> What we know now is that click-through rates on news sites are really not substantially better than click-through rates on Joe Schmo's random blog -- but they _are_ substantially worse than in certain other business segments, like search.
AFAICT, search is a really amazing ad product. Users are declaring their interest in a subject, _right now_.
> They just didn't have the metrics to prove it.
You're not wrong, but I wouldn't discount the power of inertia. There's a story Steven Levitt tells on his Freakonomics podcast about a retailer who wanted to measure the impact of print ads. He suggested not running print ads for a duration in order to measure impact, and was met with incredulity: "Are you crazy? We can't just do that. We'll get fired like Jordan was. Dude was so unorganized that he forgot to order ads for the northeastern market for his entire summer internship."
After analyzing the data from that mishap, there was no measurable impact, and yet they refused to run the trial for longer. 'We can't not just buy ads' was the argument, even though the data suggested you totally could. I guess if your department buys ads, until you have an alternative, arguing for a budget cut is arguing your department should all be laid off.
The question is: where did this pattern come from? Why buy too many ads in the first place? Corporations are supposed to be maximizing profits, and yet we hear they are wasting tons of money on ads. Why don't some of them would learn not to and bring massive returns to shareholders? Some thoughts:
- A recent comment regarding a travel agency reflected that execs would check the stats on the most popular travel agency every week, and wanted to be at the top. They would therefore run ad campaigns at the end of the week in order to drive themselves to the top, even if the ads were a net loss in revenue. This suggests that a lot of advertising is aimed at people who are already invested in the company: execs and shareholders, who see the ads and think it is reflective of how well the company is doing (which, in a way, it is: it signals they have extra money to waste on advertising)
- I recently saw a clip from a Jobs interview, where he contrasted non-monopolies, which are run by product people, with monopolies (like Xerox and IBM), which are run by "sales and marketing" people. Presumably some ads are effective. Controlling the ads that are effective gives marketing power over the company, in the monopoly case. Having attained this power, they then use it to route the company's spare revenue to buy still more ads. This has the interesting implication (perhaps obvious) that a monopoly is bad for shareholders (as well as consumers), who are being robbed of the revenue now being spent on ads.
> Why don't some of them would learn not to and bring massive returns to shareholders?
I decided not to answer that question in the comments above in the name of brevity, but since you asked. My own thoughts:
- Punctuated evolution. The firms that follow the data are the ones more likely to survive recessions. One hopes that orgs where convention is only upset in a crisis are the ones more likely to fold.
- Re Jobs: he is widely regarded as a 'sales and marketing' genius, and was succeeded by a former IBMer focused on supply chain logistics, which is where monopolies actually focus. Why hire more salesman when your customer has to come to you to buy regardless?
Another thought: advertising advertises itself. So on one side, you have data saying you're buying too much ads. On the other, you have advertisers telling you they'll increase your profits if only you pay them. I have a feeling that the advertiser side usually wins.
AFAICT, search is a really amazing ad product. Users are declaring their interest in a subject, _right now_.
> They just didn't have the metrics to prove it.
You're not wrong, but I wouldn't discount the power of inertia. There's a story Steven Levitt tells on his Freakonomics podcast about a retailer who wanted to measure the impact of print ads. He suggested not running print ads for a duration in order to measure impact, and was met with incredulity: "Are you crazy? We can't just do that. We'll get fired like Jordan was. Dude was so unorganized that he forgot to order ads for the northeastern market for his entire summer internship."
After analyzing the data from that mishap, there was no measurable impact, and yet they refused to run the trial for longer. 'We can't not just buy ads' was the argument, even though the data suggested you totally could. I guess if your department buys ads, until you have an alternative, arguing for a budget cut is arguing your department should all be laid off.