The Problem With Targeting

In Chapter 3 of my book, I wrote:

Last but not least, there is the unspeakable truth in an era in which we have come to idolise Social Media: the New Yorker was much more of a real Social Network and of a Community than Facebook or Twitter ever were or ever will be! The New Yorker was, as Steve Harrison put it, “both an extension of the individual and a place of communion to which they came for their shared experience”.

I closed the Chapter by asking:

Could the fact that we’re missing a common shared vision of the world like the one we had as readers of the NY Times or of The New Yorker be detrimental not only to the fate of our democracies, but to advertising as well?

While looking for a possible answer, I came across an article that goes against the conventional wisdom: not Half of my advertising is wasted, but I don’t know which half, as Wanamaker loved to quip; but rather: The Waste in Advertising Is the Part That Works.

Just like elaborate deer’s antlers or long peacock tails in the animal world (see: The Handicap Principle), lavish, even extravagant ad spending on the part of a company may signal a high-quality, successful brand that is confident consumers will try and buy their quality products over and over again so that they will be able to recoup their investment.

On the other hand, the argument goes, advertising on the web makes it possible for any small company to buy ads and act as if they were a big, confident and successful company.

Do I agree? Only in part: I look at a number of clues in order to make a guess about quality and reliability, and I think lavish ad spending could just as well signal an ego problem, a miscalculation or an attempt to brainwash consumers, for example to sell them products “unsafe at any speed”. Or that a company is selling crap at a premium price and can afford to continue advertising it. Soda, anyone? Or junk food? No, thank you.

Don Marti: The Problem With Targeting

However, I found a second and related argument much more interesting: on the web, low ad prices and targeting have made it unnecessary for a company to have to show their true colours and their confidence in their products to all their potential customers.

Or, as Richard Stacey put it:

The issue with targeting is that after a while, you narrow things down to the point where you stop having a group large enough to constitute an audience and end up with a group of individuals.

With enough slicing and dicing, a company can save money, but could risk ending up looking like the dishonest politician who crafts different speeches for different audiences, to the point that, as Don Marti explains, a consumer could think that:

With good enough targeting, you could be the one poor loser who they’re trying to stick with the last obsolete unit in the warehouse.

Apparently, consumers somehow understand this; they dislike tracking and targeting and dislike it even more the more they understand how it works. And there is no doubt: adoption of ad blocking and tracking protection tools is going and will go up.

So, the very fact that print ads are less targetable, force companies to speak to the whole audience and in doing so help them being perceived as trustworthy instead of sneaky is one of the reasons why ads in newspapers and magazines are more effective than ads on the web and can command a much higher price. I like this counter-intuitive theory a lot.

Plug for my Book

To find out about other ways in which companies are compromising their brands, wasting their marketing money and making fools of themselves, and to try to find an antidote to all this madness, check out: What Happened To Advertising? What Would Gossage Do?

The real real data

I came across a very interesting post on Facebook from the team that is handling Social Media for Expo 2015 in Milan. How is the event going? We don’t know. The organisers and/or City Hall and/or the national government, it’s not clear, decided not to give us, you know, the stupid citizens who actually paid for this event with our taxpayer money, any numbers. Total number of tickets sold? We don’t know. Average attendance at the event compared to the 100,000 people per day they were expecting? Same as above.

What we do know, on the other hand, is how many fans and followers Expo has; how many posts and likes and comments; tweets, and retweets, and live tweets etc. You name it, we have the data. Does all this activity lead to ticket sales? No, we don’t know that, either.

Cost Per Hour

So, the new bullshit metric for online display banner ads, the scam formerly known as Interactive Advertising, only nobody “interacted” with it, is: Cost Per Hour. CPH. Which to me, I’m really really sorry, will always mean Copenhagen. Not Cost Per Hour.

As I’m a bit of a lazy fuck, let me try to run some very rough back-of-the-envelope numbers. Facebook makes 1 cent in profit per every hour their users waste on their website. Let’s say their margin is 50%. Their revenues would be 2 cents per hour.

If their margin were 25%, their revenues would be 4 cents per hour. How many total hours do people spend on FT? How many times more than what Facebook makes can they charge? Leaving aside the hoopla: can this “very brilliant” idea ever work?

Should it ever work? Seriously: what’s the very deep idea behind this “innovation”? Let’s charge our customers more? Why in the world should they say ok and play along?

 

Update: TNW holds the key to understanding the change: it’s all about engagement. Of course! How stupid of me not to understand it. And how do you measure engagement?

The ‘cost per hour’ (CPH) metric, developed with analytics firm Chartbeat, measures how long an ad is viewed, rather than simply whether it is seen.

Yeah. Funny how nobody ever made up similar bullshit about ads on tee-vee. Maybe — but just maybe — it was because they actually helped to sell the damned products.

Advertising: Not because it worked

Why do we have an advertising funded Web? Not necessarily because it works. It doesn’t.

Advertising became the default business model on the web, “the entire economic foundation of our industry,” because it was the easiest model for a web startup to implement, and the easiest to market to investors. Web startups could contract their revenue growth to an ad network and focus on building an audience. If revenues were insufficient to cover the costs of providing the content or service, it didn’t matter—what mattered was audience growth, as a site with tens of millions of loyal users would surely find a way to generate revenue.

And are start-ups making money on ads? No, only a rare few. When is Pinterest going to turn a profit? And even the profitable companies seem not to make a ton of money. Take Facebook. $791 million in profits in a quarter looks good. But on 1.32 billion users, that’s 60 cents per user. Average time spent on the site? 40 minutes per day. Or 60 hours per quarter, which means the average profit per hour spent on their website is 1 cent.

Want to do better than Facebook? You need to move deeper into the world of surveillance. Great stuff. Read it all: The Internet’s Original Sin.

Uber Zero

Seldom, if ever at all, have I read such a long, elaborate and so well thought-out post about something — like Uber Zero — that doesn’t make any sense at all.

Free, ad-supported Uber rides are inevitable, and if Uber doesn’t do them, a different competitor – perhaps Google! – will do it.

To which my only counter-question is: What is it, 1998 all over again?

There are three aspects of this post that trouble me. The first is: what’s wrong with actually paying for a service? Why does everything always have to be paid for by somebody else (by an advertiser)? The second is: what kind of ads would they show me? Ads for a new car, for example? But why should I pay for a new car when I can get a nice one plus a chauffeur for free? And why can’t I get the car for free as well, while advertising something else? Where does the nonsense stop? And the third: doesn’t advertising work when the cost of adding one more ad is basically zero and all profit? Think newspapers, television, Google, Facebook etc. In this case, every ride costs on average 20 bucks. Which means the CPM would be 20,000 USD. What kind of luxury product can spend that kind of money in ads? Worse yet: in ads “targeted” towards people that won’t even pay for their cab ride…

And you call this an analysis

And you call this an analysis? Twitter’s new CFO on Facebook

On mobile there are fewer ads since there is no right hand rail. But mobile monetizes better which is rare….a key question here is why does mobile monetize better? Is it due to higher prices per click or higher click through rates. If its the latter ie click through rates than its enormously positive because higher click through rates are highly correlated with better ROI which leads to ad spending.

What about: because ads on mobile are much larger? They take up the whole damn screen, rather than being small and unobtrusive as on the desktop. Unobtrusive is a nice word, but what it means is that nobody sees them. And what happens on mobile, ads being huge and people having large, fat fingers, is that people click on them, whether they intended to do so or not. Fat fingers. That’s about all the “magic” of mobile if you ask me.