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

Re: Shitty Consultants

[BronsCon]

So, then, you can tell if I click your ad today but my wife buys your product tomorrow? Your ads somehow gain persistent access to my webcam and/or microphone in order to verify that the person who was sitting at the machine when the ad was clicked is still sitting there when the purchase is made, even if those devices do not exist or are disabled? That sure is some trick, and if you're not doing it (and you're not), you're making assumptions. In other words, as SNR said, it's a proxy measurement.

Re: Shitty Consultants

[Anne Thwacks]

"How did you hear about us?" is one of the most reliable, and direct sources of information about how someone found out about your product

A lot of web sites ask this, generally with a drop-down. I frequently find that either I don't know, or I heard about them in multiple ways, mostly, neither answer is available, so I select the most irrelevant.

Seriously, guys, If you are trying to collect this information, do it properly on a small percentage of transactions. If I get asked 3 times cos I buy from you three times, then I will probably go elsewhere for the fourth. I ran a polling business 25 years ago, and we knew this then. The only two reasons for polling 100% of customers are (a) stupidity, and (b) evil intent.