Can Online Advertising Survive?

One of the enduring lessons of economics is that things look rosiest just before they explode.

This happened in the tech industry in the late 90's. Prices, valuations, and interest in the dotcom economy had been soaring for years and had reached astronomical levels. And then, in the course of a few short weeks, reality suddenly reared its ugly head and it all came crashing down.

The online advertising industry may be facing a similar fate. There are some very disturbing trends developing in online advertising that we have chosen to ignore. But they are there just the same:

• Delivery:  According to a Wall Street Journal report, a recent study by comScore found that 54% of display ads paid for by advertisers between May 2012 and February 2013 never appeared in front of a live human being. Furthermore, of the ads that did appear and were counted as "visible" the threshold for "visibility" was so low as to be meaningless -- 1/2 of the pixels had to load for one second.

• Traffic: There seems to be a huge amount of fraudulent traffic to websites. Adweek reports that according to Solve Media the amount of suspicious web traffic was 46% in the 1st quarter of 2013. That means that 46% of the viewership reported by websites may have been bots, not people. According to Adweek, as much as $9.5 billion of the $20 billion that will be spent on online advertising in 2013 may be for imaginary traffic.

• Click Fraud: Nobody knows what the true extent of click fraud is. According to Business Insider "...armies of computers unknowingly infected by hackers to drive fake traffic through ads, generating up to $400 million a year in fraudulent clicks." This is particularly disheartening when you consider that click rates, which include the inadvertent clicks we all make, are at an astonishingly low 2 to 9 clicks per 10,000 ads delivered -- before fraud.

• Prices Are Dropping: According to reports, cost-per-thousand and cost-per-click rates have been dropping steadily for two years. This means advertisers are systematically losing confidence in online advertising's ability to deliver results to them.

• Social Media: Social media is starting to receive the scrutiny it deserves. The magical mystery honeymoon is coming to an end and marketers are demanding to see results. According to Forrester Research, "Social tactics are not meaningful sales drivers."

• Ad Blocking: A program called "AdBlock Plus" claims to have 50 million users. Despite its name, AdBlock Plus is more like AdBlock Minus. It does not block all advertising. In fact, Salon magazine says it derives a substantial part of its income by making large corporations "pay to play." It lets a certain type of advertising through its filtering system. But if big guys won't pay up, none of their ads get through. There is nothing preventing a more scrupulous company or browser from developing a true ad blocker, with no asterisks. In fact, Mozilla (Firefox) was reportedly planning to do just that until someone got to them.

• Dilettantism: When dabblers get involved in an industry, it is generally not a good sign. You could sense the dotcom crash was coming when you were standing in line at the supermarket and the check-out clerks were talking about their tech stocks. We now have big shots working in the online channel who are proud to say they have no knowledge of, and no interest in, advertising.

• Criminality: There is clearly a substantial amount of criminal and deceitful activity going on. The phony traffic, the phony clicks, the phony delivery numbers have to be coming from somewhere.

Any one of these factors alone is disturbing. Put them together and you have a very discomfiting picture.

Of course, the ad industry and the investment and the business communities are very high on online advertising right now because everyone's making money. Just as they were high on the dotcom sector before it evaporated.

As in the dotcom crash, the strong would survive a melt down. But a whole lot of web businesses, media buying firms, and agencies would go down hard. 

Some might even go to jail. It is difficult for me to believe that law enforcement agencies aren't looking into the mushrooming fraud. It could trigger a major event.

I never make predictions. But online advertising is a train wreck waiting to happen. I wouldn't be surprised...


World Tour...
I am speaking this Thursday in Buffalo, N.Y. on "The Golden Age of BS." Here's the info.

Where Do The Myths Come From?

The advertising and marketing industries have some very ingrained and persistent myths.

Having been in the industry for 40 years, I've heard some of these myths but I've never  seen data to support them or found out where they come from.

One of the common and pervasive legends is that older people want to be like young people. The result of this is advertising that is obsessed with showing us the insipid activities of 22 year-olds in spite of the fact that people over 50 are responsible for almost half of consumer spending.

As far as I can tell, older people certainly want to be youthful. But they have no interest at all in being like young people. This is a distinction that is apparently lost on the advertising industry.

As someone over 50, I think I have a pretty good idea of how my friends and I look at ourselves and what we aspire to.

Yes, we want to remain youthful. But we have our own idea of what "youthful" means and it has nothing at all to do with the lamentable geeks and bozos we see portrayed in automobile ads, beer ads, food ads, and advertising in general. In fact, we think of these people as either pathetic or ridiculous.

The truth is, the advertising industry has been using the "older people want to be like young people" crutch for years because they are too lazy and too preoccupied with themselves and their friends to find out what older consumers are really about.

"Old people want to be like young people" is just the narcissistic excuse that lazy, young people who dominate advertising use to justify their ignorance and indifference about the people who Nielsen calls, "the most valuable consumers in the history of marketing."

Here's an insight to the self-absorbed people of the advertising and marketing industries about 50+ year olds...

They want to be youthful. But they don't want to be like you.

Don't Forget...
I'm speaking this evening in Portland. Here's the info.

Cranky Old Guy Finds Happiness

If you're a regular reader, you've probably noticed that there is very little of an autobiographical nature that appears in this blog.

There are two reasons for this. First, I prefer writing about advertising to writing about myself. And second, I believe you prefer reading about advertising than reading about me.

Once in a while, however, I write something autobiographical and today is one of those days. Several people have sent emails or asked recently about how I'm enjoying my almost-retirement, so I thought I'd write about it.

It has gone way better than I had any right to expect. I have not had a moment of regret about leaving the agency business.

One of the things I thought I might miss was being treated like a big shot. When you're an agency ceo and your agency spends a lot of money in media, everyone wants to be your friend and take you places and buy you lunch. When you retire, you quickly become "Bob who?" The good news is that I haven't missed it at all. Yes, there are a few games I'd like to have gone to, but that's why God gave us television.

The issue that has been challenging has been figuring out exactly how retired I really am. My new company, Type A Group, seems to be evolving into something different from what my partner and I conceived.

We started with only two things we knew for sure: it was not going to be an agency, and we were not going to hire anyone.

Other than that, we defined the business loosely -- as a consultancy to agencies and marketers in a few different areas. Our mantra was that we'd know what business we were in when we got our first client. After about 90 days, it became clear to us that the one area which seemed most interesting was helping companies and agencies market to the over-50 crowd. This is a major opportunity that I predict will explode in the next few years.

But interesting things keep popping up that have nothing to do with over-50's. Some  we have passed on, and some we've decided to pursue.

One of the things that has been so pleasant about these past few months is how varied the work has been.

Another of the surprising things is the amount of speaking we're doing. I'm not here to pimp the company, but I will say that I'm really enjoying the speaking and it seems to be going over well with the audiences we've been addressing. As you can imagine from the blog, our talks are different from the usual conference fare, and while not everyone agrees with us, people seem to enjoy the talks and the response has been terrific. It's almost like being in the entertainment business.

We're also engaged in a creative project, which is the last thing we thought we'd be doing. Out of the blue, my partner had an idea and we brought it to a company and they liked it and it looks like we're going to produce it.

Without question, the most liberating part of the almost-retirement gig is that I don't really give a damn about a lot of things I used to have to worry about. As an agency owner one of the great burdens was the worry about people whose livelihoods and families depended on me. One wrong word to a client and peoples' jobs could be in jeopardy. So I always had to be careful about what I said and how I said it. Now I say exactly what I think, and if someone doesn't like it, so be it. There is an amazing feeling of freedom when, after decades, you can finally tell the truth and not care about the consequences.

Of course, the thing that keeps me most busy is writing. In addition to this blog I have two books I am "working" on (by "working" I mean feeling guilty about by not doing a fucking thing.) One is fiction and one is another compilation of blog posts and short pieces. The one thing that is a complete shock is that my book remains the #1 selling ad book at Amazon and has been for 6 months. I hardly make any money from the thing but it's still very gratifying.

The answer to the question about how I'm enjoying my almost-retirement, to those of you who have been kind enough to ask, is that it is still early days, but so far it has been excellent.

And Speaking Of Speaking... 
I'll be talking to the Portland Ad Federation tomorrow evening on the subject of Social Media vs. Traditional Media. If you're in the Portland area, please come. You can find the info here.

Online Ad Criminals

On June 17th, we published a piece called The $7.5 Billion Ad Swindle. It was about the massive fraud that is being perpetrated on advertisers by criminality within the online advertising industry.

A new report by Solve Media indicates that the fraud is growing at an alarming rate. According to an Adweek piece last week, in just 3 months the size of the fraud has jumped to about $9.5 billion this year (by the way, kudos to Mike Shields of Adweek who won't let this story go away.)

In the first quarter of 2013, Solve reports that the amount of suspicious web advertising traffic has risen from 43% to 46%. That means that 46% of the viewership reported by websites seems to be fraudulent. It is not people. It is computer programs (bots) pretending to be people to drive up the numbers and screw advertisers out of billions of dollars.

Not only that, suspicious advertising traffic has also started to rear its ugly head big time on mobile sites. Over 1/3 of mobile traffic during this time period was suspicious.

As the problem becomes more severe, the silence from online publishers, ad networks, and agencies remains deafening.

Just like 15 years ago when everybody was soaking the dot-com clowns for all they were worth, nobody wants to kill the golden goose. When corporate management finally figures out how their money is being pissed away, CMO heads will roll and agencies will be fired.

Until then, nobody seems to care that half of online ad money is being stolen by con men and swindlers. The insane naivete and cluelessness that has permeated the whole online advertising enterprise since its inception is still shocking.

Now it has taken a new form. Not only are marketers ignoring the awful truth about the ineffectiveness of online advertising, they are turning a blind eye to the fact that they are being skinned alive by crooks and their willfully corrupt accomplices in the ad world.

And if you think the fraud in the U.S, is bad, get a look at these numbers from some other countries. According to Solve...

• 92% of web traffic in China is suspicious
• 80% of Venezuela's web traffic is suspicious
• 77% of web traffic in the Ukraine is suspicious
• In Singapore 86% of mobile traffic is suspicious

The irony in all this is that the web was supposed to make advertising so much more accountable by giving us accurate tracking of advertising traffic. Well, they were right about one thing. It's being tracked. And what the tracking has revealed is the likelihood that there is an astounding amount of criminal activity at work.

Fortunately for the thieves, charlatans, and hustlers, nobody seems to give a shit.

An Industry Of Umpires

In baseball, the players play the game and the umpires' make sure there is a smooth and decorous process.

The fans come to see the talent of the players. When umpires impose themselves disproportionately on the flow of the game they are roundly booed.

The best umpires are the ones who are virtually invisible. The worst umpires are the ones who think the game is about them.

A very strange phenomenon has happened in the advertising industry. Almost unnoticed, the umpires have taken over the game.

The players -- the people who actually make the ads -- have been marginalized. They are now "support."

The business is in such a state of disarray that the umpires are playing the game. The account managers, the planners, the strategists and data analysts are now taking the at-bats and running the bases.

There has always been a certain type of activist "umpire" in the ad business. Like in baseball, the really good ones are catalysts for a smoother, more enjoyable and better played game. The really bad ones think the game is about them.

The sad thing is that while baseball fans would never pay to watch umpires play ball,  clients are actually more comfortable with this arrangement.

Something has gone very wrong. Either the players no longer have the talent to keep the paying customers interested, or the customers have forgotten what the game is about.

Ad Exec Says He Didn't Know Anything

CHICAGO -- Advertising executive Fenton Schmetz admitted today that all during his successful 18-year advertising career he didn't know anything.

Schmetz, who most recently held the position of Chief Irritation Officer at Compucom, a worldwide, international, global, intercontinental agency said in an interview, "I really don't know anything about advertising or marketing or people or business. I just made things up. I don't even know how to pay my cable bill."

When asked how he was able to fool people for 18 years, Schmetz said, "I would ask people to come into my office and show me what they were working on. Then I would say 'I don't like that' and I would make them change it. After they changed it a few times I would say 'OK, that's better.' Also, sometimes I went to meetings and ate blueberry scones and nodded my head."

Schmetz said he was first attracted to advertising by the clothing. "I always looked very good in black t-shirts and I thought that if I could just find a job where I could wear a black t-shirt every day I would do very well. Oh, and expensive eye wear. I always wanted to wear expensive eye wear. The other thing that attracted me to advertising is that I like friendly girls and I found that advertising has a lot of them."

Schmetz said the most difficult challenge for him during his tenure at Compucom came at lunch. "During the work day it was easy to fool people. I just took the things that everyone else said and moved a few words around. Like, they would say, 'We need a multi-channel solution that leverages our disruption across the ecosystem' and then I'd wait a few minutes and I would say, 'I think we need disruption across the ecosystem that leverages our multi-channel solutions.' Everyone seemed to agree."

"That part was easy. The hard part came at lunch when people started talking in English."

Schmetz explained that the aspect of advertising he liked best was being with clients. "I think I was very good at working with our clients. I would make statements about 'value propositions' and 'engagement' and 'use cases' and they would nod their heads and then we'd go have a drink. Sometimes we'd go to Las Vegas and pretend to have a conference about social media, which I was really good at."

Asked why he decided to come forward with his admission at this time, Schmetz said, "It's time for me to move on. I feel like I've accomplished everything I can do here. But I want to apologize to my colleagues and clients. It was wrong of me to claim I understood anything. I have no idea why people buy stuff. I don't know what makes a good ad. I don't know anything. Honestly, I don't even know what an 'ecosystem' is. Is it like when you hear your own voice or something?"

When told of Schmetz's departure, one of his clients, Rajai Pargamanianaianan, CMO of Doodeo, said, "We are very sorry to see Fenton leave. He played an important role in our success. He had one of the most fertile marketing minds we've ever worked with. He deeply understood our value proposition and our engagement and our use cases."

What is Schmetz going to miss most about advertising? "Oh, definitely the intellectual stimulation of trying to rearrange sentences to say the same thing everyone else is saying but in a much more complicated way. It's not as easy as you think. Also, I will miss the friendly girls."

What does he plan to do next? "I'm thinking of starting a blog."

Is It Art Or Science?

We're going to get a little philosophical here today my friends, so hold on tight.

The question before us is, is advertising an art or a science? This may seem to have no relevance to you if you're busy on your 8th version of a deck about Big Save's giant Halloween sale. But bear with me, I think it will be interesting.

There are aspects of advertising that are artistic and aspects that are scientific. For example, we spend untold hours lighting scenes for TV commercials simply for the artistic benefit of having them look good. We also do post-analyses of media buys for the scientific benefit of understanding how much money we pissed away.

However, our journey today is not to examine discrete aspects of advertising, but advertising as a whole. Has it, thus far in its existence, been primarily an art or a science?

Before we get bogged down in semantics, I am going to propose a simple definition for what it means to be a science. A science is a body of knowledge that progressively helps us understand how things work.

For example, biology is a science. At one time we knew nothing about how disease was caused. But through the study of biology we have progressively learned that diseases are caused by bacteria, and viruses, and other environmental and genetic agents. We have built on that knowledge to create preventive measures and cures for diseases that are demonstrably effective. This is why, when we have an infection, we take antibiotics, not bacon.

Fine art, on the other hand, may be more emotionally pleasing than biology, but it is hard to demonstrate that it has made progress toward helping us understand how the world works. We may prefer Rothko's #14 to the Mona Lisa, but you'd have a hard time convincing anyone (outside of the Upper West Side) that it represents progress toward a deeper understanding of the world. Similarly, it would be hard to maintain that Spamalot (while brilliant in its own way) helps us understand the world more than Hamlet.

This is why #14 and Spamalot and Mona Lisa and Hamlet are art, not science.

Still with me?

Okay, now let's get to advertising. What do we know about advertising as a whole that we didn't know 50 years ago? It is my contention that we have made very little progress toward a deeper understanding of how it works.

• We know that companies that advertise tend to be more successful than those that don't
• We know that a substantial part of what we spend on advertising is wasted
• We know that people tend to prefer brands whose advertising they like
• We know that advertising that speaks to a need tends to be more effective than that which doesn't
• We know that advertising that attracts attention tends to be more successful than that which doesn't

And that's about what we know. If you went back and looked at the literature, I think you'd find that we knew most of that stuff 50 years ago, and that we really haven't made much progress in understanding the deep truths about advertising. In other words, I don't think we have made much, if any, progress toward making advertising more effective.

We certainly have more precise tests, and more precise data, and more precise measurements. We use the language, the methods, and the tools of science. But have we made advertising work better? Not that I can see.

Advertising in some ways feels like philosophy. Do philosophers today have any better ideas about the nature of reality than they did 2,500 years ago? What arguments about the nature of Truth, Beauty, Reality, and Goodness have been settled since Plato, Aristotle and the other classical philosphers argued about them?

To my mind, philosophy also may use the language, the methods, and the tools of science, but it is really an art because we haven't actually settled anything. All we have are more modern descriptions of the same stuff.

Ditto for advertising. We delude ourselves into thinking that by employing the methods, language, and tools of science we are making progress. Sure, there has been scientific progress in some of the aspects of advertising (media buying in particular.) But what arguments about the nature of good advertising have we settled? Sit in an ad agency for 30 minutes and you'll probably hear the same disputes about what is good advertising and what isn't that you would have heard 50 years ago, albeit with a new vocabulary.

I contend that we haven't really made much progress toward understanding the fundamentals of how and why advertising works. Consequently, contemporary advertising -- like Rothko and Spamalot -- is different from the past, but it's not necessarily better.

Like a lot of art, there are those who would argue it's actually worse.

Open Letter To Harvard

"Thank you for sharing your idea with HBR.org. Due to the volume of submissions we receive, we are not able to respond personally to each inquiry. Please know that if we are interested in publishing your work, we will contact you directly.

The HBR Web Editors"

Dear HBR Web Editors,

Thank you so much for your email.

Before I sent in my submission to the Harvard Business Review, I read on your website that you were very busy and would only respond to me if the piece in question was accepted for publication.

Imagine how surprised I was when I received an email from you informing me, once again, that I would only hear from you if my piece was accepted.

It was very thoughtful of you to write to let me know that I probably wouldn't be hearing from you. Although, honestly, I'm not sure why it is easier to write to tell me that I  won't be hearing from you than it is to write when it's time to write. It seems like either way you are writing once. Then again, if my piece is accepted, you will be writing twice. So why not wait and just write once?

Now, to be honest here, I flunked algebra and you guys are from Harvard, so there's probably something about computers or quantum theory or gender studies that I don't understand that has to do with why it's easier to write twice than once. But, just in case, I'd have someone in the math department check this out. I mean, you guys are busy, right?

Big picture, Harvard, I wish more people would be as considerate as you are and communicate with me when they think they will not be communicating with me.

I am trying to follow your good example by sending you this email to inform you that if I do not hear from you again I will not be responding. Frankly, I am just too busy right now to answer emails that I don't get. Please understand, there is nothing personal in this. There are so many emails that I am not receiving every day that it would take hours -- maybe days -- to respond to all of them.

Like you, I believe it is important to keep in touch with those we plan not to be in touch with. Consequently, I am going to telephone a great many of my friends this week to explain to them why I will not be calling. I think it is the polite thing to do (I was also thinking about texting my cell phone contacts to explain why I won't be texting them but those messaging charges are frickin' amazeballs, right?)

Thank you once again for your thoughtfulness. And if you do not hear from me again, please consider it my personal way of staying in touch.

Yours truly,

Bob Hoffman

Media Buyers Are Ruining Everything

The fun part of being a contrarian is coming up with crackpot theories. And I've got a doozie for you today (by the way, how do you spell doozie?)

(Also, by the way, get ready for a lot of "by the ways" and parentheses today.)

I think that a substantial part of what makes our culture such a toxic cesspool can be laid at the feet of agency media buyers. Yup, all this rot is their fault.

You wouldn't think that a kale-eating, instagram-obsessed 28 year-old media buyer could have much effect on society. But you'd be wrong. They actually have an alarming and pernicious effect.

In a very insidious way agency media buyers influence our culture. Their decisions on what TV, radio and web media to buy largely determine what types of TV, radio and web content are produced. Nobody wants to produce programming or content they can't sell (except NBC, but that's an accident.)

Media buyers pay special attention to the interests and tastes of 18-34 year olds... oops, excuse me, Millennials (they've been re-named, promoted and deified. By the way, I just noticed that "deified" is a palindrome. Is this blog awesome, or what? But I digress...)

These peoples' tastes determine what our media look and smell like. They set the tone and determine the agenda.

Why do people care about the amazingly talented and sophisticated (sarcasm) Miley Cyrus? Because the media pay attention to her. It's quite a simple formula -- no media coverage, no Miley.

Why do the media pay attention to her? Because media buyers will "buy" her. Why will media buyers buy her? Because idiot 18 year-olds want to hear about her.

 I don't really know what this illustration means but I don't think it's fair that the digi-dorks get to use all the arrows and circles.

The obsession with targeting 18-34 year-olds is mostly quite dumb. But that's a whole other story that we don't have time for today. You really can't expect media buyers to understand it. They just do what media buyers have always done (it's so much simpler than thinking.)

Why is most TV, radio and web programming and content so astoundingly stupid? Because 18 year-olds are astoundingly stupid.

So what ya get is crazy stupid programming which fills us with crazy stupid values and crazy stupid culture and creates crazy stupid people. Ergo, media buyers are ruining everything.

It's a very pleasant time to be an idiot.

And who would know that better than me?