Is Online Advertising Worthless? (zerohedge.com)

turkeydance shares a story from ZeroHedge: Category 1 storm clouds are gathering over what has traditionally been one of the most lucrative, and perhaps only profitable, sectors to come out of Silicon Valley in decades: online advertising. Two months ago, it was P&G which fired the first shot across the "adtech" bow when not long after it announced it was slashing its digital ad spending because it thought it was not getting the kind of return on investment it desired, it made a striking discovery: "We didn't see a reduction in the growth rate." CFO Jon Moeller said "What that tells me is that that spending that we cut was largely ineffective"...

So fast forward to last week, when during Thursday's Global Retailing Conference organized by Goldman Sachs, Restoration Hardware delightfully colorful CEO, Gary Friedman, divulged the following striking anecdote about the company's online marketing strategy, and the state of online ad spending in general... What Friedman revealed - in brief - was the following: "we've found out that 98% of our business was coming from 22 words. So, wait, we're buying 3,200 words and 98% of the business is coming from 22 words. What are the 22 words? And they said, well, it's the word Restoration Hardware and the 21 ways to spell it wrong, okay?"

Stated simply, the vast, vast majority of online ad spending is wasted, chasing clicks that simply are not there....One wonders how long before all retailers - most of whom are notoriously strapped for revenues and profits courtesy of Amazon - and other "power users" of online advertising, do a similar back of the envelope analysis, and find that they, like RH, are getting a bang for only 2% of their buck?

Comments

An old idea

[AHuxley]

The idea that if your brand is not been seen everyday it gets selected less and less when a consumer goes shopping. The other band that spent big on new ads got selected for been new. A consumer has the need to try a new look competitor again due to more new ads.
No matter how near a monopoly a brand gets due to quality or price it has to keep spending big on its name as if it was entering the market.
Classic TV, print, radio, billboards ads gave way to banner ads and deep tracking internet ads. Anything to keep humans seeing the trusted brand name and its products everyday.
The new problem for the ads is the old separation of TV, print, radio, billboard ads is now their direct online competitor. Social media wants to sell and build their own trusted consumer and entertainment brands.
Private label https://en.wikipedia.org/wiki/... and other ways computer company/social media owners/shopping sites now want to sell are replacing or buying up decades of generations trusted names.
Browsers are considering blocking outside ads. Social media and online shopping push their own new brands or partners that profit share.
The need for ads has not changed. The way select products get presented on a few captive platforms has changed.

Re:I always wonder why

[thomst]

jetkust wondered:

When you search for a company or website on google there is an advertisement for it right above the search result taking you directly to the web site you were looking for. I always click on the search result because clicking on an ad is just weird to me, even though they both likely take me to the same spot. But what is the point of buying an ad like this if they are already trying to get to your site in the first place? Why convince someone to do something they are already doing? Are they afraid another company is going to buy the search ad and someone is going to randomly click on another website instead of the one they were specifically looking for?

The link in the ad does not take you "directly" to the website for which you were searching. Instead, it takes you there by a roundabout route. Here's the URL for the ad that the search string "procter and gamble" generates:

https://www.googleadservices.com/pagead/aclk?sa=L&ai=DChcSEwing5erkavWAhUCl34KHRC6B2kYABAAGgJwYw&ohost=www.google.com&cid=CAESEeD2JLJzL1dBgUZFbmBGP-fz&sig=AOD64_3I39rwK0_DYxkNqTS1PJcvi8-iYg&q=&ved=0ahUKEwi42ZGrkavWAhVoxlQKHWkNCfwQ0QwIJQ&adurl=

Note that the url in question begins with "https://www.googleadservices.com/pagead/aclk". That's a call to googleadservices.com, which is google's central advertising hub, alerting it that a pagead has been clicked.

The next bit is "&ai=DChcSEwing5erkavWAhUCl34KHRC6B2kYABAAGgJwYw&ohost=www.google.com", which tells googleadservices to employ the script at "ai=DChcSEwing5erkavWAhUCl34KHRC6B2kYABAAGgJwYw", and that the request is originating from google.com. The "ai=" part might mean "advertising insight", or "artificial intelligence", or even "acknowledge immediately". I dunno - you'd have to ask one of google's advertising engine programmers (and they a are notoriously closed-mouth crew).

The "&cid=CAESEeD2JLJzL1dBgUZFbmBGP-fz" string which follows is clearly an identifier for the "client ID", or the Universe really is entirely devoid of meaning or logic. (YMMV. Or, y'know, not.)

That, in turn, is followed by "&sig=AOD64_3I39rwK0_DYxkNqTS1PJcvi8-iYg", which is pretty obviously a digital signature, probably included to prevent clickjackers from gaming google's revenue stream - or because google just likes to admire its own signature. (My own bet would be on security, rather than self-regard, btw.)

Finally, we have "&q=&ved=0ahUKEwi42ZGrkavWAhVoxlQKHWkNCfwQ0QwIJQ", followed by "&adurl=", the first part of which looks like a query string to me, with the last bit pointing to a null value. My guess is that, absent an actual value for "&adurl=", it causes the AI to redirect your browser to the client's default URL, per their contract with googleadservices. (Again, contents are packed by weight, not volume, and some settling may occur during shipping.)

Contrast all that with the non-ad link that the search string "procter and gamble" generates, which is simply "http://us.pg.com/".

In other words, "It's all about the Benjamins."

You're welcome ...

Re: Shitty Consultants

[SNRatio]

Correct, you should know to the penny, to the minute how effectice your online ads are.

Horseshit. Most sales cannot be directly connected to a click any more than viewing a commercial on TV can. Most of the time you don't know if the person who clicked is the person who bought your toothpaste or furniture. Clickthrough is not a measure of an ad's effectiveness, it's just a proxy.

Re:I always wonder why

[rmdingler]

In other words, "It's all about the Benjamins."

Nice post. Average click-through rate is about 2%, and the average price to the advertiser is $1-2.00 US.

Re:I always wonder why

[whoever57]

Contrast all that with the non-ad link that the search string "procter and gamble" generates, which is simply "http://us.pg.com/".

I searched for Procter and Gamble, then right-clicked on the first non-ad link that google shows. Here is the URL (remember, this isn't an ad):
https://www.google.com/url?sa=...