The Ad Scam

Many moons ago, I sat through a presentation by the director of marketing for a company where I was working. He put up charts and graphs showing the effectiveness of the various market programs. It was very well done, but complete bullshit. Talking with the guy after his presentation, he admitted as much.

There was no way to measure the effectiveness of his programs. I had been tasked with trying to come up with a way to do it, which was why I was in his presentation. To the guy’s credit, he knew there was no point in trying to fool me so he came clean. He was just making assumptions from anecdotes and wishful thinking.

The guy was not an asshole or a crook. He was doing his job like every other marketing guy. His bosses and coevals made all the same assumptions he made and relied on the same pseudo-logic to justify the marketing budget. Everyone just assumed smart people had worked it all out a long time ago.

That’s why every great company spent money on ads, campaigns, promotions, etc. The one very memorable thing he said was that he made sure to spend a little more than his budget every year. That way, he would get  a bigger budget the next year.

I’ve always wondered if there would come a time when companies figured out that much of their advertizing was a waste of money. Dr. Pepper spends millions on college football, but their product still tastes awful. The percentage of people who will like odd flavored soda is fixed. No amount of advertizing with change it. Beyond product awareness and sales, advertizing strikes me as rather pointless. As I type this, I’m watching an ad for something that may be for clothes or possibly wheat. I have no idea and doubt anyone else does either. Millions were spent for something and I doubt the company will see a nickel in return.

On TV, most of these ads are filtered out by our brains as background noise. On-line, they are blocked by the browser and browser add-ons. I suspect most of us have become so good at blocking out web ads that we don’t even notice them. When I bother to look, I wonder why anyone would be spending money on them. Sites that lard up on ads, like Brietbart and the Daily Caller, I tend to avoid. If I have to close eight windows and then find and mute some stupid video in order to get to your site, your site sucks.

Of course, it has long been suspected that skimmers like Facebook use click farms to scam companies into advertizing with them. This video from earlier in the year is pretty good. No one has ever bothered to refute it. It has been known for a while that there are “like farms” for hire that will boost a Facebook page for a fee. Twitter has been plagued by zombie accounts to boost the follower counts of celebrities. The fact that Facebook, and presumably others, is using robots and click farms to scam advertisers should not shock anyone. The degree is the question. How much of scam is on-line advertising?

It appears half of these ads are never actually seen by humans.

Online advertising is a fickle thing. It accounts for 20% of the ad industry’s total spending, and over 90% of revenue for the internet giants Google and Facebook. That said, no one seems to have any idea whether it actually works.

That uncertainty reached a new high this week, as Google announced that 56.1% of ads served on the internet are never even “in view”—defined as being on screen for one second or more. That’s a huge number of “impressions” that cost money for advertisers, but are as pointless as a television playing to an empty room.

This is not a big revelation. The web metrics company ComScore reported last year that 46% of online ads are never seen., an ad fraud company acquired by Google in February, has pointed out that a large portion of ads are “viewed” only by robots, revealing that one botnet of 120,000 virus-infected computers viewed ads billions of times, running up the tab for advertisers without offering them the human eyeballs they sought.

Still, the acknowledgement by a heavyweight such as Google that ad viewability is a problem could shake up the industry by delaying possible IPOs of ad companies and requiring new ways for advertisers to gauge the effectiveness of their ads.
The nineteenth-century retailer John Wanamaker famously said, “Half the money I spend on advertising is wasted. The trouble is I don’t know which half.” In this case, it’s the obviously the half that pays for ads which are never seen, and now advertisers are looking for new tools to figure out which those are.

It’s worth noting that Google made this acknowledgement of the deficiency of the model it has profited richly from while also offering a new model to advertisers: In July it introduced its Active View product, which measures only viewed ads.

This goes back to the puzzle of Facebook and Twitter. How can they be worth billions? Yeah, they have lots of users, but so what? Those users pay them nothing. The ads on Twitter are minimal and you can’t even see them on your phone. I don’t do Facebook anymore, but the ads I used to see were mostly scumbags like dating services and fake medicines. At some point, the guys writing the checks will figure out they are wasting 100% of their money these sites.

4 thoughts on “The Ad Scam

  1. Facebook and Twitter are worth millions because people believe that after a few more years they’ll be worth billions.

    grey: Facebook sucks as an advertising platform for small businesses. Facebook is set up such that they’ll only serve ads to a random and limited selection of a business’s followers. To get it served to all of them, you have to pay quite a lot–as in, multiple orders of magnitude more than the “standard” fee. To get it served to everyone on Facebook, you’re getting into five or six figures–that is, a large company’s ad campaign size of budget.

    Which is what Facebook needs to keep the lights on. They aren’t going to be supported by Grandma’s Homemade Jelly who buys a twenty-dollar ad once a month, they need Volvo to spend a hundred k every week to get a Volvo ad in front of everyone on Facebook for a day.

    And you’re right about it being “mindshare”, not specific products. The point of traditional advertising, these days, is not to convince customers to switch to your product; it’s to convince current users to stay with you. To tell Volvo drivers that their next car should definitely be a Volvo too, to tell Bud drinkers that they’re making the right choice of beer. New product discovery happens via friend networks, which is why advertisers are starting to bribe fashion and “lifestyle” bloggers.

  2. I worked for a time in advertising and I know that as it is an ‘industry’ it has to produce something. In this case the product is eye-candy (or irritating eye-sores depending on which way you look at them.)

    As a well-paid industry remarkably free of actual sweaty work it has to keep promoting itself to keep the checks coming in. But the one thing that makes all TV advertising pointless is the number of people who can recall an ad’s ‘storyline’ or its music and even its characters, but have very little recall of the product spending all that money to make it happen.

    As I worked in newspaper advertising, we didn’t have the music and the movement but we jumped through hoops to tell potential advertisers that for every copy of the paper purchased there were three readers, which we couldn’t prove though we had lots of data to seemingly back up the claim.

  3. I wonder that myself. If the ads cannot produce a positive ROI, who buys them or who would be left to buy them after everyone has been burned? But there are a lot of small business – thousands of new businesses created every year – and probably many them advertise on Facebook. There is an inexhaustible supply of new advertisers. Then you have the big advertisers like GM, Ford, and movie Studios. Unlike smaller advertisers, they are more interested interested in generating ‘mindshare’ than a positive ROI. They just want to raise brand awareness for their latest soda, car or movie rather than turn a quantifiable profit from the ads. These big advertisers have so much money that the Facebook budget is still small relative to other media.

  4. I have a Bachelors of Business Administration and the statistical models and analyses used in our accounting, economic and production classes were markedly missing from marketing classes. Virtually no quantitative applications were taught or applied to advertising strategies. I suspect much more than 50% of all advertising budgeting is wasted. I too also wonder why companies like ADM, TRW etc., that have no exchange with the general public, advertise.

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