JCL Blog

Yes, But Does The Advertising Work?

The front page of the SundayBusiness section in the NY Times carries a piece by Natasha Singer about Frank Addante's Rubicon Project, a real time trading market for internet adds.  This feature length article dutifully talks about the size of the industry ($2B in display ads bought by auction in the US this year), and other players in the business (BlueKai), the mechanics of the business (cookies), and consumer response (mostly they don't care but the advocates think they should), and advertiser response (apparently they like it a lot).  The author then wheels through a number of anecdotes that illustrate how the auction system can be used.  Anyone dedicated enough to make it to the end of the article is not rewarded with a conclusion but the now tired trope that the customer is the product.  

I am on this rant about the article not because I think it shouldn't have been written or placed prominently in the Sunday edition but because it could have been so much more.  No wonder newspapers are threatened!  So much of the content is disappointing.  Newspapers say that their advantage over bloggers is the interplay between the reporter and the editor that results in better content.  Where was the editor on this one?  

Here are some questions that I would have wanted to see surface in the article: 

  1. Does the targeted advertising featured in the article work?
  2. Is there a causal link between these auctions increased consumer tracking?
  3. Have there been any actual cases where people  have been harmed by the tracking?

 Those seem like pretty basic questions if you ask me.

Here are some other things a reader might like if interested in this subject:

 Anyone want to guess how this article got into the NY Times?  Answer:  The PR firm from Rubicon wrote it.

What if Advertising Doesn't Work… At All?

Forget not knowing which half does not work.  Click through rates are at 0.02 – it is not that hard to imagine 0.00.  OK, maybe a Bud advert gets a guy off of the couch and headed to the frig to have another beer.  But outside of that could there be anyone left that believes anything they see in advertising?

When AT&T says they have the best cell coverage, or BP says they really care about the environment, we know that in fact the opposite is true.  Following this line of thinking I suppose the scale of advertising effectiveness could go below 0.  There are a few attack ads I have seen this campaign season that have inspired me to fight harder for the guy being attacked.  I would put that in the negative effectiveness category.

Advertising worldwide is a $400B industry.  If everyone comes to believe that advertising just does not work, it could free up that money to do other things – like lower the cost of products, or pay for R&D.  Alternatively, it could be a means to accelerate creative destruction.  Essentially a tax on companies that make bad products or that have weak values.  They spend their last available dollars on big branding efforts and then go out of business.

It is interesting to note that Google, a company that makes its money selling advertising, does very little advertising of its own products and services.   We could say that with over 65% market share – they don’t have to advertise.  If we see a big campaign out of Google, it may be a sign the end is near!

What will a world without advertising look like?

The Real Reasons for Advertising

 It was right here in Seattle in March of 1922 that Remick's Music Store purchased the first radio advertisement on station KFC, some months later on August 28, 1922 the Queensboro Corporation in New York City advertised apartments for rent on WEAF.  In those days the results were dramatic.  The ads that worked -- really worked, and those that did not were not renewed.  By worked of course, I mean produced more sales.  Back then you advertised to get more sales.  Now the reasons are more complicated. 

There are whole books about how and why to advertise.  Here are my thoughts about the real reasons:


  1. Surface New Opportunities: Of course an advertisement cannot actually sell anything.  Even on the web, an ad can only deliver the prospective customer to the web site.  The selling is up to the advertiser.  Some sales are a quick order processes - buying a movie ticket on Fandango for example - but most involve a sales process beginning with the new opportunity and ending with real revenue.  So even today the number one reason to advertise must be to drive new opportunities into your sales pipeline.
  2. Improve name recognition (build the brand): Brands are important and advertising can introduce people to your brand.  Interestingly, Millward Brown just released their survey of the most trusted worldwide brands and Amazon.com got the #1 spot in the USA.  I would venture to say that Amazon.com somehow achieved this without advertising.  "Advertising is the price you pay for having an unremarkable product or service," said Jeff Bezos at the 2009 Annual Meeting as reported by the Seattle PI.
  3. Defend against the competition: Every industry has a publication that is central to their universe.  This publication, whether on the web or in print, has the trust and the eyeballs of just the people you want to sell to.  An advertiser can work to exclude their competitors from the publication as part of their agreement to advertise.  But only as long as the company continues to advertise.   So if you want to keep the competition out of a publication, just advertise.
  4. Make the sales department think marketing is doing something:  Sales is measured by revenue, marketing is measured by.... well we still don't know.  Marketing should be measured by the delivery of new opportunities to sales.  Absent the ability to track such a thing, most companies resort to measuring marketing by the perception of performance.  Advertising is visible and leaves a perception.  
  5. Get recognized at industry events:  Companies like to get recognized just as much as people do, or for that matter, just as much as movie people do.  What if you could get an academy award for your movie just by spending a few extra dollars advertising?  Luckily the academy works hard to prevent that kind of thing.  If you want to get recognized in your industry, advertise with the people who give out the awards.
  6. General employee feel good stuff:  We have come to think of the people that run Google as logical, quantitative types.  So why spend the big bucks for a super bowl ad when 70% of the searches done in the world are already done on your site? To make sure your employees feel great about working at Google.  It worked and it only cost $2.5M.  


I am not trying to say that companies should not advertise.  There are cases where advertising is absolutely the right tool for the job, but you must know what the job is.  I wrote another post about Getting the Digital Dollars that proposes that as advertising gets more measurable -- sales of advertising will actually increase.  I still think that is true.

Companies that can measure the impact of their advertising on specific new opportunities in their pipeline will be rewarded.

Here are some other lists of reasons to buy advertising:

The Newspaper Association of America

The Newspaper Association of American (web)

San Diego Radio Broadcasters Association