November 29, 2012

The Wonderful Things We Used To Know

One of the ongoing qualities of mankind that you have to admire has been our ability to delude ourselves into thinking we know things that we don't know.

There are so many wonderful things we used to know that we don't know anymore.

We used to know what the universe was made of. It was made of protons and electrons and neutrons which were made of quarks and a whole bunch of funny little subatomic particles. And then a few years ago we found that about 94% of the universe is made of stuff that is a complete mystery to us. We call it dark energy and dark matter because we have no idea what it is. It's not the stuff that stars or people or protons are made of. It's... we don't know what the hell it is. We're not even sure how to look for it.

It was less than 40 years ago that our experts warned us about disastrous climate change. In 1975, Newsweek informed us that meteorologists "are almost unanimous" that “catastrophic famines might result from…global cooling.” That's right, cooling. On Sept. 14, 1975 The New York Times told us that this global cooling "may mark the return to another ice age." And on May 21, 1975 the Times said "a major cooling of the climate is widely considered inevitable" because it has been "well established" that the climate in the Northern Hemisphere "has been getting cooler since about 1950."

And then, to our dismay, we found out a few years ago that the Earth is actually warming at an alarming rate.

For hundreds of years we knew that diseases were caused by witches, or frogs, or bad vapors, or angry gods. It is only in our very recent past that we've learned about microbes and genetics.

You'd think that after thousands of years of being wrong about just about everything we'd have learned a little humility. But, of course, we never do.

Which brings me to the very mundane subject of advertising.

We used to know how interactive advertising worked. But then the more we studied it, the more we found that consumers have no interest whatsoever in interacting with advertising.

We used to know how social media worked. But the farther along we get, the more we find that our assumptions about the impact of social media on consumers' buying habits are way out of line with reality.

We used to know what was happening in media. And then TV didn't die. And TiVo didn't take over. And the computer and television didn't converge.

But being wrong doesn't stop us.

We still have people making a nice living going from conference to conference, from boardroom to boardroom, who know how it all works and how it will work in the future. They know what we need to do and how we need to do it. They know.

The only problem is this -- they know nothing. They are fools at best, and liars at worst. Anyone who takes them seriously is an idiot.

It's such a shame. We used to know so much.

November 27, 2012

Social Media Bombs On Black Friday

Despite all the hyperventilating over social media, people with open minds and judicious temperaments are still unconvinced that it has significant impact on commerce.

We know that display advertising on social media sites, notably Facebook, has delivered a whole lot less than promised.

But defenders of social media marketing tell us that it is not the advertising value of social media networks that makes them so magical. It's the content value.

The story goes that the real strength of social media is manifest in the feeds and updates on Twitter, Facebook, YouTube, and Linked In. Here people see marketers' posts and they also see the endorsements and referrals from members of their "community" and are powerfully influenced by them.

It's a lovely little story. Unfortunately, it's all bullshit.

We recently wrote about a report from Forrester Research that stated, "Social tactics are not meaningful sales drivers" and that the effect of social media on online sales was "barely negligible."

Now, a report from IBM that measured the effect of social media on online sales for Black Friday have produced some startling data.

The highlights are these:
  • While online sales on Black Friday increased over 20% from last year, everything IBM measured relating to the effect of social media on these sales dropped.
  • Traffic to online shopping sites from social networks dropped 12% from last year and accounted for eight-tenths of 1% of traffic.
  • Sales at online shopping sites that came as a result of referrals from social media networks dropped by over 35% and accounted for one-third of 1% of sales.
  • Referrals from Facebook to online shopping sites accounted for two-thirds of 1% of traffic. Remarkably, during this same period, Facebook's user base increased 25%. If there's ever been a clear demonstration of the difference between the popularity of social media and the effectiveness of social media marketing, this is it.
  • And get this -- last year referrals from Twitter accounted for two one-hundredths of 1% of online shopping traffic. This year they accounted for 0% of traffic. That's right, zero.
While online media propeller-heads argue about the nuances of these "metrics," to the rest of the world the numbers are so ridiculously small they barely even qualify as rounding error.

The idea that "conversations about brands" on social media networks are a major influence on consumers is one of the great pillars that social media marketing theory is built on. But as we often say here at Ad Contrarian Worldwide Headquarters, nobody's smarter than the facts.

The results from this IBM report should be another nail in the social media marketing coffin.

But, fortunately for the social media lobby, the marketing lemmingocracy has bought very deeply into the social media hype machine. It's too late for them to back out now.

  • Only 0.68% of Black Friday online sales came from Facebook referrals--two-thirds of one percent. That was a decline of 1% from last year.
And how about Twitter?
A couple of years ago, people were excited about Twitter's potential as a commerce platform, too.
But Twitter's impact on ecommerce, it seems, is zero.
Not "basically zero."
  • Commerce site traffic from Twitter accounted for exactly 0.00% of Black Friday traffic. That was down from 0.02% last year.
So much for the idea that Twitter or Facebook's business models are going to have much to do with commerce.

Read more:

November 26, 2012

Facebook Trying To Commit Suicide?

Facebook may be about to cut their own throats.

According to Business Insider, they will soon be launching a product that will...
prove to marketers that there is a type of online advertising besides Google search ads that is worth spending large amounts of money on.

Read more:
It has come up with a way to prove to marketers that there is a type of online advertising besides Google search ads that is worth spending large amounts of money on.

Read more:
It has come up with a way to prove to marketers that there is a type of online advertising besides Google search ads that is worth spending large amounts of money on.

Read more:
prove to marketers that there is a type of online advertising besides Google search ads that is worth spending large amounts of money on.

Read more:
"...prove to marketers that there is a type of online advertising besides Google search ads that is worth spending large amounts of money on."
(By the way, that bold "prove" is not from me, it's from the gee-whiz article at Business Insider.)

Facebook better be careful. If their methodology is any good, the only thing they're likely to prove is how ineffectual display ads on their site are.

According to the article, the basis for Facebook's new product is a research tool from a company called Datalogix that allows them to correlate the delivery of ads on Facebook with the purchase of products. So, for example, they can tell Coke that of the 1 million people who had a Coke ad delivered on Facebook, 300,000 bought a can of Coke in the next 3 days.

Sounds pretty good, huh? Except there's a little problem. There's a big difference between correlation and causality. Correlations can be very misleading. For example, of the 1 million people who get a flat tire today 300,000 will probably also buy a can of Coke in the next 3 days. Does this mean getting a flat tire causes the purchase of Coke? I don't think so.

Most ad agencies and advertisers are so dumb and so addled by impenetrable "metrics" that they'll probably buy a correlation scam, if that's what Facebook has in mind. But if some smart people start asking the right questions, Facebook could find itself in deep snow. If they think they can prove substantial causality between the crappy little ads on their site and substantial purchase increases of major brands they're delusional.

Right now, small scale advertisers who don't need significant reach (dentists, weight-loss scammers, rehab clinics, and other crappy direct marketers) are willing to buy Facebook ads because they only pay for clicks, and on a cost-per-click basis they can project a positive ROI. But if Facebook thinks they can prove a positive ROI to brand marketers who aren't buying clicks and need massive reach they're asking for trouble.

The problem for Facebook here is that if this new methodology cannot prove a positive ROI to brand marketers as it promises to do, they will seriously damage their push for a reach-and-frequency based revenue model. And they will remain in the thrall of crappy little direct marketers.

They better be pretty certain they can prove what they think they can prove before they launch this thing.

November 21, 2012

November 19, 2012

The Remarkable Dominance Of Live TV

Here in the science wing of The Ad Contrarian Worldwide Headquarters our never-ending battle against the forces of ignorance and trendiness sometimes forces us to publish some actual facts. You remember those, right? Those were the things we used to rely on before the online crowd introduced us to "metrics."

For the benefit of the few who are still interesting in understanding what's really happening in the world -- and because no one loves you like I do -- I have taken the trouble of producing some graphs or charts (I can never figure out the difference) that demonstrate how live television continues to  dominate the media landscape.

The following have been produced from Nielsen's 2012 Q2 Cross-Platform Report which was released within the past few days and, to a substantial degree, discredit just about everything our chattering media geniuses have been predicting for the past 10 years.

Just imagine for a moment that the internet had been invented before television. Then look at these charts in that context. Can you envision how intensely the "shiny new object" crowd would be telling us to dump the web and be all over TV?

And whatever you do, don't show these graphs to Bill Gates...
From, January 2007
Bill Gates: Internet Will Revolutionize Television
DAVOS, Switzerland —  The Internet is set to revolutionize television within five years, due to an explosion of online video content and the merging of PCs and TV sets, Microsoft chairman Bill Gates said on Saturday.
"I'm stunned how people aren't seeing that with TV, in five years from now, people will laugh at what we've had"
We're laughing, Bill, we're laughing.

November 06, 2012

November 05, 2012

Either Facebook Is Nuts Or I Am

In our last exciting episode, we decided that Facebook's business strategy is a pig's breakfast. They reach a billion people but all they can do is sell crappy little ads to divorce lawyers for $1.50.

We described this problem in esoteric marketing terms (well, esoteric for a dumb-ass blogger, anyway) as one of confusing the "demand creation" model with the "demand fulfillment" model (please don't make me explain that again. Just read this.)

So where does this lead us? It leads us to the conclusion that Facebook is in the wrong business.

First, let's start with a little media theory. Of all the overblown ideas being hustled by the online ad industry the biggest, by far, is "targeting."

Media science baloney notwithstanding, reach is way more important to big marketers than targeting. To paraphrase a former colleague of mine when asked by a cola maker who their target should be, he replied, "Any asshole with a mouth."

Big brands need big reach, not the diminishing returns of finer and finer targeting.

The "precision targeting" of online advertising is supposed to make it far more efficient and effective. Not even close. Not even close to close.

In fact, online advertising's record of motivating consumers is alarmingly terrible. With all their clouds full of data, Facebook ads attract 5 clicks for every 10,000 views. This is mindblowingly ineffective.

In fact, in a recent experiment a blank display ad -- blank! --with no copy, no art, no nothing, just empty space -- had a higher click rate than the average "precisely targeted" Facebook ad. The whole online targeting/effectiveness thing has so far proven to be a complete and utter joke.

Of course advertisers -- being dumber than stumps -- don't realize that "targeting" means absolutely nothing without impact. Who cares how many left-handed Episcopalian cheese-makers you can reach if they don't notice the ad? As a certain Mr. Bernbach once said, "If no one notices your advertising everything else is academic."

Secondly, why would a company that can reach a billion people even want to sell targeting? They should be selling anti-targeting. They should be selling reach. They are the only media property in the solar system that reaches a billion people and they are trading on their ability to reach falafel lovers in Yonkers.

Facebook has taken precision targeting bullshit to its logical absurdity. They're sitting on a gold mine, but they're throwing away the gold and selling the dirt.

So, you might ask, why is Facebook pursuing this strategy?

The answer is that they have to. They refuse to allow advertisers to use Facebook to create ads with any degree of impact. Consequently, they have nothing of value to sell to substantial advertisers. All they have is negligible little junk space for weight-loss hustlers.

Now we get to the speculative part of this exposition. Demurrals notwithstanding, I think the creepy Zuckerberg kid doesn't really want to be in the ad business. Like all these rich web phonies, he sees himself as some kind of high-minded visionary. Advertising just doesn't fit his smug idea of who he is and what he stands for. Just look at this ridiculous spot he produced to celebrate himself.

To him, advertising is a crass affair, unbecoming his noble purpose. Which is why it is relegated to invisible little postage stamps on a part of the page no one looks at.

In short, he's embarrassed about being in the ad business. To be honest here, so am I. But I don't have investors.

Here's what Facebook needs to do:
  • They need to forget about "precision targeting." It's bullshit and it's not working. And it's not the business they should be in anyway.
  • They need to sell reach. They have tried. But as currently configured it is a pathetic joke. Reach and frequency are irrelevant if the ad units have no impact. See Mr. B above.
  •  The platform doesn't matter. Mobile or immobile, advertising that is invisible is worthless. Period. Exclamation point. All this hyperventilating about Facebook's mobile strategy is a red herring.
There are only two ways this is going to happen. First, the Z-man has to get used to the idea that he's in the ad business. Second, he has to get rid of all the Global Chief  Engagement Content Relationship Jargonators. He has to get some ad sales people who know what the f/k they're selling, and then give them something worthwhile to sell.

November 01, 2012

View From The Ivory Tower

The Wall Street crowd got all lightheaded last week because Facebook posted some better than expected numbers. Pardon me if I don't join in the champagne shower.

Here in the Ivory Tower wing at The Ad Contrarian Worldwide Headquarters, we're starting to think that Facebook may turn out to be one of the all-time dumbest companies on the planet. And remember, to be the all-time dumbest you have to be dumber than Pepsi. That ain't easy.

I'm the farthest thing from a digital strategist, but I have this feeling that Facebook's business strategy is all wrong.

Facebook is the only media company in the universe that reaches a billion people on a regular basis but seems determined to sell cheesy $2 ads to dentists.

To understand the problem with this we have to go back to first principles. We have a couple of axioms about advertising that are relevant to this issue.

The first is that interactivity is the enemy of advertising. Whether the interactivity takes the form of clicking a tv remote, pushing a radio push-button, clicking a mouse or swiping a page, we believe that people are far more likely to interact with a medium to avoid advertising than to engage with it. You can read more about that here.

Second, we believe that online advertising has turned out to be far better at fulfilling demand than at creating demand. This accounts for the success of advertising on sites like Google and Craig's List, where people are searching for something. It also accounts for the failure of most display advertising. You can read more about that here.

The exception to the first axiom is found in the second axiom. People will purposefully interact when they are looking for something -- when they are in "demand fulfillment" mode.

In this mode, people will engage with advertising. When they are not in this mode, they  will avoid. Somehow Facebook seems to have gotten the idea that they are like Google.

They are using a "demand fulfillment" business model -- crappy little listing ads that only "searchers" would find appealing -- to monetize "demand creation" advertising -- which requires big, impactful, and atttractive ideas.

Anyone following me here?

Maybe this brilliant graph will help.

The way you make big ad money in the "demand creation" model is in the upper right quadrant. You sell big, impactful ads to broadly targeted advertisers. The way you make money in the "demand fulfillment" model is in the lower left quadrant. You sell a million crappy little ads to dentists. This is how the yellow pages and the classifieds used to do it, and how Google now does it. Facebook is a "demand creation" medium stuck in a "demand fulfillment" quadrant. 
According to Facebook's coo, they have so many users, it's like three times the Super Bowl audience every day. But do you see the Super Bowl crowd there? Do you see Coke and Budweiser and Doritos? No, you see pet groomers and divorce lawyers.

This is because they are selling the wrong stuff to the wrong people for the wrong reasons at the wrong price. Other than that, they're doing fine.

In our next exciting episode, we'll talk about why Facebook's focus on mobile does not solve this problem; why their emphasis on precision targeting is all wrong; and why they need to do something different and radical.

Maybe we'll also find out why if I'm so f/ing smart, how come they're all billionaires and I'm a schmuck with a blog?