Why Online Ads Haven't Built Brands

This post is adopted from a podcast I did last year.

One of the questions I’ve been wrestling with for years is why online advertising seems to be incapable of building major consumer-facing brands.

We’ve had 20 years of phenomenal growth of online advertising and yet I have trouble coming up with one example of a major consumer-facing physical brand that was built by online advertising. I can think of no examples of major brands of beer, soda, cars, toothpaste, paper towels, candy bars, soap, fast food, peanut butter — you get the picture — that were built by online advertising.

After 20 years of existence radio and TV had built hundreds - if not thousands - of consumer brands.

There are some who would argue that there are very big web-native brands that have been built by online advertising - e.g., Amazon, Google, and Facebook. I’m not so sure that advertising played a major role in the building of any of those brands, but let’s leave that argument for another day and just focus on brands that are physical and not web-native, which probably constitute somewhere around 95% of the products we buy every day.

What’s the issue with online advertising that has rendered it ineffective at advertising’s most important job — building a major brand?

For years I fumbled around trying to answer this question but I’ve never really understood it. I have blamed an absence of creativity. I have blamed the fact that it’s mostly direct response style advertising, but I’ve never really evolved a comprehensive theory of what the problem is.

But someone else has. A while back I received an email from Richard Shotton, a very smart guy and author of the wonderful book, The Choice Factory, directing me to a piece from 2014 called “Ads Don’t Work That Way” by a guy named Kevin Simler on a blog called Melting Asphalt. I’m going to do my best to summarize Simler’s argument, but reading the original is highly recommended as my interpretation of his argument is likely to be flawed at best.

Simler starts by quoting some standard explanations of how advertising works at building brands. Let’s borrow some terminology from subatomic physics and call these “standard models.” Here are some examples from standard models:

“An ad succeeds at making us feel something and that emotional response can have a profound effect on how we think and the choices we make” 

Or

“By creating positive associations between the advertised products and feelings like love, happiness, safety, sexual confidence... these associations grow and deepen overtime making us feel favorably disposed toward the product and ultimately more likely to buy it“

Or

“advertising rarely succeeds through argument or calls to action instead it creates positive memories and feelings that influence our behavior over time to encourage us to buy something at a later date.” In other words, “if Coke shows us enough images of people beaming with joy after drinking that product we’ll come to associate Coke with happiness and then sometime later will be more likely to purchase coke"

Simler is not happy with these explanations. He says it portrays us as far less rational than we actually are. “While we may not conform to a model of perfect economic behavior, neither are we puppets at the mercy of every Tom Dick and Harry with a billboard. We aren’t that easily manipulated.”

Instead he offers an alternative to the standard models that he calls "cultural imprinting.” Don’t be turned off by the awkward terminology. The theory underpinning his cultural imprinting idea is that in some way we all want to be part of what is culturally acceptable.

As he says, brand images are "part of the cultural landscape we inhabit. They provide cultural information. When we ignore brand messages we’re missing out on valuable cultural information and alienating ourselves from the Zeitgeist." He says this puts us in danger of becoming outdated,  unfashionable, or otherwise socially hapless. We become like "the kid who wears his dad’s suit to his first middle school dance." In other words, in some way brand choices send messages to others about who we are. And no one wants to send the wrong messages.

This is not new thinking. When I first started working in the advertising business 1,000 years ago we used to call products that were most responsive to advertising “necktie products” -- products that are used or consumed in public and are plainly visible to others. Why are products like beer and soda and cars so responsive to advertising? Because these products are used in public and are highly visible. Whether we care to admit it or not, those of us who are not sociopaths prefer to be socially acceptable among our group.

So what does all this have to do with the online advertising problem? Here is the connection I’ve been missing. In Simler's words “cultural imprinting relies on the principle of common knowledge.  For a fact to be common knowledge among the group, it’s not enough for everyone to know it. Everyone must also know that everyone else knows it.” 

In other words, part of our purchasing calculation is not just our belief that X is an acceptable product, but our expectation that other people believe this brand is acceptable because they know what we know.

Here is an example he uses to describe purchasing behavior using the standard model…

We see a Nike ad that makes an association between Nike and athletic excellence. Over time we internalize this association and feel good about Nike, and when it comes time to buy some sneakers at some later date we are more likely to buy Nikes.

In the cultural imprinting model it starts the same…

We see a Nike ad that makes an association between Nike and athletic excellence. 

But here’s what’s different. Over time we understand that everyone else has seen Nike ads and they also associate Nike with athletic excellence. So at some later date when we buy a pair of Nikes we don't have to worry that our group will think we're idiots.

Of course, this does not guarantee we will buy Nikes, but it makes the likelihood greater. And as I have written ad nauseum, marketing is about one thing only -- likelihoods and probabilities.

For advertising to be effective in the "cultural imprinting" model, it’s not enough for it to be seen by a single person or even by many people. Someone has to know that everyone else has seen it, too.

This may very well be why online ads have been largely ineffective at brand building. In the online world, everyone lives in his or her own little digi-world. I have no idea what my friends are doing online and what ads they may be seeing. Even if they watch the same YouTube videos as me, I don't know what ads they are being served.

In mass media, I know what my friends are seeing. I know that if they’re watching football they’re seeing the same ads I am. Consequently I have reasonable confidence that my friends believe that Nike makes acceptable running shoes, Ford makes acceptable pick-up trucks, and Coors makes beer I don’t have to feel weird about.

But I have no idea what my friends are seeing online. Even if they go to the same sites I do, I have no idea what ads they are seeing. Consequently, I have no frame of reference for “cultural imprinting.” I don’t know if they will think me an idiot for buying these headphones I saw on Whatever-dot-com.

In a nutshell, this may very well be why thus far mass-market advertising is demonstrably more effective at brand building than precision targeted, highly individualized advertising.

Highly individualized, personalized advertising -- the obsession of online advertisers -- makes advertising a private, rather than public, experience. It keeps us from knowing what advertising our friends are seeing. Which in some way keeps us from knowing what brands may be culturally acceptable.

For years I’ve known that online advertising has been mysteriously ineffective at brand building and now I think I finally understand why. By the way, Kevin Simler, the person who connected the dots for me, isn’t a marketing or advertising person — he’s a tech guy. But I believe he understands marketing better than most of the so-called professionals.

If he's right, the current obsession of advertisers to make their advertising perfectly individualized and perfectly personalized may be perfectly wrong.

(There is probably not a singular reason for the phenomenon of online advertising not having built major consumer-facing brands. But if you combine Simler's "cultural imprinting" hypothesis with the "signaling" hypothesis, I think you have a pretty good explanation.)