If you've got a team of smart people willing to drop $500k on a banner campaign and you can accurately measure the results and it's still worth it with all the fraud, good for you.
If you're a mom and pop store looking to spend $500 on advertisements they should be made aware there's a good chance they will be defrauded unless they know what they are doing.
This is really important. I really believe small-time projects have no business buying advertising online. It's just so incredibly low value that to scale it to meaningful results takes a lot more money than a person or small group of people bootstrapping their project on a shoestring can muster.
For example: my wife has written a sci-fi novel. You can buy an eBook or paperback on Amazon. We would have to spend a few thousand dollars a month to acquire a single, purchasing reader. In contrast, I can drop around $100 on a booth at a book fair and sell 50 copies in about 8 hours. And we get almost all of those people to sign up for the mailing list (and almost all of them remember their email address well enough and have good enough handwriting to ensure it's a valid address). I don't get any chance to reconnect with my paying customers with just Amazon.
No, I'm sure it doesn't scale as well, but we don't have anywhere near the money it would take to scale online advertising to even those low of sales numbers. But we have a large enough margin on the paperback (we're self publishing and print-on-demand has gotten pretty cheap) that we typically break even for the combined print/booth costs. Similarly, growing the mailing list for when we finish editing the next book (which will be any day now) has been a lot easier in-person.
From the article:
We use them to measure the efficacy of campaigns we run our way, using our metrics.
We’ll spend a million bucks on a literal f**k ton of banners (I mean, just billions
of the things, it’s crazy). And then we’ll do targeted brand sentiment and purchase-
intent surveys using our internal peeps, online along with companies like Nielsen and
Foresee, and offline with a bunch of (really quite awesome) companies you’ve never
heard of. Then we’ll see whether the banners moved the needle, and if they did (and
they often do), we’re happy.
In other words, if you're not already successful, this article isn't for you.
As easy as it might be for some people to buy into your narrative, on HN, it realllllly isn't true.
The basic statistics to calculate the RoI on a banner ad spend isn't particularly difficult when you have a software dev/web dev available.
No matter how much click/impression fraud there is...you are trying to track conversions not clicks/impressions at that scale.
If I know I spend $500 and get 10 sales, it isn't a statistically valid sample but its pretty clear if I break even on that $500...I should keep doing it since its essentially free marketing. Similarly, if I'm willing to eat $N per customer acquired via marketing, the same is true as long as $50/customer is equal to or less than my margin per sale + $N. "Sale" in this context is tracking what exactly those 10 people bought over the lifetime of them being a customer, generally.
The only real thing the "already successful" people have is a bunch of smoke and mirrors that honestly doesn't have verifiable value that they use to bullshit clients. Conversion rate is literally the only statistic that is verifiable, cost effective to verify, and able to give you a concrete idea of whether or not the RoI of the campaign is worth it.
We have an on staff statistician and his primary job is just automating the conversion rate calculations, the return-per-ad-campaign, etc. We spend enough money its worth hiring a staff statistician to do that but honestly any programmer with a book on statistics would 90% as good.
I am talking about ROI. If you're bootstrapping a project, I doubt you can get a good enough ROI in online advertising for your first 100 sales. If I had the kind of money to make online advertising work for the conversion rates I've seen on my projects, I wouldn't be trying to start a business in the first place.
If you were starting a project on your own, tomorrow, and the only money you had was the money in your own savings, what would you do? You said $500 gets you 10 sales. Where? How?
The math is the same whether you have a company going through $500 a month in marketing or $5 million a month.
Yes, if your conversion rate doesn't make sense for you, don't do it.
I'm not going to go arguing how to make $500 into 10 sales. It depends on what you are selling, what the competition is bidding for ads, your lifetime value of a customer, etc.
This is really not a strange/weird/unusual scenario for a combination of 20+ low competition CPC ads on Bing, Google, etc. Given small budgets, that is what you'd aim for as you don't have the money to compete with the high cost keyword bidders.
I'm confused why you think that is hard to achieve?
These numbers aren't particularly optimistic given most people aim/expect a ~1% conversion rate, so if it was .8%, you could double your CPC, etc.
I'm not disputing your formula, I'm disputing your inputs. It's the part you've explicitly dismissed that is the problem. You can't say "our $5 million/month spend for 100,000 users proves that you could spend $50/mo and get 1 user."
You keep throwing theoreticals around, inventing numbers to match your narrative. "If horses were 10 feet tall, then we'd be able to ford this river." A 10 foot tall horse is called an elephant, and we can't afford elephants. How do we ford this river with the one horse we have? And your answer is, "well, if animals were 5 times larger than they usually are, then I don't understand how you don't understand."
...yes its actually easier with less money as 83 clicks a day is all you need so you aren't competing with high cost keywords which tends to start being unavoidable somewhere past 100+ clicks/day.
And yes, I've done this with $500/month as the spend. If you go through my comment history you'll notice I used to work entirely with small businesses as a contractor which I've mentioned at least a couple times I believe.
I wouldn't use up-to-date hypotheticals from my current job given its a scale almost no one on HN would operate at. :/
I'm not really sure what your conviction this isn't possible comes from?
Obviously, $50/month/sale is not going to work out for a book that sells for $10 but that is a different problem.
I know it's terribly old-fashioned to take the word "literal" literally ... but I'm now trying to imagine what a "literal fuckton of banners" might actually be. It's pretty disturbing.
I think the article's point is that, if you compare banners to physical billboards, then you have the same issue but the billboard still works. So even your theoretical mom and pop store is getting value out of the impressions.
But when you pay someone to put up a billboard, there isn't a risk that they'll put it by a road they think gets tons of traffic, but is actually just used by one guy being paid by the building owner to drive past it repeatedly.
...and you also don't get thousands/millions of billboards put up for $500. This part of the comparison should probably be ignored as it is more to do with the intrinsic differences between the physical world and the digital "world" than it is with banner ads vs. billboards.
There is no value to "impressions". Impressions != sales. Sales are the only thing we should be counting as value. Focusing on impressions is how we get click-fraud in the first place.
While sales resulting from ad impressions are important (i.e. direct response ads), wouldn't you also agree ads for establishing branding are important as well?
The vast majority of ads for luxury cars, for example, aren't going to elicit an immediate purchase, but still provide value for the automaker down the line.
Obviously the ads have to eventually lead to sales, but an immediate and trackable sale isn't always an option.
Startups aren't luxury car brands. If you're selling a product or service, I think you establish brand by making happy customers. That first requires a sale.
> You establish brand by making happy customers. That first requires a sale.
In some cases, that may be right, but in general branding begins the first time someone interacts with your product (or even your industry). If I notice your business name on Google SERPS, I am engaging with your brand.
I didn't really use NewRelic for 2 years after I first heard of it, but I did keep seeing them and speaking to them at events, reading blog posts, etc. Eventually, I signed up and paid for the product. What convinced me to do that was the branding work they did before I became a customer.
Even for freemium products, the business builds a brand to encourage people to invest the effort into signing up. Even government services (e.g. in the UK - the BBC, the NHS) do branding work.
Branding doesn't start at the point the customer enters their credit card.
You should be able to get your first few sales without any brand identity, just based on the merits of your product. I expect the majority of people reading this site who actually have a project in the works are probably boot-strapping. There is no way they'll be able to spend on "building brand" before they start making sales. Whatever Facebook or Lexus or NHS or whomever does has no baring on us, we are fundamentally different beasts.
Also, you're not sending me your credit card number, you're sending it to Stripe, or Amazon, or PayPal. Regardless, I think you severely overestimating how cautious people are with their credit card info.
The bulk of the market are conscious of these issues; the "leading tail" of the market, the early adopters much less so. Obviously the "lagging tail" of the market won't buy without cash and without personally knowing the seller and inspecting the goods in person before buying. Branding however is for the rest of the market.
No, but if you're a brand marketer, you need to be able to perform demand planning. If $(ad spend) > (impressions) * (conversion rate) * (price) then you do it. You can't get around counting impressions. But it's not important that impressions are accurate; just that they behave roughly like they have in the past.
What the article is saying is that there's an upper limit on the amount of fraud that can be perpetrated without showing up in other metrics, and at current prices, brand marketers just don't care. Because brand marketers don't care about impressions; they care about P&L at the brand level. If a banner ad campaign drives top line brand revenue, that's all they need it to do.
Click fraud is the opposite of impression based advertising. Click fraud is when the bad guys encourage people to sign up for services or click on links that offer a sales based bounty and are rewarded for their actions.
Impression based brand advertising is a different model to click based lead advertising. The former places all the risk and work on the adveriser, the later pushes it towards the publisher. If you run a website that's hugely popular and don't want to waste your resources on other business's ad campaigns then selling by impression is the only sensible option.
I hadn't considered this article's perspective before, but I think it is very compelling. A lot of commenters (and likely readers) are probably focusing heavily on the perceived impact of the "fraud" of reporting X amount of impressions and/or clicks, when only Y amount of them were "real." They feel like they are paying for X but only getting Y. I think the simple point this article effectively made is that ad companies have continuously reduced prices so that their clients are actually only paying for Y, or at least they are benefiting from a discount which observes the uncertainty.
I think the basic assumption has been that, even though we know the total number of "impressions" is exaggerated, the number is correlated with the "real" number. So long as that assumption is usually true, this is no more a case of fraud than Airlines' reward "miles".
To be fair though, larger clients who blanket the web with ads for a campaign have the advantage of spreading the risk over a large number of websites and times. The people most impacted by impression-based ad runs are those who can only afford the smallest campaigns.
Publishers should also attempt to learn how their readers interact with advertising as a way to better educate potential advertisers.
Most of the advertising on my site is not for products available for online purchase and my readers are architects and designers looking for inspiration for future design projects. So whenever a company inquires about advertising I try to find out their goals - branding, online sales, etc... If it is to drive online sales, I believe it is my responsibility to let them know that those campaigns perform terribly.
At that point, they can decide what to do, but at least they won't and shouldn't be surprised or feel taken advantage of if the campaign doesn't perform in a way I told them it wouldn't.
And if you're clever, you can place your campaigns so that you minimize exposure to fraud, such that you pay for X and get X, while at the same time your banner ads are cheap because the market in general is wary of fraud.
Of course, this lunch isn't totally free in that it costs time and money to avoid fraudulent placements and sites known to have low bot rates have ad space that trades at higher CPMs.
As someone currently working on fighting advertising fraud, the article premise is wrong. Specifically, there is a significant amount of wasted money that currently goes to fraudsters (usually through RTB exchanges). If we are able to eliminate all of them, then that wasted money will be left to split amongst the legitimate players, which is good for everyone. So yes, CPMs will go up, but the value of each impression will go up even more.
He does say that. He just doesn't trust you to get the price right. I.e., he believes that in "fixing" advertising fraud, the CPM will go up more than the value will go up.
"Honestly, at first when that article got posted I thought you were going to talk about something else: like maybe how the entire dream of the internet is a bit of a fraud for advertisers in general."
Dream of the internet (presumably they mean dream of the web) was not initially one of advertisement.
That's a lot of condescending language and he's basically trying to make the point that he doesn't care about banner fraud because most of the cost is shouldered by people who produce content and not the companies who are paying for advertising.
I am not in the online advertising business (one side or another), much less in the banner business. But that was a horrible, patronizing text to read. I couldn't pass the first half, which is sad, because it look like an interesting point.
The author somehow felt that the ones talking about the problem with banners were being arrogant assuming that the buying industry didn't know that for ages, so his answer to this was: 'I will be even more arrogant, more patronizing than they ever could be!!'.
I detest advertising. It's literally designed to undermine reason and supplant critical evaluation of ones needs and priorities.
As for web advertising, maybe I was the last person on the planet to figure this out but sometime late last year the web just became unusable on most popular news sites. Popover ads that come up before you can read the content and multiple large ads inline with the content and that "no mans land" on the right.
I seriously hope there is a way to make MS Edge default to the "reading view".
Advertising & pop-ups on popular news websites are great! Because they remind me that news sites have zero (or near zero) value, and I should be getting back to work instead of wasting time reading them. If they really had value for me, I'd be signing up for a paid subscription & then they wouldn't have to run ads.
Some advertising is good. I am so glad that Harvest advertises. I know I saw it repeatedly advertised on Daring Fireball, so I was aware of it by the time I needed something like it, and I'm super happy with it.
No, people want to buy things, and there are a lot of things competing for their attention. Advertising, at its most basic, is just how we inform potential customers that we even exist.
Yes, some (a lot? Most?) advertisers get way out of hand. But advertising is not itself evil. It's a tool that may or may not be misused.
> It's ... designed to ... supplant critical evaluation of ones needs....
> No, people want to buy things
That's rather the point. The desire to buy things is driven not by critical evaluation of need, but by psychological trickery that falsely associates buying stuff with a whole range of actual needs.
If ads promoted critical evaluation of a person's needs in relation to available products, that would be a different thing entirely. It is quaint, but I can't help think naive to suggest that the core of advertising is informing customers, and the psychological trickery is 'misuse'.
So it's been psychological trickery that has led people to think, "gee, I'd really like a nice novel to read right now" Or, "boy, I could really go for a fun video game to play"?
How else are consumers going to find out about products? There's no world product registry where products get evaluated on their merits and ranked objectively. There's no such thing as "if you build it, they will come". Even putting a big sign on the front of your building "Joe's Diner" is a form of advertising. Otherwise, people will walk by without any notion that there is food there they might want.
There's no such thing as "If you build it, they will come."
I'm not sure why you think that counters my point.
As I said, if most advertising were about the critical evaluation of needs that would be different.
Instead, you're more likely to get boobs advertising your video game, or butts advertising your deodorant. Because sex sells, the key word being 'sells', not 'informs'.
It is literally not possible to sell something without advertising it in some way. You have to let potential customers know that something is for sale. Putting a "for sale" sign in your used car by the side of the road is a form of advertising. Putting fruit in a basket in front of a store is a form of advertising. Making a sale requires some level of communication from seller to consumer that there is a product or service for sale. We call that communication "advertising".
That's very different from a Coca Cola ad, because it doesn't actually specify who is selling what and where. That's advertising a brand, which is what I'm objecting to.
This article talks a lot about how low click rates don't matter -- but that wasn't the issue brought up by the WSJ. The key take away is that, even if you ignore clicks, impressions are twice as expensive as your reporting suggests.
> An astounding 54% of online display ads shown in "thousands" of campaigns measured by comScore Inc. between May of 2012 and February of this year weren't seen by anyone, according to a study completed last month.
> Don't confuse "weren't seen" with "ignored." These ads simply weren't seen, the result of technical glitches, user habits and fraud.
Ad fraud is not just a waste of energy (like TV ads playing to no viewers). It supports bad stuff on the Internet at the expense of good stuff.
* Ad fraud is now the number one malware payload.
* Low-quality impressions show up on copyright infringement, comment spam, and other problem pages.
* When advertisers buy programmatically on markets that include both legit and fraudulent inventory, publishers pay for fraud in the form of lower CPMs.
The fact that no user really enjoys banner advertising occupying their screen real estate, and that most of this advertising can be prevented from displaying with a simply installed browser plugin, makes the whole online advertising economy seem rather tenuous. And yet, some of the largest companies on the planet derive most of their value from it.
I don't think this is necessarily true. Attractive, non-animated banner ads are my "favorite" type of online advertising to encounter. Standard AdSense text ads are ugly and add so much clutter to the page because of the added text.
If ads were usually like this, instead of resource-heavy Flash ads or ugly AdSense ads, I probably wouldn't use any ad blocking software. Static image banner ads are probably the only online advertising I have ever clicked or taken notice of.
Banners these days are good for "Brand awareness" and not good for generating traffic for a website or to deliver actual actions on a site (purchase, sign-up, etc). Having said that, it is also true that banner fatigue is a real thing, and that lots of people already "tune out" of the traditional banner areas on sites.
Disclosure: I also work for a company that specializes in fighting advertising fraud.
I think this is either willful ignorance or a complete misunderstanding of the fraud ecosystem. It's not about click through rates by a long shot.
But since the OP's main argument seems to be how the bigger ecosystem of online advertising already accounts for fraud, let's take that further. With this attitude, he's effectively saying that:
- They're okay with indirectly sponsoring the spread of viruses and trojans (rationale being: it's cheap!)
- They're okay with paying some dudes with some smart scripts (eg. the fraud mechanisms) the same amount of money as hard-working content creators and publishers
- And they don't care enough about the budget either. Accountability is apparently a fairy tale in this context?
The industry is under heavy fire regarding this subject as it is, and I'm not sure whether this attitude is going to further the conversation.
There's a subtle difference measuring who saw a road billboard and a website banner. On the former you must spend your own resources, on the later it's paid from your visitors' wallet (internet connection + power + cpu time)
I can't help but wonder why all advertisers don't switch to payment by click-through-and-buy, rather than just by click or impression. You can't fake that.
Ad networks won't go for it outside of very specific and narrow use cases (high-end ecommerce) because they don't have control over the quality of the landing page, a crucial element in whether the user converts or not.
In case of facebook where their ad network controls the whole process (SSP + Exchange + DSP) they would only lose, besides the infrastructure cost, the opportunity to make money by serving another ad.
But for the majority of ad serving world it's not that simple. If you're for example a DSP and buy ad impressions from exchanges via real time bidding, you have to pay for the impression even if you can't charge the advertisers for it. So you lose money twice. You don't serve another ad which would make you money and you have to pay for an ad that won't be paid for by the advertiser.
Meh, crocodile tears. If they shouldn't have to pay in the rare case that my site is down, then I shouldn't have to pay in the more-common-than-not case that there is no real person behind the click. And note that I have an incentive to keep my site up, whereas they apparently have no incentive to keep click-fraud down, evidenced by the fact that it's more than 50% of the case.
It doesn't matter how you decide to buy/pay for your impressions because it gets normalized by their ad system to an effective eCPM (revenue per 1000 impressions). Let's say you only want to pay via a "click-through-and-buy", after a certain number of impressions and clicks they will have a benchmark for how much in commissions were paid. They take that number, divide by impressions/clicks, and then have an eCPM to rank you by. If the eCPM achieved by allocating impressions to your campaign is less than via traditional CPM or CPC based buys then you will get lower allocation and thus the system optimizes you out of inventory.
That seems like a harder thing for the advertisers to measure than impressions or click-throughs and incentivizes the sponsor of the ad to lie about units sold.
If you're a mom and pop store looking to spend $500 on advertisements they should be made aware there's a good chance they will be defrauded unless they know what they are doing.