July 18, 2016

Tons Of Data And Not An Ounce Of Sense

One of the great advantages of online advertising is that it generates lots of very valuable data. This data helps us make excellent media and marketing decisions. Or so I'm told.

But I'm afraid I may be suffering from that ailment called "cognitive dissonance" because from what I can see we have lots of data about online advertising and we're making astoundingly dumb decisions.

Let me give you an example.

Google tells us that here in the U.S. the average click rate for an online banner ad is about .07%. That means for every 10,000 ads we run we get 7 clicks. This is beyond alarming.

But we also know that about half of those clicks are accidental. So that gets us down to 3.5 real clicks per 10,000 ads served.

Then we have to account for fraud. Now nobody knows how much click fraud there is, but there is responsible research that estimates it as high as 90%. I'm frankly skeptical that it's that high, but I think most knowledgeable people agree that it's probably no less than 35%. So let's go with that more conservative number.

Now we're down to an effective click rate of about .02%.

Since all the amazing data we have at our fingertips has allowed us to target only highly worthwhile consumers, we can assume that those 2 people we have induced to click with our "precisely targeted" compelling message are really valuable to us.

But wait a second...

We also know that 85% of clicks are generated by 8% of the population. The probability of inducing a click is not so much related to the preciseness of our targeting or the relevance of our message, it is related to the likelihood of having reached a click maniac.

So it's unlikely that the two measly legitimate clicks we're getting are even prospects.

Am I crazy? Because it seems to me that every bit of precious data we have about display advertising tells us that it's a complete and utter joke. And yet every year we increase our spending by double digits.

As far as I can tell, we have tons of data and not an ounce of fucking sense.

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