Green-field Advertising

Advertising works, really.

Advertisers have spent decades believing that advertising works. It does work. But for the most part, advertising does not work as well as advertisers want to believe. The key point is that they "want to believe." That's the genesis of confirmation bias. We see this everywhere, but we see it most acutely in advertising. That's because measuring causation and incrementality from advertising is very hard, and measuring it correctly is even harder still. While there are advanced statistical models and academics who have addressed this problem, for the most part advertisers have lazied-their-way out by measuring easy-to-measure things like reach and frequency, which by the way are just as roughly estimated. For example, in television, advertising reach is estimated from the number of households watching a particular TV show and then extrapolated to the entire population; that's a very rough approximation. Most ad budgets are spent based on these rough estimates anyway -- GRPs ("gross rating points") -- rather than on rigorous mathematical models. Some advertisers have fallen even further and just report on "ad spend" -- the number of dollars they spent, as if that had anything to do with anything. It certainly is a badge of honor for some advertisers -- i.e. I've seen a LinkedIn profile where the person listed the amount of budget they spend every year. Yeah, it was a real person.

Digital advertising works, really.

Digital advertising provides even more fodder for confirmation bias. That's because "digital" throws off tons of data, and a lot of it is easy to measure -- for example, number of ad impressions purchased, number of clicks, traffic to websites, etc. In the cases where the advertiser does ecommerce, you can also see the sales numbers. But keep in mind, measuring whether digital ads caused the sales is a whole different matter. While the sales did occur, the person who purchased something might have done so anyway, not because they saw or clicked on an ad. Measuring the "cause" is further complicated by fraudsters that simply trick the reporting to make it appear that they caused the sales, when they had nothing to do with it. This has happened for two decades in affiliate fraud. And this is exactly what happened to Uber. Uber paid for app-installs. They thought this was the most optimal way of avoiding fraud. But alas, they were still paying fraudulent mobile ad exchanges that had falsified the analytics to claim credit for app installs that had already happened in the past. That's right. The Uber app was already installed on the device; the mobile ad networks used a technique called click-flooding to falsify the reporting so they could get paid the cost-per-install (CPI).

Look, we've got sales to prove it, really.

For big brand advertisers that don't sell anything online, the connection between digital advertising and sales is even more tenuous. How do you measure whether digital ads caused the sales of soup and soda in grocery stores. Again there are statistical models and experimental techniques (like turn off ads in a region and look at impacts), those are rarely used in real life. It's usually relegated to academics to do once in a while. The other complication is that companies like Procter and Gamble don't even sell to grocery stores directly. They sell to Walmart and other store chains, more like B2B ("business-to-business"). So while they might know how much bulk was sold to which store chains in which region, they rarely have the feedback loop of sales lift in stores. Yes, I am aware there have been at least two decades of companies trying to correlate offline sales to online advertising -- from Catalina Marketing on down to VC funded startups. I've watched it all and most of the proposed solutions don't pass my sniff test. I will only give them rough "correlation" not "causation."

But, when these advertisers turned off advertising, nothing happened. Really?

Consider these additional examples, documented over the years. eBay famously turned off paid search ads in a third of the country, and saw no change in sales. That's because people who were looking to buy, just typed in eBay.com to go to eBay anyway. Airbnb turned off $800 million (all of their digital ad spend, at the start of the pandemic) and traffic remained at 95% of the levels of the prior year, when they were blowing money on digital ads. After spending $10 million on Amazon ads, "the #1 drinkware supplier on Amazon" SimpleModern turned off all of it. Purchases continued of their drinkware continued, because customers were going to buy it anyway. When SimpleModern was running ads, customers accidentally clicked the ads and went on to purchase -- they would have gotten the sale anyway. P&G turned off $200 million, no change. Chase turned off 99% of the sites in their digital advertising, no change. Uber turned off $120 million in paid app-install spending, no change. The app installs continued because they would have happened anyway.

Are you buying ads because it makes YOU feel good?

I get it. Shopping makes you feel good. Shopping makes me feel good too. I can definitely see how spending millions on advertising, and then getting reports that say how great the advertising worked, is an ego booster. I can also see how showing those glowing reports to your boss is a career booster for you too. So much positive affirmation. But also, so much confirmation bias. Are you spending money on advertising because it makes YOU feel good, or because it drives incremental sales, absent if you didn't do the advertising? Are you spending money on advertising because it makes you LOOK good? Are you spending money in digital because it makes you look "digitally transformed" and more advanced? These are hard questions; if you ask them, it will require some soul searching. So let me make this easier for you, and more practical and tangible.

Are you steering into the train-wreck of paying for sales that would have happened anyway?

While most of you cannot run "turn off" experiments (you have to "spent it all"), you can start to ask customers if they purchased after seeing an ad, or clicking on an ad, or seeing an ad in the past. Most of them will tell you they didn't buy because of the ad. Most of them may tell you they don't recall seeing an ad. Some of them will tell you they would have purchased anyway, because they already know you and like you. This is why it drives me crazy when ad tech companies convince advertisers to do retargeting and remarketing. Retargeting means showing ads to those who visited your site before; and remarketing means showing ads to those who purchased from you before. By doing either, or both, you are deliberately steering into the train-wreck of paying for sales that would have occurred anyway. Do you see how completely ass-backwards that logic is? You are wasting money on retargeting and remarketing -- i.e. showing ads to people who would have bought anyway. Adtech companies are gloating that they successfully sold you this snake oil for so long. What should you do instead, to stick the middle-finger at them going forward?

Green-field advertising makes you feel good and look good too!

By using up your money on retargeting and remarketing, you have little left over for awareness advertising to make people aware that you exist, so they can become your customers. For the vast majority of advertisers, only a small portion of the population knows them or are their customers -- let's say 10%. That means the other 90% doesn't know you or hasn't purchased from you before. Repeatedly showing "creepy ads that follow them around the internet" to the 10% is like trying to squeeze more blood from a turnip; you're not going to get much if anything. It also raises the risk of you pissing them off. Showing ads to the other 90% who don't already know you is likely to drive significantly more incremental sales for you -- i.e. sales that would not have occurred in the absence of the advertising. That group is also vastly larger than the group of existing customers -- nine times larger in this example. Green-field advertising is also guaranteed to be "incremental" because those sales could not have happened before. These new customers were not aware of you before; but once they are aware more will buy from you. This is the kind of advertising that will make you look good to your bosses, really. You drove more sales; and that will make you feel good too, really.

Will you consider green-field advertising?