Tired of feeding an opaque, slimy industry of bots and fake clicks.
Procter & Gamble, one of the largest and most sophisticated advertisers in the world, reported on Thursday that sales were slightly down in the fourth quarter and for the fiscal year, despite consumer price inflation. It’s the epitome of corporate revenue stagnation: only price increases keep revenues from declining. An activist investor – formerly called “corporate raider” – is breathing down its neck. So cost cutting to raise profits is the trick.
When a corporate giant cuts costs, it cuts the revenues of other companies.
And it did. Its “selling, general, and administrative expenses,” which include advertising and marketing, fell 7% in the quarter. Net income jumped 12%. And digital advertising took it on the chin in P&G’s earnings report:
Digital ad spending was lower versus a high base period and due to current period choices to temporarily restrict spending in digital forums where our ads were not being placed according to our standards and specifications.
Back in the day before digital ads, advertisers lived by a rule of thumb: Half of our advertising doesn’t work and is wasted; we just don’t know which half.
Digital advertising with all its consumer tracking technologies and direct micro-targeting promoted by now withering “adtech” companies or booming Facebook was supposed to have changed that equation. But it hasn’t. The hard part still is figuring out which half is wasted. But P&G is working on it.
When P&G speaks about cutting digital advertising, people listen, other companies follow, and the advertising industry quakes in its boots.
In April, P&G announced some details of its $12 billion or so cost-cutting binge over five years. This includes slashing $2 billion in advertising expenditures – among them $1 billion in media and $500 million in agency fees.
A year ago P&G announced that it would move away from ads on Facebook that micro-target specific consumers. Facebook is trying to leverage its enormous trove of consumer data to enhance its income. This has been its big promise. But P&G found that this micro-targeting of specific consumers based on the data Facebook has collected on them reduced reach and wasn’t working.
During the earnings call with analysts on Thursday (transcript via Seeking Alpha), CFO Jon Moeller explained the gist of it:
“In the fourth quarter, the reduction in marketing that occurred was almost all in the digital space. And what it reflected was a choice to cut spending from a digital standpoint where it was ineffective: where either we were serving bots as opposed to human beings, or where the placement of ads was not facilitating the equity of our brands.”
He touched on the two most common complaints about digital advertising scams:
- Advertisers are paying for ads that are viewed and clicked on by bots, not humans.
- Ads are placed by thousands of automated “ad exchanges” that are out of control of the advertiser on sites and pages that don’t match the advertiser’s products.
The entire vast space between legitimate advertisers and legitimate publishers is populated by a murky slimy world of often invisible entities, usually automated, that try to extract their cut and in the process further dilute the effectiveness of advertising expenses.
So P&G cut over $100 million out of its digital advertising spend in the fourth quarter, and this is what happened, according to Moeller: “We didn’t see a reduction in the growth rate.” And he added, “What that tells me is that that spending that we cut was largely ineffective.”
These spending cuts on digital ads are part of a larger strategy to more quickly halt spending on things – from ad campaigns to product development programs – that aren’t working, CEO David Taylor told the Wall Street Journal:
“We got some data that said either it was in a bad place or it was not effective,” Mr. Taylor said of the digital cuts. “And we shut it down and said, ‘We’re not going to follow a formula of how much you spend or share of voice. We want every dollar to add value for the consumer or add value for our stakeholders.”
P&G didn’t say if it would shift its ad spend from digital to other media, such as television. TV networks have long been clamoring that much of digital ad dollars disappear without trace in the opaque world of the Internet. But back in the day when we lived by the rule that half of ad spending was wasted and that we just didn’t know which half, there was no digital advertising – and TV networks got a big part of the pie, and still, half of the ad money just disappeared without producing results. So TV isn’t going to be the solution.
Marketing executives of other companies too have long riled against the murkiness of digital advertising, the false promises, the intractability of the Internet, the clicks and views by bots on which advertisers are wasting their money, and the billions of dollars that get blown without results. But getting a grip on what works and what doesn’t is hard.
There’s a larger issue: Retail spending (not adjusted for inflation) has grown on average 2.4% per year in the US over the past five years. Over the same period, digital advertising nearly doubled to $72.5 billion in 2016. Clearly, even digital advertising – despite the lure of Facebook and the like – cannot induce consumers overall to spend more and increase the size of the overall pie for advertisers. It can only, at best, divide up the pie differently.
And when one of the most sophisticated high-tech advertisers in the world decides it is overspending on digital advertising and is able to very carefully remove the rot, thus bringing down its costs without hurting its revenues, other companies will follow, with some consequences for the relentless but often ineffective surge of digital advertising dollars.
Investors who bought the hype of “adtech” in the world of digital advertising are left holding the bag. Read… Another Former $2-Billion Startup Gets Rolled Up
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I remember reading (possibly on this blog) that Facebook derives some 60% of its revenues from the ads that are placed by companies that make apps. Assuming this is true, we can see that P&G type companies account for only 40% of the ads. I don’t know what % of Facebook ads come from P&G, but I suspect they are not enough to rock the boat. The bubble in the valley is still going strong and probably for each $ that P&G pulls out, the app companies pump in 2$.
May be, as with everything else now a days, the digital advertising companies can chug along with zero participation from the real economy. If so, all analysis based on fundamentals is meaningless. It is as if real economy is from mars and the digital economy is from Venus.
“”I don’t know what % of Facebook ads come from P&G, but I suspect they are not enough to rock the boat.””
You can bet that lots of other major advertisers will follow the lead of P&G.
That WILL rock the boat..
Unilever has pulled back it’s spend on digital as well.
Marc Prichard, Chief Brand Officer for P&G, gave a “shot across the bow” speech in January at Interactive Advertising Bureau in which he called some of them criminals. See full transcript here: http://www.campaignasia.com/article/procter-gamble-chief-issues-powerful-media-transparency-rallying-cry/433442
He gave them a year to clean up their act to implement a one view-ability standard and third party verification.
Kudos to him for speaking up. His speech will change the industry.
Spot on.. Also, these $60 per hour techies in Seattle propping up $4500 per month one bedrooms might be in some trouble if industry actually looks at what they’re getting for their buck.. I have never looked at a Facebook adv. or Google or any news sites advertisers. Whatever anyone is paying to run an adv. is tossing away real money. Lately, I’ve noticed audio advs. will pop up while I’m trying to read a story so the cure for that is a mute button.
Can social media sites AD revenue really be accounted? How can they be accounted quarter to quarter apart from them claiming such and such an amount? Charging for clicks? Rates? Different AD methods for different customers? Can recognised auditing practises able to give a vivid and accurate account? Or are they based on clicks. FB seemingly 2 billion subscribers. We regularly hear of many social media sites have millions of users, subscribers, billions of clicks etc and therefore their revenue is great. As an investor I really would want to know how these billions of elements collected by these sites quarter to quarter are being churned to real dollars and cents. Revenue accounting can never be arbitrary. Seemingly the billions or millions could be potentially a source of income. But what about them disappearing overnight. Populating a Database with names and clicks is not a daunting task with the internet now when compared to the Dot com year 2000 period.
But understanding real revenue recognition in each case remains a pain for the investor.
This also works for audio: highlight and copy all, paste to a text editor, close the browser, read the story in a text editor. Go back for another one maybe. The insights of reporters are plain text, and they are innately severable from hundreds and hundreds of MB of bloat. It’s not magic, it’s mostly the alphabet. Let’s point this out to sites that use autoplay audio and video, or to the readers.
I do not have a FaceBuck account, but have an dormant Linked-in account. After barely touching it for ten years, it is still active. So the question is how many of the FaceBuck accounts are dead souls serving as lure for advertisers.
That’s only a question for us. Companies like Facebook and google have those numbers for sure. They can tell if an account is dormant and they can likely differentiate between bots and humans to a degree.
Though there are always new bots that are hard to detect.
The question is how much of that info do they share with customers who pay top dollar for adverts?
My sister and her bf work for Google, and the answer to your question is…less than you think.
Trust me, they willingly do not share any proprietary information. It takes a savvy buyer to ask the right questions to pull that type of information. There are many ways customers can save x # of dollars if they’re knowledgeable enough.
Trust me. There is no buyer savvy enough to figure out if what these companies say is accurate or not, or worse, whether they lie or not.
But mark my words: blockchain technology will one day solve this problem. It will be the revolution of online advertising. Right now, this industry is still prehistoric and the buyers are at the total mercy of those monopolies.
Most people I know have 2 or 3 facebook accounts and maybe 10+ gmail accounts. Does that mean the same ad, is sold to the same person 10 to 15 plus times. Also, Facebook has this annoying habit of equating each of its account with an actual person. The funny thing is, people actually believe them.
It is an amazingly opaque industry. The technology is so complex and convoluted that the industry to audit the numbers with a minimum of reliability and credibility does not exist yet. Pretty much everyone has to take their word for it and many clients jump in simply with fear of missing out.
Indeed, I just got a request in my email inbox from a long forgotten associate to join his Linked-in network: “Longforgotten Dude wants to add you to his network.” I forgot my Linked In password years ago – haven’t logged in since 2011 or thereabouts.
Subscriber growth for any of these big social networks are probably barely keeping up with the ghosted accounts like mine. And of course there are the duplicate accounts for people who abandoned their original profiles years ago, the rejoined. There’s no incentive for the social networking sites to delete unused accounts – that would hurt their subscriber numbers.
There was a typo in your comment. It is Fakebook not FaceBuck.
With FB ads, you only pay for views and clicks. So, accounts that no one logs into or not often (like mine) don’t “charge” advertisers. The only thing they contribute to is the total count of FB users in statistics – not even the count of “active” users.
And why would bots be clicking on ads – isn’t their purpose to post fake news and mess with people? FB works to shut down fake accounts, they have a whole division dedicated to this. I once had a duplicate account shut down by them that I made because I couldn’t get into my original one due to a glitch and I was in a hurry to set up a group chat for something – they took it seriously.
As soon as click farms were identified to exist, advertisers should have figured out the game was nothing but fraud. The people running these companies are pure genius.
I often wonder what the relationship is between advertising and sales. How much of it is actually necessary and/or makes a significant difference?
I was looking into it recently and learned that Zara, the clothier, pretty much has no advertising budget. Their principal is one of the ten richest men on the planet.
Some advertisements alert the public to products and sales. But then there are the power players like auto, telecom, banks, etc., the major sponsors that put their brands all over the place. Why? Does it create consumer confidence that they’re legitimate operations?
Is it possible that AdTech implosion is big enough to be a black swan?
One way to test this is to just pull all ads for a year, then track the results quarter over quarter.
The true metric need to be some type of pay for performance model. Take for example FB, let’s say the advertiser insist on using digital coupons and pay the advertiser for use of the coupon. That’s a way to direct link this stuff. Doubt if google and Facebook would buy into this.
Advertising to me seems almost totally wasted. I can’t recall the last time when I bought a product based on an ad, especially for something as familiar as soap or some other P&G type product. Maybe if it’s a brand new product I’ll actually look at the ad, but mostly I just ignore them or use an ad blocker.
Part of the problem is that we’re getting ad overload, too many ads makes you sick of all ads where you don’t want to look at any of them regardless of what they’re for.
And Facebook is a mess. There are more posts on it by advertisers than friends to the point all I’m doing it is looking at one long advertisement, which is not the reason I look at Facebook. Facebook is so bad now that they’re a sitting duck waiting for some new reduced ad or ad free social media page to take their place and rapidly put them out of business–and no one will miss them.
These on-line services such as FB and Youtube will slowly destroy themselves with all their advertising- they are getting greedy and will kill the golden goose. A new recent trend is to have video ads inserted into the middle of articles. MarketWatch has started this and its a turn-off. Most of the time you an just hit the small x button in the corner to kill it, but some are forcing you to watch. The overkill on ads will discourage use of their “service” which might not be a bad thing to get people to engage and communicate face to face.
After the 2016 Election, I cut my usage of FB waaaay back (I have never ever had Twitger) as I felt they helped elect Agent Orange. But, some of my relatives and neighbors, that’s all they use to give out information. But I find I don’t need that information (pictures of food and where they ate, for exxample.) I agree that FB is now an unholy mess…I don’t know how to customize my account, do not wish to know, get solicitations from people trying to build huge lists of “friends” (I guess). JUst not participating.
Womens’ shoe adv follow me everywhere, so I click on them and make the advertisers pay. Maybe they’ll figure it out…$400+ shoes have a very limited market.
I recently tried Google AdWords. Clicks but few contacts. IMHO not worth it.
There is no sustainable advantage in a complicated, non-transparent, inefficient and fraudulent media supply chain.
Marc Pritchard, Procter & Gamble
If P&G wants to sell more products they need to lower the prices. My shopping isn’t geared by advertising, it is geared by quality, utility, and pricing. I buy the cheapest detergents because they are just as good as the most expensive. I buy branded soda in bulk when it’s on sale. I buy a certain brand of toothpaste because the packaging works for me. No amount of advertising is going to change any of this. They would be better off giving away free samples like they did in the “old” days, maybe that would drive more business to them. Otherwise, it’s mostly price that drives their segment.
BTW, consumers are more aware of merchandising. They know that the more a company advertises the more the product is going to cost them in the end. I avoid certain high end brands because I know the advertising is what makes them unaffordable, and I don’t want to pay for that.
” …the more a company advertises the more the product is going to cost them in the end.”
Petunia, this is not really the case. This is one of the most prevalent fallacies about biz there is.
Advertising actually lowers the price of goods because it expands the market yielding economies of scale. A poorly designed ad strategy, or other factors for the company such as rising input prices, general inflation, govt regulation, etc can cause higher prices.
Every time I see something I buy advertised on the Superbowl I switch to another similar product. If they can afford to spend millions for a few seconds of airtime, I know I’m paying too much. BTW, I don’t even watch sports, I see the ads on the news.
Another reason for high prices might have to do with how the product is positioned. The price is what you pay for the perception you have bought. This can be due to the fact that the product says you have arrived or because it has better bang for the buck.
“Advertising actually lowers the price of goods because it expands the market yielding economies of scale.”
Sounds like a quote from an old Econ 101 textbook.
And maybe this was true 100 or even 50 years ago (to some extent) but not anymore, especially for established brands. P&G can spend 1 billion dollars on ads for bar soap and it won’t cause me to buy more soap than I actually need (or to change brands).
Today ads aren’t designed to inform, they’re specifically design to misinform, to lie and manipulate the supposedly stupid public into buying something they don’t need for reasons based entirely upon emotions. But today’s consumers, having been inundated with ads since birth, have developed an immunity to them to a great extent and have become very savvy ad consumers and aren’t so easily fooled, which I’m sure the ad agencies are well aware of.
In fact the primary purpose of ad agencies is not to convince consumers to buy their client’s product but to convince their clients that consumers actually pay any attention to their ads (which for the most part they don’t). Because if they can’t lie to and manipulate their clients into buying more ads they won’t get paid.
As others have mentioned, the only “ad” that has ever swayed me is free or reduced cost samples and coupons. That way I can actually try the product to see if I like it, and I’ve adopted a lot of new products that way.
Exactly.
Also, in the age of the Internet, user reviews and ratings are many order of magnitude more efficient in convincing a potential buyer to consider your product. Companies are finally starting to understand this and more and more of them are, predictably, starting to game this mechanics as well. Ad agencies are slowly morphing their methods to fit this new reality. They are using methods such viral content, user generated content (blogs, youtube), ads disguised as apps or games, seeding awareness in online communities, etc. These “ads” are much more stealthy in order to fool the “savvy ad consumers”.
“Advertising actually lowers the price of goods because it expands the market yielding economies of scale.”
What about store brand products at major retailers, best of both worlds then, economies of scale without advertising. Trader Joe’s is my favorite example, there are entire articles comparing their products to branded products, and Trader Joe’s almost always wins on value.
I try hard to stay away from brands these days, buying store brands as much as possible. The only items where brands still mean better value seem to be car tires and major appliances. A few hundred more up front seems worth it as they last longer and are a better usage experience – we just got a new dishwasher so this is top of mind for me right now!
Petunia – right with you. There was an ad on TV (I watch TV my employer’s house; he has a TV) for some new kind of toothpaste that was supposed to be good for the gums, and I did some Googling around. It’s an old German brand name from the 1930s, and the claims they make for it aren’t anything that could be claimed for any toothpaste, as long as you brush your teeth daily. But I’d still try it because maybe it tastes better than what I’m used to. But free samples, that you used to mail a coupon from the Sunday paper in for, are a thing of the past.
You might want to look into magnets for laundry rather than detergents. We have been using them for years with good results – clean, odourless, and since I have no idea any longer what the price of laundry detergents are, I cannot give you any idea how long the price of the magnets takes to meet the price of the detergents. But years of use must surely have paid off several times over.
How do the magnets clean your clothes? Dirt is not magnetic.
I prefer fairy dust.
Borax, on the other hand, is an inexpensive mineral you can add to hard water to soften it and boost your regular detergent if you’re looking for a better clean and brightening.
My MIL worked for P&G as a chemist on detergents and thought their original dawn formula couldn’t be beat for dishes (or wildlife and oil spills). They were often changing their formulas and making them worse. She wasn’t impressed with some of their “innovation”. Maybe that is where some of their money is going – their crazy New Zealand scented dish soap. Really? I think I saw that. How many versions of Tide can you fit in your laundry room? The rest of their money could be going to their CEO. They should shake out his pockets, they might find a few hundred mill.
https://blog.kamens.us/2009/01/01/magnetic-laundry-scam/
The best thing you can do to improve your laundry is to add TSP to your laundry soap. Huge difference.
I cause P&G some loss. I use 2 of their blades at a time.
The first #1, is the newest blade, doing the first & the hardest job, going down.
The second#2 is an older one, doing the easier job, the second shave,
going up.
When #1 becomes dull, I mark it and it’s becoming #2, replacing
the older #2, doing the easy job.
A new blade will become the new #1.
When done, I blow air to make them dry fast, preventing moist & corrosion.
I never saw an add teaching customers how to extend the life of a blade.
Michael,
How about a real “blow against the Empire”? Use a straight razor. As an affectation, I learned how to use one at college, as a Freshman…lots of blood in the beginning.
I got sick of overpriced Gillette contraptions and purchased a decent razor handle and a package of double edged blades. 100 top quality Feather brand blades cost pennies a blade. I think I’ve used 20 in the past year. And I don’t need a blood transfusion after shaving like I’m sure I would if I used a straight blade. I use Proraso shaving cream (comes in the tube like toothpaste); one tube lasts me more than a year, for about 12 bucks Canadian.
Just buy your blades at the “wrong store”. I buy blades at Safeway, a major food retailer, or the “house brand” at Target. I simply aim for a triple-blade razor for a dollar per disposable. I used to buy the triple blades for the permanent handle, but then they escalated the price. Now, the disposables are cheapest. Don’t buy anything specifically advertising on tv etc (Gillette, etc). Gillette was on sale at Safeway as a “loss leader”. Everyone bought them fast, I got one package, and then, no more.
But Google keeps blowing out its earnings reports. Cost per click dropped and yet earnings are up, meaning more people/bots are clicking. When would this issue be addressed?
A company that I was working with was paying sometimes up to $150/click on Google ads. They were subscription based company, and the number of companies and developers that subscribe to the company’s services is publically available (they were using a third party platform for their subscription service, and that third party platforms always have that publically available).
In any case, I don’t work for them anymore, but after a year of wasting ad money on expensive clicks on Google ads, they have something like 8 more users subscribed to their service; mind you these are not paying customers; these are just people who have shown interest and subscribed for free.
I really just want to know where the money to waste like come from. I want to tap into such easy money. It is amazing; they spent around a quarter of a million to gain 7-8 free subscribers. Isn’t there a higher manager saying what the hell have you done with that money?
Here’s the thing: I get paid by Google for ads. I never get paid double-digit dollars per click. Average is less than a buck per click. So if Google ran these ads on WS, and someone clicked on it, I might have gotten a few bucks for this click, and the difference would have made its way to Google’s bottom line.
:-]
Wolf,
But aren’t Google’s higher per click charges for times when a potential customer is searching something out specifically? For example, someone types in “horseback riding” at Google, wanting to find a place where he can take his kid for a ride. That click would have more value than someone who’s here for the content and might notice the ads or click on them on accident, no? The former is already a buyer.
There are several types of ads, including search ads that appear on Google search results (these don’t apply to me); and ads that appear in the media (like some of the banners you see here).
Search ads are priced by keywords, with the most desirable keywords costing the most per click. These high-cost keywords usually relate to high profit items, such as finance, insurance, and loans.
The ads that appear in the media are placed by different criteria, such as contextual ads (when I write about cars and you see a car ad) or behavioral (when you went shopping at Amazon for coffee grinders and then an hour later you see a coffee grinder ad next in an article about junk bonds).
The cost per click for media ads is established in a bidding process that takes milliseconds and occurs with each ad that is placed on each site (one of the reasons why there is a delay before ads appear on the site). So if a lot of advertisers bid for the same placement, the cost will rise for them, and in theory, I should get more money :-)
I’m not an expert, and I’m already talking at the edge or beyond the edge of what I know…
Wolf, you are quite correct; on your side, you are using AdSense; the other side of AdSense is AdWord that we use to place bet on keywords. Since the software that we were working was somewhat obscure (it had to do with big data and machine learning), there were fewer users who would have searched for those obscure terms, and thus there was a lot of competition for those obscure terms from the companies who provided services in that space.
So, from the side of the advertiser, it is all about what specific terms you want your ad to appear for. As you mentioned terms such as finance and insurance are extremely expensive terms to bid on.
The ads on here are kind of fun, though. I saw one just now for an Intel “Edison module”. What the hell is that? So I did some looking around; it’s for a product that was discontinued a little over a month ago. But the ads live on…
It makes me want to click on the weirdest ads I see on here. Wolf makes a little money and I get weird ads. Win-win.
:-)
“I really just want to know where the money to waste like come from.”
I would venture to guess that much of that money was from ads from traditional media. It’s easy money because these companies do it for fear of missing out, fear of being behind the curve. At the end of the quarter or the year, when the numbers don’t make sense, it must be because they didn’t get the hang of this new tech yet, so they think. Therefore, they keep trying, refining and hoping.
Companies like P & G have to maintain a market presence for brand recognition and for retail/franchise support . They may regret trying to save money this way in the long run. Better to redirect this spending (if it is ineffectual) rather than cut back for short term bottom line thinking.
If they redirected that money into savings for their customers it would be the best advertising of all in this economy. Nothing spreads faster than than information on a good deal nowadays. They could grow their revenue by growing the market, instead of trying to grown profits by spending more.
Petunia is absolutely correct. Why? Because she actually goes into a store and shops for her family. I can tell by some of the statements posted, that there are opinions, but not witnesses. Petunia is a witness.
I for one, walk in her footsteps 100%, and until advertisers understand who the real buyers are and what they buy and why, they are shooting in the dark and wasting bullets.
I am enlightened reading how google and click ads work and how expensive they can be. I wonder how many times I would need to click on a Wells Fargo ad to affect their bottom line. I wonder.
Actually competitors are known to click on each other’s ads in order to make it expensive for the other side to keep running their ads. So, in this case, Google gets all the money, but the company which published the ad gets nothing.
A lot of advertising is annoying and it chases away customers. And the more advertising I see for some products, the more certain you can be that I will never buy it.
A little bit of publicity for a product will be more effective than endlessly trying to ram that product down your throat. The underlying presumption is that their customer is as stupid as their ad writers.
Kam: I don’t think you are quite correct. Go to YouTube videos. Then you see a video about some cute cat, or some half naked woman, and the video has 10 million view counts. At the same time, you go to a video that is done by some technical professional that actually makes you money if you learn it, and it has 23 view counts. That shows the level of intelligence of the users.
We judge the world by our own intelligence and that’s doomed. You have to judged the world by the average intelligence of people in that space. This is how people like Oprah Winfrey who can relate to total morons can make hundreds of millions. But some genius at MIT has to live on paychecks.
So, advertisers are generally correct in thinking that they are dealing with morons. They know a few like you will never be fooled, but 98% are easily fooled.
Christopher Martin,
How is brand recognition quantified in terms of dollar values? I’m sincerely curious. Do you know?
A few standard ways come to mind:
1. “Willingness to pay” studies
2. Segmentation studies showing that P&G customers are higher income, spend more on CPG
3. Customer lifetime value studies
Having worked in this field though, in a room of executives, even those who purport to prefer quantitative data, nothing is more consistently persuasive than qualitative data – real quotes from real people, sound bites and video interviews are best. Remember, P&G doesn’t actually have to prove their brands have worth, they just have to convince their client their brands can command a premium.
“P&G doesn’t actually have to prove their brands have worth, they just have to convince their client their brands can command a premium.”
And here lies what’s fundamentality defficient in modern business. I recently read an article by an anthropology professor called “On the Phenomenon of Bullshit Jobs”: http://strikemag.org/bullshit-jobs/
What you wrote is exactly that. Business nowadays prioritizes and values bullshit jobs, jobs that don’t add any true value or produce anything. So the company, instead of investing in developing real value for customers, it pours more money into bullshit jobs to produce more bullshit destined to fool customers.
Comment below covers some of the ways it is monitored. Imagine you have a budget based on projected profit. How are you going to allocate it? Brand recognition can be achieved by corporate image advertising, product placement, sponsorship etc. Then you have specific product promotion which may be price or other benefit oriented and will be complemented by point of sale promotion – displays etc. Then you have advertising to target life cycles and trends/fashions. At the end of the day the trading results tell you if you got the mix right. If not, you or your advertising agency can be at fault but the answer is not to reduce your budget. Petunia’s price war approach has its place but most companies prefer to establish product worth then run specials on price which are short term promotions.
I wonder if putting uBlock origin to block online ads I don’t want to see and Ghostery to block trackers I don’t want following me, on all my web browsers has anything to do with it.
No, because no one gets paid when you block ads.
I don’t get paid either when you block ads on WOLF STREET.
Sadly, your site’s ads are not visible unless javascript is turned on. Smart geeks keep it turned off for many, many reasons.
Are you using Firefox?
Nadroj Tox: Actually, it is very difficult to browse if you turn off the Javascript; for example YouTube doesn’t work at all if you turn of Javascript; the same with Facebook and many other sites. So, anyone using any of these sites will have to have it on, or at the least turn it on and off based on which site they are visiting.
Wolf,
There is an add-on for FF called Tab Permissions that does allow tab level control of features like JS and plugins and what not – I only use in extreme cases – but there are situations where it solves problems.
Personally, I just dump cookies, LSOs, and the like when the browser closes and call it good.
Others might feel differently. I do get mean when the pop up videos, modals, and screen locks go into effect … which is why such addons are popular.
Regards,
Cooter
I don’t think anyone minds a few ads on a site, it’s when the site has so many ads that it interferes with the pleasure of reading the site that people become angry and sick of them.
There are some sites that have so many that it literally bogs down my computer and I can’t even scroll down to read an article (The Huffington Post comes to mind here, with so many ads it takes several minutes to load the site–which I don’t have the patience for and eventually give up). Or they have moving ads that give me a headache and make me nauseous.
There seems to be no self control with some companies. They’re so greedy for every dime they don’t care how the sheer volume of ads affects their readers. Maybe if there were some sort of voluntary code of ethics saying we only allow so many ads/page that would help, but there isn’t, so we’re stuck with the present unregulated ad saturated system.
I have the same laments. Some sites have become unreadable without ad blockers. And that’s a shame. Because the “free” internet is supported by ads, and when we block them the whole ecosystem collapses. But as you said, it’s self-inflicted.
There are now some moves underway to improve the situation, but it may be too little too late.
There’s the Coalition for Better Ads (ran by your favorite tech giants). Pretty much abide by their rules or you can’t advertise on their sites.
You can always get ad blocker. Google is making it standard on Chrome and I believe Apple is doing the same on Safari. It’s a double edge sword though. Since “free” sites depend on ad revenue to stay “free”. If everyone uses ad block, the free sites go away or people have to start paying for things again.
https://www.betterads.org
If I want to read an article on ZeroHedge, I click the ‘print’ space near top right to avoid ads.
My cheap, but functional Hamilton Beach coffee maker’s on/off switch was causing trouble this week, so I looked at coffee makers on BestBuy, Menards, Target and Walmart; sure enough for a day after, all kinds of coffeemaker ads popped up everywhere.
A couple of squirts of DeoxIT on the switch worked … so far anyway, but it is interesting to be targeted by digital ads.
i just whitelisted you in appreciation of you blog.
THANK YOU!!
I use uBlock and I have configured it to be disabled on sites that I like (like this one). For sites that show total lack of respect to the user (such as Forbes, which not only display tons of ads but also has video autoplay), I don’t bother to visit, even with uBlock on.
I would suggest a safety razor not a straight razor. You can buy 100 blades for about $10. I use about 1 blade a week so that’s a two year supply. Safety razors are not inexpensive (good ones) and the shave is slower. You also must sharpen and strop them. Too much work.
I’m surprised that anyone smart enough to frequent this blog would be so dumb as to waste otherwise productive time by the act of shaving.
A natural mulch for the skin, a preventative against droopy jowls; in its earlier stages a first-rate fingernail scrubber, and, a mark of distinction, confidence and all-round good sense.
Come On!!! Michael, throw away your razor and celebrate the liberty of hirsuteness.
OK guys, everyone who’s ever purchased a product because they clicked on a Facebook ad, raise your hand. I thought so.
Here’s another thing – so many sites are now designed so that scrolling with a touch screen causes you to accidentally click on ads. It happens every damned day on my iPad and my Android. How many “clicks” is that generating each year. I’ve started scrolling with my left hand – I noticed most of those ambush ads are clustered along the right hand side of the screen. A lot more right handers than lefties out there – that wouldn’t be deliberate would it? Nah, couldn’t be.
Try a BlackBerry. They finally killed their own OS (bummer), but they have a very secure android based phone – let’s you control much more than iPhone or Andriod will.
Folks still don’t realize – the product is the phone user, not the phone (while we are on the subject of razors) – all about the data.
Regards,
Cooter
CrazyCooter – that’s very interesting. I’m determined to keep my little flip phone as long as I can but sooner or later I’ll have to get a “smart” phone. Maybe I should look at the Blackberry phones.
nah, alex… HOLD OUT. KEEP YOUR HEAD UP.
some 20-something guy living on the street screamed in joy said i was “so GANGSTER” for having a flip phone.
don’t join the hordes of bent-over addicts not where they are. i sometimes long for the days of crack dens. addiction was contained. now it’s everywhere.
Here here!
Mostly I browse on an an ancient ipad. Before I finish, I clear all cookies but acttually I don’t know whether all is cleared. On a more modern imac I use CCleaner to delete unwanted cookies but that does’t stop sites I don’t want putting local storage files on my hd. Getting rid of that junk requires more effort on my part, including occasionally removing all which includes some I don’t mind having.
There is a sad irony here. We all hate advertising and resent the the social impact of the values it promotes–youth, desirability, power and money are what matters. But pretty much everything we adults read and enjoy outside of books is supported by ad revenues.
Newspapers, magazines, sites like Wolfstreet are either low cost or free because they carry ads. (Facebook is free also, but who cares.) Mass media publishing and advertising grew up together. If the New York Times or Wolfstreet had to depend solely on subscription revenue, would they survive?
Mary,
I’d make an exception for Netflix / Hulu. I personally think that Netflix is an incredible value. I wish they weren’t tied to Amazon’s servers.
Mary,
I agree but I think the digital ad problems are mostly self inflicted. Pop up ads have been the forcing function that have motivated most people to get ad blockers. Embedded ads are not generally annoying and most people tolerate them. They give you the option to read or not. I have also learned that for a lot of, people, especially the younger people, the smart phone is the only computer. The banner ads are a killer on those little screens. So they turn turn to ad blockers or become negative about the advertisers. Which means they are alienating customers not selling to them.
Finally I’ve noticed YouTube must not tailor their ads to the video content. I watched a couple of Beth Hart songs today and the ads were pre-teen oriented candy ads. seems unlikely pre-teens would be watching Beth Hart songs.
Infowars.com is a great example of surviving, they got blacklisted. They survived and grew because of their great supplement line, water purification, tshirts, ect the radio show stream is free, and you can also pay to subscribe, and donate. They skip advertising breaks a lot when they are in the middle of discussing something.
Infowars survives because there always have been kooks and always will. Like Coast To Coast AM and the Flat Earth Society, you’ll always have that fringe.
And the fringe looooooves to spend, trust me on this, I’ve spent more time around survivalists than I like to think about. I call it “Buyvivalism” or “Sellvivalism”. There’s always another water filter, high-capacity magazine, goofy “bolo” knife, trick belt that unties into yay-many feet of paracord, etc.
Now a lot of this stuff makes sense. Nothing wrong with having a few handy things around. But really, just like how shows like Ice Road Truckers turn out to be a big soap opera featuring big burly guys instead of housewives, a lot of “preparedness” and “survivalism” is just an excuse to buy stuff; guys having their own version of Avon Products and Tupperware.
Very true: survivalism used to be carrying a length of string, a coin, and a pen-knife.
You were ready for anything then!
You might laugh at these conspiracy mongers but they provide a service to the rest of us : they worry about the best tools needed to survive so we just need to be aware of them for that fateful day that is approaching ….
Must be nice to be so superior. Must be a California thing, or is it localized?
Alex in San José I can always tell when someone has never tuned into infowars , kook, fringe, survivalist, are the words main stream uses to black list them.
Truth is they have a streamable 4 hr daily news show, one of their commentators is one of the guys who does interviews with Wolf.
And being a prepper can be a very good thing, you can learn a great deal about finding good deals, learn to build, grow and preserve food, self defense, ect.
Chuck in NJ, I had a conversation with a friend who spends thousands of dollars a year on maintenance for his fishing boat, he has no food storage. And he doesn’t eat fish. I asked him what are you going to do if there is a disruption of services, like your debt card won’t work, grocery stores are closed, he said I’ve got guns I’ll be coming to your house to take what you have, seriously I said that’s your plan you’re going to rob your friends and neighbors?
I can tell you pretty much every prepper is prepared to defend what they have sacrificed to put in their year or two worth of supplies.
Prepping is not only about a disruption of services, think about how much money you spend at the grocery every week and imagine being able to survive without spending that money every week.
Personally I bought a 1/4 acre last week and I have enough money saved to build and pay for a house on that land in the next year, I will plant fruit trees and a wonderful food garden. I am not promoting infowars or being a prepper but you really ought to take another look there’s a lot to be gained.
>>> “Personally I bought a 1/4 acre last week and I have enough money saved to build and pay for a house on that land in the next year, I will plant fruit trees and a wonderful food garden.”
That’s wonderful!!
Thank you Wolf, it’ll be a great adventure.
I’d like to see commercials from that solar window company I saw on your site a couple of days ago. That technology looks fascinating.
My housekeeper thinks I’m a pervert because I go to a Chinese lingerie site and click on about a dozen things. Then for a month, I have scantily clad ads on my computer.
I don’t think I’ve ever bought anything based on an internet ad.
That strikes me as a “non-denial denial”. In other words, she’s actually correct in her assessment of you, but arrived at the insight by observing relatively innocent behavior.
;>)`
“Tired of feeding an opaque, slimy industry of bots and fake clicks.”
Sounds like you have some very traumatic experiences with this industry Wolf.
But I think Walmart leaning on P&G to reduce its prices as a tactic in the AMZN wars might hit P&G harder than many might think.
P&G is selling through AMZN directly and AMZN is getting all their consumer data. Is AMZN rich enough to buy P&G?
I understand that Amazon thru their new Alexa voice product is selling a lot of Amazon branded products, and not necessarily at a discount. I saw a Galloway video that talks about Amazon search results thru Alexa being different than search results using a PC.
From what I have read about it, it tracks you spending habits and amounts and charges you according to the ‘wealth factor’.
Walmart.com is selling Gillette and J&J products made in third world countries on its US web site. I suspect that these products were never intended for the US market, but they are competitively priced and much better value than the local Safeway or CVS and they are delivered within 2 or 3 business days without requiring a $99 annual membership fee. It pays to shop around. Don’t assume that AMZN has the best prices.
Wolf, you mentioned to me some time ago that you farm out your ads to an agency. Doesn’t this mean you have very little control over what appears on your site? And do you actually see the ads and so share the experience of your viewers? If not, maybe this is one of the problems. If site owners don’t see what their viewers see then they have no way of knowing what’s happening to their site and how unreadable its become.
Also, if you deliberately restricted the total ads on your site wouldn’t you be able to charge more (provided there was more demand than supply) and this could partially compensate you for the fewer ads?
I use an ad agency. So a lot of the financial ads you see are via the agency. I have a lot more control over those ads. They also pay more.
I also use Google ads to fill in the remaining inventory. I have almost no control over those ads. I can exclude some categories of ads and some ad technologies, but that’s about it. Even then… for example, I don’t allow “auto-play” ads on WS (these are the annoying things that suddenly start talking or playing music). Yet, despite the fact I don’t allow them and that Google doesn’t allow them, they STILL sneak through the system occasionally.
And I have some private clients. That is the best relationship for both. No middlemen involved. They know exactly what they’re getting, and I know who I’m dealing with. They’re great, and I treasure them, but I don’t have enough of them.
No I would not be able to charge more if I ran fewer ads. That’s not how the pricing works. But if I run too many ads, I might run off my readers :-]
No easy solution, damned if you do, damned if you don’t. And I don’t understand the system enough to understand how ads just “sneak through.” Weird, it sounds like you and others who run sites are almost trapped by the system into doing things you’d rather not. Too bad–for everyone.
The balance is just right at the moment, Wolf.
We come here for facts, and an intelligent commentariat, get them, and the ads are never annoying or intrusive, at least in my experience.
P&G large advertiser yes sophisticated no it toke this long to work that out
The observations about opaqueness are amusing – print advertising was just the same.
I recall that advertising execs were appalled when the very first online ads revealed just how few readers/viewers paid any attention to them or bothered to go through to the advertiser’s site.
It really threatened to blow the lid off the whole game, for both media and agencies.
Then they developed a whole new layer of obfuscation and phoney stats and have been living off that quite nicely thank you.
In the end, it’s all entertainment on our way down -enjoy it! Indignation about the phoney-ness is missing the point.
Much more important is to pay attention to the use of media indirectly and directly to soak people in propaganda, which is often it seems 100% effective! How next do they wish us to think? Just wait and see…..
On the whole, I’m rather in favour of opaque and corrupt business models that get you a good lunch: and I got a lot of very good lunches indeed out of advertising in my younger days, as dd my agency contacts/co-conspirators.
Now I’m a (word-of-mouth) traditional craftsman – an honest business.
I saw the Light. :)
I’ve been doing searches for lightweight workout shirts, and an ad for REI appeared on this site. But if I go to others sites, like Zero Hedge, I get inundated with ads from outdoor clothing stores, which I don’t click on, because I don’t really want to provide financial support to a site that so often spouts bizarre conspiracy theories, even though some of the articles are actually relevant. I would rather support a voice of sanity like this site, and I do when the opportunity arises.
I contributed to ZH (through comments and occasional “reporting”) for a few years, and was, ironically, banned a year ago for openly criticizing the rapid decline of the user experience.
It boggles my mind that a site that makes so much money would degrade the user experience so sharply, and I have no doubt that they have lost plenty of other readers as a result.
I suspect that ZH realizes that sooner or later the jig will be up, as more readers resort to ad blockers and large advertisers are caught up in scandals related to their advertising on a web site that tolerates so many racist comments.
Exactly – the fact that ZH is a forum for racist comments and off-topic lies too often is a real turn-off to otherwise fresh and interesting information and opinions.
Occasionally, someone responds with a correction that is clever, gently humorous or an admonishment but it’s few and far between. Why allow racial comments at all on a financial blog?
Pe;tunia represents the leading edge of where things are going. People are starting to become much more value concious with what they buy.
Advertising will always exist; it’s a matter of type and degrees based on the amount of loose money around. A new high value product might advertise for awhile to get started but most ads today are driven for emotional appeal, not value. That will change.
Digital versus traditional ads….well all new fads/technologies get overexploited/overutilized until right-minded people finally figure out what’s worth what. For a long time, I’ve thought the digital thing was over executed and more a bother to my internet experience than not. I suspect I am not alone.
Facebook, Linked, Twitter…and the rest of all that crap will all decline significantly down the road when the economic reset hits full stride. People won’t have the time or the energy to mess with this crap. It’s not real life; they just don’t know that yet.
YES… Petunia is like The Oracle to me.
Hi there,
I just wanted to give some quick info on how these advertising models work for those who haven’t done them. There are three basic types of campaigns:
Cost per Click (CPC)-pay a certain price for each click
Cost per Mille (CPM)-1,000 views lasting at least X amount of seconds
Cost per Acquisition or Action- eg. someone clicks on an ad and buys a product or signs up for a newsletter.
There are a few more but these are your main ones. Google and Facebook will have you put in all the info, score it based on how relative it is, and you put in how much you are willing to pay at maximum. Then the ad goes to an automated algorithmic auction where if yours wins it will go on the page somewhere. This happens every time someone goes to a new webpage where these companies put ads.
If you have more questions I might be able to answer them
Cheers
Be afraid, Google and Facebook. Be very afraid.
Just a suggestion, but could you organize a section of recommended advertisement links which your loyal and grateful readers could click on to send some revenue your way?
I use a ad blocker for the reasons mentioned by other commenters: many websites are practically unusable without it. I chose uBlock Origin from a discussion on Slashdot based on complaints from online advertisers about ad blockers. A somewhat ironic result. I will try to whitelist your site in any case.
I would be prepared to click on links provided by your sponsors when I had spare time as quid pro quo for the service you provide. Perhaps others would as well. It could be a more direct and targeted approach for advertisers. Assuming that your readers are a useful demographic to some of them.
I’m a very small scale competitor of P&G. The main product of my farm is olive oil. We often have extra oil, oil from the bottom of a tank, oil that’s getting old, and we make skin care products from it: soap, hand salve (with beeswax), lip balm, etc. It sells in local stores. Despite a high price ( a bar of soap retails at $6), the demand is insatiable. We are regularly approached by people (from USA, China, India, Brazil) who want to distribute it. Can you supply me with 20,000 units a month? No, we can’t, this is an artisanal operation. If I were 40 years old instead of 70, I might scale it up. We have never advertised or even considered it. If you have an excellent product, it will sell itself. Advertising seems to be irrelevant.
Great to hear stories like this.
But you do advertise. You just don’t pay for it. It’s called “word-of-mouth advertising.” It’s the best advertising there is. Every company is dreaming about it. But it’s really hard to get. Kudos!!
This reminds me of a fascinating short story by B. Traven:
https://libcom.org/library/assembly-line-b-traven
about The Market and what we think of it.
Thank you VERY much for that link..
yes! yes! yes!
and who are you???
pray tell!
x
Thank you, Kitten. The olive oil and skin care products are under the name Yolo Press, sold in the Sacramento area. Widest selection would be a the Davis Food Co-op in Davis.
YOLO! great name! i love “press” for pressing oil instead of a publishers’ press!
thank you for the answer; i will have to keep my eyes out when i’m in the area because i am also totally INSPIRED by your story as that’s my fantasy– to have an underground (word-of-mouth) quiet little artisinal clothing business and a LIFE.
thanks for posting as you do and answering me. there are so many amazing stories just under the names here.
blessings to you, Old Farmer. I’ve got a smile on my face because these are the stories of true economic rebellion i love. and you get to be cool and not DESPERATE. i love that.
thanks for being here. an example. all that good stuff.
x
Kitten,
Not sure if you realize this, but YOLO in this case refers to the county near Sacramento and not to the life philosophy espoused by social media millennials, You Only Live Once.
Old Farmer,
I used to live in Davis. The Food Co-Op there is one of my favorite grocery stores ever.
I’ve mentioned this a few times but facebook and web ads are typically not profitable. I ran facebook ads for about a year and never made my investment back, In fact, in the early days I came close.
The fact is, for the last few years ad spending has exploded but it has not led to an increase in sales. One would think this “new technololgy” which targets specific customers and demographics would have created massive ad leverage.
It’s produced NADA. In fact, it’s hurting the web. I don’t click on any news items anymore because I’m tired of the sign up now screen, follwed by the fact that you have to click through 20 screens to get to a simple point.
This is what happens when technology people try to run advertising companies
I installed an adblocker only because a streaming site I use is essentially non-functional without it. Otherwise I don’t object to ads on websites if it keeps the sites free. Let corporations throw money down a hole if the sites I like grab some of it on the way.
I tend to be wary of clicking ads. Too many scams, malware and junk products use online ads. The sad fact is that online ads get more than just the half wasted, is over 70%. I tend to go to sites when buying something online, not to click ads.
the fact is the waste and fraud is 90% coming out of the big exchanges i.g google adx, appnexus and alike and the middlemen controlling the black boxed DSP/SSP technology. one could easily eliminate most of this by taking the BIDDING technology into their own hands and building out their own exchanges.
I’m not sure this is relevant to this discussion, but some years ago in the car business I was selling GM products (Cadillac and GMC). Honda and Toyota announced that they were investing millions in an all out effort to improve quality. GM’s response was to spend the millions on ads telling people they were improving quality. That didn’t work either.
People are never as stupid as manufacturers and advertisers hope they are.
The problem lies with companies not tracking performance based buys properly. A lot of mobile paid acquisition companies are far ahead of the p&g’s that buy mass impressions on cpc based campaigns and have shoddy ass tracking in place. What ends up happening is you have a bunch of digital marketers who typically know jack shit about the underlying tech and tracking methodologies or engineers who have no context.
If every part of the funnel is tracked properly (pixel, sdks whatever needed based on platform) assuming you also build reliable customer value models that account for the revenue driven from one of the users…you’d see a much different picture. These big agencies don’t know what the fuck they are doing either. The problem is a lack of overall knowledge on how to properly acquire customers and the technology behind these platforms.
Setting up marketing databases properly, setting up tracking at every point in the funnel properly, setting up campaigns properly, and eventually building automation on top of your campaigns to properly ad opt each individual ad at the most granular level so that you are acquiring users from your paid media sources with the highest possible lifetime value.
Moon,
As you correctly stated, the advertisers would need a system controlled at every point, in order to assess the value of their campaign. Most shoppers don’t understand that loyalty programs at retailers are attempting to do just that, match up your purchases with your history of targeted ad views. This is what passes for AI at the tech firms, simple match ups.
In order to take this type of system to it’s logical conclusion would require a tracker necessary for the buying and selling of all things. In the Christian world that would be descending into end of the world prophesy.
FYI – P&G just clarified that it is NOT cutting back its advertising on Facebook – see AdWeek – it is cutting it back elsewhere (like where bots roam on the general internet). They are just not focusing on micro targeting with FB since the broad reach is more successful for their broad products like toothpaste. Interesting.
Marketing is a passion of mine so I like reading and watching ads. i find ads inspiring and fascinating that so many come my way even thiough I cannot possibly be in the advertiser’s target market. But as a former Punch magazine (UK) reader I am immune to advertisements. Actually I became immune long before I became Punch reader. The reason I am immune is to do with how I read ads. Instead of reading literally, I turn the words around. For example, when an ad says “crazy prices” I interpret that as excessive. Try it for yourself: some fun can be had!
Here in UK Tesco supermarket strapline is “every little helps”. Tesco would’ve had the field to itself had it not been for customers of one of its competitors the German discounter creating “every Lidl helps”.