February 14, 2019

True Detective: How Bullshit Becomes A Fact


There is so much bullshit in our business that sometimes you have to wonder where it all comes from. Yesterday I decided to "peel back the bullshit" and see if I could reconstruct how something that was completely wrong wound up being represented as a fact in reputable publications like Forbes and The Drum. Here's the story.

Yesterday Samuel Scott tweeted out a quote from an opinion piece in The Drum.

Anyone with half a brain knows that millennials are nowhere near having the most spending power. In fact, on a per capita basis they have the lowest spending power of any adult group. People over 50 control 70% of the wealth in the US, and are responsible for about half of all consumer spending.

So I decided to do a little detective work and try to figure out where this bullshit "fact" came from. In doing so, I got a nice close-up look at the astounding ignorance that is embedded in our industry and how bullshit, repeated with enough frequency, becomes a fact.

I started with the piece in The Drum. It was called "Why direct-to-consumer companies are using Influencer generated content to win over the market." It was a thinly disguised self-promotion piece full of the usual data hysteria. As noted above, the piece claimed that millennials "have the most spending power of any generation."

As justification for this claim, the article linked to this article in Forbes entitled "How To Tap Into The Millennial $200 Billion Buying Power With Social Media" which asserted that "By 2018, they will have the most spending power of any generation." 

The article offered no back-up for this claim other than a link to this thing called "41 Revealing Statistics About Millennials Every Marketer Should Know." This piece lived on an agency website, was written by someone who was two years out of college who called herself a "Marketing Strategist." The marketing strategist had this to say...
Once again, there was no back-up for this claim other than a reference to something called "Bazaar." Searching for this source lead me to a pdf from 2012 entitled "Talking To Strangers: Millennials Trust People Over Brands" by a company called Bazaarvoice that sells some kind of software for harnessing the power of "user generated content." (Remember that?)

Once again, there was no detail or proof, just this assertion...

The attribution for this claim was a footnote about a book...
1. Kit, Yarrow and O'Donnell, Jayne. Gen BuY: How Teens and Twenty-Somethings Are Revolutionizing Retail, 2009.
The book in question was published in 2009 and was one of those "millennials are a new species" things that were all the rage until it turned out that millennials were pretty much just like everyone else. I couldn't find a direct claim in the book (frankly, I didn't look very hard) that "millennials have the most spending power of any generation." The closest thing I found was this:
"Generation Y, (remember when millennials were called Gen Y?- BH) those born between 1978 and 2000 has overtaken baby boomers in sheer numbers and is poised to do the same with its incomes by 2017..." (Emphasis mine, BH)
Of course, this turned out to be completely wrong. Millennial income did not overtake baby boomers in 2017. According to Business Insider, in 2018 in the US baby boomers out-earned millennials in every state in the union. "In all 50 states and Washington, DC, the median millennial made less money than the median Gen Xer or baby boomer...The gap in median income between millennials and baby boomers ranged from the older generation making about 25% more than millennials in Iowa to 65% more than millennials in Alaska."

The average millennial income is about $35,000. The average baby boomer income is about $46,000. There are about 9% more millennials than baby boomers, but their income is about 24% less. So even though there are substantially more of them, in aggregate their income is way behind baby boomers.

Here's a graph that demonstrates that income per capita among baby boomers is far higher than millennials.

One more thing. Even if millennials had higher income than baby boomers, that still doesn't mean they would have "the most spending power." Spending power is not a function of income. It is a function of income plus accumulated wealth plus access to credit. According to the Federal Reserve, baby boomer wealth is more than 15 times greater than that of millennials (which means they also have way more access to credit.)

So let's recap the timeline.
- In 2009, a book incorrectly predicted that millennial income would surpass baby boomer income by 2017.

- In 2012, in a self-promotional pdf by a software company, this false prediction was misinterpreted to mean that millennials would have "more spending power than any other generation" by 2017.

- In 2017, a piece of "content" on an agency website, written by a "marketing strategist" two years out of college, used this quote from the software company to assert that millennials "will have the most spending power of any generation by 2018."

- Later that year, an article in Forbes used the assertion on that agency website to justify a claim that, "By 2018, they (millennials) will have the most spending power of any generation."

- And yesterday, in 2019, an article in The Drum leaning on the piece in Forbes, proclaimed that millennials "have the most spending power of any generation."
And that, my friend, is how in the slovenly and slipshod world of marketing, bullshit becomes a fact.

January 30, 2019

The High Cost Of Online Trash


The online advertising ecosystem is impossibly complex. Today, I will try to provide a highly simplified overview written for non-media-savvy, non-tech-savvy readers. The idea is to give civilians like copywriters, marketing managers, and auto dealers a big-picture view of the online display ad environment and a point of view on its pitfalls. I have tried my best to write it in plain English and make it so simple even a CEO can understand it.

As a copywriter, I am not an expert on media buying so be warned. To account for that, I have bounced this off some digital media experts who have assured me that it is as accurate as you can reasonably expect from a dumbass blogger. This is excerpted from my forthcoming book "Delusional: How Marketers Waste Billions on Fraud and Fairy Tales" which will be published later this year. Okay, here we go...

                                                 *****                                                               
“...We keep feeding the beast by pouring incredible sums of money into this unproductive, unmanageable abyss. Remarkably, we keep doing so even though we know that only 25 percent of every digital dollar reaches the consumer. … [that] represents more than $20 billion in marketing waste, inefficiency and ineffectiveness.” Bob Liodice, CEO, Association of National Advertisers
There are basically two ways to buy online display advertising.
  • Contextually — Buying “contextually" means you buy the old-fashioned way. If you’re trying to reach golfers, you buy ads on the Golf Digest website. The context of the website determines the buying criteria.
  • Behaviorally  — Buying behaviorally means you don’t buy ads on a specific website, you follow presumed golfers wherever they go on the web and buy ads wherever they land e.g., a beer website or an airline website. The behavior of the target determines the buying criteria, not the nature of the website. 
The big difference between traditional advertising and online advertising is that previously we could never know the behavior of individuals. Now, with "tracking" we can follow people across the web as we were never able to do with TV, radio, or print and reach them wherever they go.
The advantages of buying behaviorally are presumed to be…

Economy: Behavioral targeting reduces costs by allowing you to find those who are presumed to be golfers at cheaper locations than Golf Digest. By following a golfer to someplacecheap.com you can show her the same ad you might have shown her on the Golf Digest website, but at a lower cost. This results in lower CPMs (costs-per-thousand.) Keep this in mind because it will become important later.
Precision: Adtech helps you identify not just golfers in general, but left-handed women golfers over 35. Presumably, this results in "more relevant" advertising.
The concept of behavioral targeting has been widely adopted by the advertising industry. As a general rule, behaviorally targeted ads are bought programmatically (by software.) Programmatic buying currently represents about 80% of online display advertising.

On the other hand, for the most part contextual advertising is bought directly from the publisher or the publisher’s network. While it may employ the use of some software, it is most often not bought programmatically.



The question for advertisers is this -- is it more efficient to buy behaviorally or contextually? Because of the complexity of the system, it is almost impossible to compare apples to apples. But let’s try our best.

There are at least four aspects of behavioral targeting that are problematic:
  • Accuracy: How accurate is the targeting data? Behavioral advertising is only as good as the data that informs it. There is troubling evidence that data residing in the adtech ecosystem -- particularly data bought from data brokers --- is not as accurate as might be hoped. We experience it every day when we get ads for stuff we bought three months ago and ads for products we have no interest in. In one test, targeting data bought from a data broker was able to correctly intuit the sex of an individual 43% of the time. A cat flipping a coin would be right 50% of the time.
  • The “tech tax:” According to the World Federation of Advertisers and others, adtech, the technology that drives behavioral buying, costs about 60% of every ad dollar. In other words, buying, managing, and verifying the data that is needed for a programmatic buy eats up about 60¢ of every ad dollar. This means that of every dollar spent on behaviorally targeted advertising, only 40% is “working media.” Said another way, every ad dollar buys 60¢ of technology and 40¢ of advertising.
  • The “fraud tax:” The web is riddled with ad fraud. The actual amount of fraud in the system is controversial, with estimates running from 5% to over 50%. Experts would agree that in open ad exchanges web fraud is probably at least 20% greater than it is when buying direct. Many would say it is far higher.
     
  • The "long tail" of trash: There are tens of millions of websites. Many of them are pure junk. Many of them buy fake traffic to appear successful. Many of them aren't even real but are software that mimics a website for the purpose of attracting ad dollars. But they all sell ad space very cheaply. Programmatic systems see low prices on these junk sites and fake sites and bid on the worthless ad space they are selling to meet CPM goals. A famous case history involves Chase bank. They were advertising on 400,000 sites every month. They reduced the number of monthly sites to 5,000 (a reduction of almost 99%) and saw no difference in performance. An astounding number of the sites they were buying from programmatically were worthless.
One of the big problems in marketing today is math illiteracy. Too many people in advertising simply don’t know how to “do the math.” Let’s do some simple math and see where it leads us.

- We know adtech eats 60¢ of every programmatic ad dollar. This means when we buy programmatically we have 40¢ left for working media.

- If fraud takes another 20% of our 40¢, it means we have 32¢ left for working media.

- So, if directly-bought (contextual) advertising delivers 100% working media, and programmatically-bought (behavioral) advertising delivers 32% working media, behavioral advertising has to perform at about three times the level of contextual advertising to be a break-even proposition.** Put another way, the technology we are paying for only pays out if the resulting media buy is three times as effective.

Experts I have spoken to tell me that it is highly unlikely that behavioral ads can perform at three times the level of contextual ads. In fact, it is not unusual for them to perform at a lower level.

There are other reasons why programmatically-bought behavioral advertising is questionable:
Brand safety: When you buy directly you know where your ad is going to run. When you buy programmatically it can run almost anywhere.
Data abuse: When you buy directly you greatly reduce the need for the adtech industry to collect the massive amount of data that drives behavioral targeting and leads to data abuse and privacy abuse.
 Additionally, the data you use to target and track your most likely customers programmatically are fed into the adtech system and become easily available to your biggest competitors. It's called "data leakage."
Fraud abatement: When you buy directly you greatly reduce the potential for fraud. You usually pay directly to a publisher which means there is much less opportunity for fraudsters to insert themselves into the complexity of the process.
Transparency: The complexity of the programmatic ad ecosystem makes the tracking of ad dollars grossly opaque. This has resulted in scandal after scandal and is now the central focus of an FBI investigation. Directly bought advertising is far more transparent. You know who and what you are paying for and you know what you’re getting.
Behavioral targeting and its cousin, programmatic buying, are flawed concepts that have been sold to the marketing industry by people who have invested billions in systems designed to extract money from the ad buying industry. The more these people can complicate the system and insert themselves between the advertiser and the publisher, the more money they can extract.

Why is 80% of online advertising now bought programmatically? One very simple reason -- the "extractors" have convinced marketers that lower CPMs equal better value. As we said earlier, behavioral targeting often results in lower CPMs. But credible studies on this subject show that lower CPMs are not necessarily the result of more efficient buying. They are often the result of bottom-feeding -- more trash, more waste, more bots, more fraud and less value.

In traditional media -- where you know exactly what you're buying and the ecosystem isn’t drowning in trash and fraud -- using CPMs to evaluate efficiency is sensible. But online, where tens of millions of worthless and imaginary websites compete for your ad dollars by offering very low costs, using CPMs as a measure of efficiency is a mistake. Low CPMs are a truer indication of how much trash you're buying than how much efficiency you’re getting.

As regular readers know, I believe the adtech ecosystem -- and its evil spawn of tracking and surveillance -- are a dangerous and corrupting influence on advertising and on society. I hope this piece has demonstrated to the uninitiated that it is also bad business.

* There are hybrid ways to buy (e.g., programmatic direct) but we're trying to keep things simple here.

** In an effort to compare apple-to-apples and keep the math simple, I have given programmatic a working media number of 40% and direct buying 100%. In reality, direct buying doesn't produce 100% working media and programmatic buying doesn't produce 40% working media. The Association of National Advertisers says that programmatic buying only produces 25% working media I don’t know where that other 15% of “waste” for programmatic goes, so to be fair I’m going to assume that it is applicable to both programmatic and direct buying methods. In other words, direct buying probably results in something like 85% working media and programmatic something like 25% working media. But to keep the math simple I have given them both a 15% percent promotion to 100% and 40%.

January 22, 2019

How Brand Advertising Became Synonymous With Bullshit


It has become a generally accepted truth in the marketing industry that we are too focused on short term results and not focused enough on brand building. Field and Binet have done excellent work to demonstrate this. Everyone from Byron Sharp to Martin Sorrell have commented on it.

Despite our recognition of this issue, we continue down the destructive path of short-termism.

A recent post on LinkedIn by Prof. Marc Ritson bemoaned this. Ritson included a graph in his post showing that short-termism is not just continuing, it's accelerating.

"Its incredibly depressing to see that this trend of short termism is not just going to continue, it’s getting worse,"
said Prof. Ritson.


If we know that continued investment in short-term tactics at the expense of long-term brand building is counter-productive, why do we continue to do it? Some of the reasons are obvious:
  • Short-term activities show instant results: And there's nothing marketers like better than instant results.
  • Brand building efforts yield soft measures: Even if you're doing a great job of brand building, how do you demonstrate it? Indications of brand strength are not the measures that impress CFOs or Boards. They want sales, and they want 'em now.
  • The web: Online advertising has become the dominant form of advertising and it has been used almost exclusively as a short-term (direct response) medium. As Tom Goodwin says, "Why has there never been a brand built with digital advertising? There are many answers, the main one is that we've never tried to."
  • The brief life of a CMO: When your shelf life is measured in months, there is little incentive for you to think in years.
But there is another reason for our discomfort with so-called brand building activities - and no one likes to talk about it. In some circles "brand advertising" has become synonymous with bullshit. And, sadly, in some circles it is bullshit.

We have frittered away substantial credibility by allowing anything that doesn't have a cogent sales message to be called brand advertising. Much of what we call brand advertising has become squishy and free of strategic discipline. We've become flabby and self-indulgent.

Brand advertising has come to mean pretty much anything we can put a logo on. There is almost no frivolous marketing activity that can't be excused as "branding." Put your logo on a pair of socks? Branding.

In reality, there are two kinds of things we call "brand" ads -- those that are specific to a product and actually help sell something, and those that are someone's hobby horse with a logo pasted on at the end. The unfortunate part is that our dreadful vocabulary defines them both as the same thing -- "brand" advertising. They are not.

Pretty pictures and a nice track is not enough. Pounding your chest for world peace is not enough. Buying a pop tune and having people jump around is not enough. Successful brand building is difficult work and requires advertising that says something.

The ads that best build brands are those that have a clear and specific message about a product and deliver it in a memorable way.

Just because your ad is image heavy and free of a sales message doesn't mean you're building a brand. Not selling is not enough.