs.
               | 
               | Here are more details (repeated for clarity)
               | 
               | Assumptions: 20% corporate tax rate (assessed on total
               | profit) 80% Marginal rate of return for advertising (next
               | dollar you can spend)
               | 
               | 1) You have $2 profit (before taxes). You can take it and
               | pay $0.4 in taxes, leaving $1.6 after taxes.
               | 
               | OR
               | 
               | You have $2 profit (before taxes), You spend an extra $1
               | on marketing with 80% return. The $1 spent on advertising
               | returns you $0.8. You now have 1.8 total profit. You pay
               | 20% ($0.36) in taxes, leaving 1.46
               | 
               | You will always loose money if the marketing ROI is less
               | than 100%
        
               | malshe wrote:
               | Ok, thanks for the explanation. I got confused because of
               | your definition of ROI. Normally, ROI of 80% would mean
               | you invest $1 and get back $1.8 in return. see https://ww
               | w.investopedia.com/terms/r/returnoninvestment.asp. What
               | you described will mean -20% return and not 80% return.
               | But I get the point you are making and I agree with it.
        
         | malshe wrote:
         | This is a great point, and the authors don't take it into
         | account. Expensing advertising certainly provides tax shield
         | and it will make a significant difference at the margin.
         | 
         | Edit: The taxation become relevant while considering expensing
         | vs capitalizing advertising. I am not an accountant but from
         | what I understand, at least in the US, advertising is commonly
         | expensed.
        
       | lupire wrote:
       | Title is critically incorrect.
       | 
       | It should be:
       | 
       | > The ROI analysis shows negative ROIs _at the margin_ for more
       | than 80% of brands, implying _over-investment_ in advertising by
       | most firms.
        
         | evancox100 wrote:
         | You are correct, but if you look at total instead of marginal
         | the picture's not much better. While 80% of brands have
         | negative marginal ROI, 67% (2/3) have negative net ROI, and so
         | would presumably be better off with zero advertising.
        
           | singhrac wrote:
           | Not necessarily. The thing to measure is the marginal ROI at
           | zero advertising spend. Derivatives are not bounded by their
           | average value across a range.
        
             | rhizome wrote:
             | I'm not an MBA nor even a math person really, what is the
             | "I" in this equation when the ad spend is zero?
        
               | zeusk wrote:
               | You just take the interval (0, inf). So you analyze it as
               | limit spend -> 0+ in that region.
               | 
               | My personal opinion however is that ad industry is a big
               | scam.
        
             | mlyle wrote:
             | The claim was: "67% (2/3) have negative net ROI, and so
             | would presumably be better off with zero advertising."
             | 
             | If they truly have negative net ROI, they would be better
             | off with zero spending than their actual spending. The
             | claim holds.
             | 
             | > The thing to measure is the marginal ROI at zero
             | advertising spend. Derivatives are not bounded by their
             | average value across a range.
             | 
             | OK, so if we're going to get super pedantic... the
             | derivative could be negative at the current value, and at
             | zero, and there could be a positive ROI for _some_ value of
             | spending (between 0 and the amount spent, or even for some
             | value _more_ than what was spent). But it 's not really
             | likely, nor relevant to the point the person above made.
        
               | evancox100 wrote:
               | Furthering the pedantry, even assuming monotonically
               | decreasing ROI as ad spending increases, as long as ROI
               | of the first dollar was positive, there would be some
               | optimum between zero and current levels. But my original
               | statement still holds, zero would be preferable to
               | current levels of spending for those brands.
        
         | mbesto wrote:
         | I can't see the whole article, but if they don't mention
         | advertising for brand recognition then they are missing half
         | the puzzle (i.e. indirect effectiveness, which is almost
         | impossible to measure).
         | 
         | Coca Cola doesn't shower 16-25 year males with ads because they
         | think they'll walk out the door and go buy a can of Coke. They
         | do it because when they have discretionary income (age 22+),
         | they recognize the brand. This is impossible to measure
         | precisely.
        
         | dang wrote:
         | Submitted title was "Advertisement has a negative return on
         | investment for more than 80% of brands", which broke the site
         | guidelines, which ask: " _Please use the original title, unless
         | it is misleading or linkbait; don 't editorialize._". We've
         | fixed it now.
         | 
         | https://news.ycombinator.com/newsguidelines.html
        
       | Animats wrote:
       | TV ads.
       | 
       | Where you can't measure response rate directly.
        
         | jondwillis wrote:
         | The editorialized title here should probably be changed...
        
         | ohazi wrote:
         | Also where "modern" "smart" platforms decide it's acceptable to
         | chop up a video into a dozen slices and insert the same. exact.
         | ad. in between each segment, causing half the viewers to swear
         | off that brand for life?
        
           | stronglikedan wrote:
           | Similarly, the only game I play on my phone is a card game,
           | and ever since I visited my company's website to check on
           | something, our Google ad is shown between hands almost 90% of
           | the time. I never click on it, so you'd think they'd stop
           | showing it after the 500th time (it's been weeks since I
           | visited the website). Is that just a ploy by Google to
           | overcharge us for advertising?
        
           | wyldfire wrote:
           | I don't know if it's for a lack of bidders, or if the ads are
           | that way by design. Some of what you're paying for is brand
           | identification and repetitive commercials are one way to get
           | that. Despite however annoying it might seem. The pool being
           | advertised to will consider the advertised brand when
           | 'Good/Service Need X' arises, whereas they likely would not
           | without the ads.
        
           | 015a wrote:
           | Hulu is one of the worst at this, and it's astounding to me
           | how seemingly willfully dumb advertisers can be.
           | 
           | It makes me think that no one in this industry actually
           | cares. You've got marketing and advertising executives
           | commanding eight figure budgets, inventing whatever metrics
           | they need to showcase success and protect their jobs. They
           | pay YouTube, Hulu, Samsung, etc millions, who provide back
           | whatever engineered metrics they need to keep getting those
           | paychecks.
           | 
           | You'd think there'd at least be some evidence in mapping
           | advertising spend back to revenue, but I suspect that the
           | platforms who can actually do this (e.g. Etsy) don't last
           | very long or see worse advertising revenue, because it
           | becomes startlingly obvious how poorly advertising works
           | (especially when automated at scale).
           | 
           | It's a house of cards, with so many people deeply invested,
           | spending their entire careers justifying their position, that
           | it probably wont ever change.
        
             | sfblah wrote:
             | This is exactly the dynamic we see in my company working on
             | search ads.
        
           | lupire wrote:
           | 50% is tiny. I'd estimate most YouTube product ads only sell
           | to <1% of the population.
        
         | sfblah wrote:
         | I work for a company involved in search engine advertising.
         | 
         | While it's technically possible to track conversions, very very
         | few customers actually do it. Some don't have a great way to
         | track it (health-care products where there's a privacy issue,
         | brand advertising, informational advertising, services where
         | there's no obvious immediate call to action, etc.)
         | 
         | Even among those who do track "conversions," I'd say under 10%
         | of them actually define a conversion as something where money
         | is exchanged immediately, which makes it hard to defraud. More
         | than half of the conversion tracking we see just requires the
         | user to spend a certain amount of time on the website, visit a
         | certain number of pages or to provide an email address.
         | 
         | Not surprisingly, we see a massive dropoff in conversion
         | percentage when money needs to change hands. It's more than
         | 90%. Also, not surprisingly, when some action is required for
         | conversion, we see more than half of the visitors taking that
         | exact action and nothing more.
         | 
         | Our analysis of the above is that more than half of clickers on
         | search ads, and probably more like 80%+ are just bots (or human
         | "bots" in clickfarms) clicking the ads and then pretending to
         | convert. Their incentive is that they are clicking ads on
         | search pages where they get a share of the revenue.
         | 
         | Interestingly, when we alert customers to this dynamic and try
         | to get them to shift their ad spend or conversion tracking to
         | prevent this kind of behavior, they actively do not care and
         | prevent us from doing it. Our analysis there is that marketing
         | managers in general know that what they're doing is largely
         | ineffective, but they don't want to admit that to their bosses
         | because then it puts their jobs at risk.
         | 
         | So, what we do is help them maximize where we can, without
         | pushing them too hard on the above: "Humankind cannot bear very
         | much reality."
        
           | dec0dedab0de wrote:
           | Have you considered that the marketing managers are the ones
           | hiring the bots to meet their goals for a bonus?
        
         | mateo411 wrote:
         | It's harder to measure than digital ads, but plenty of
         | companies measure the effectiveness of TV ads.
        
         | bluGill wrote:
         | > Where you can't measure response rate directly.
         | 
         | You can never measure response rate directly. There will always
         | be people who see your ad and then respond later (possibly by
         | some other ad on a different platform that they wouldn't have
         | responded to in the first place otherwise). This might or might
         | not matter to you.
         | 
         | The large companies who buy ads have statistical departments
         | tracking their ad response. They know how well the ads work to
         | close enough for their purposes. Those departments don't need
         | the direct response rate because there are better measures.
        
       | BeFlatXIII wrote:
       | The problem with advertising is that I waste 80% of the budget.
       | The real problem is that you can't determine which 80%.
        
       | cbsks wrote:
       | Here's a link where you can actually view the paper:
       | https://privpapers.ssrn.com/sol3/papers.cfm?abstract_id=3273...
       | 
       | There is also an interactive website where you can play around
       | with some of the data: https://advertising-
       | effects.chicagobooth.edu/
       | 
       | Both are linked from the lead author's website:
       | https://voices.uchicago.edu/bradleyshapiro/
        
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