[pmcgrathm]

As someone who has been responsible for a bit north of $1B in profitable, attributable digital ad spend in my career, I can say with conviction that the problem comes down to analytics and misalignment of incentives, NOT the performance of digital media channels.

1)Agencies charge on a % of total media spend, and are thus incentivized to spend more.

2)Advertisers net benefit from expected lifetime value and revenue generation, but are often reticent to share this type of information to an agency.

Agencies are commonly unable to get access to business-level health metrics such as churn, RPU, LTV, and thus optimize to top of the funnel metrics that often do not correlate with attributable lift but do correlate with showing the value of increased levels of spend. Such metrics include click-through rate, viewability, brand awareness and safety, fraud mitigation, etc.

This, combined with the improved ease of use for major digital platforms (I know quite a few startup CEOs who manage all of their PPC/Facebook ad spend), is why the agency model has started to fail. And that is a good thing.

The less intermediaries that touch an advertising campaign, the less likely it is that we as consumers will see an irrelevant ad.

[baybal2]

It is, better to say, a sunset for the industry as such.

Digital ads had the most wow effect at the time of google's text ads and Internet yet not being a general demographics' thing.

Back then, they were able to show numbers, but not now.

First generation internet users were mostly highly technically literate, high income professionals. Now, the user ratio has reversed.

You can argue that putting efforts to find a needle in a haystack was still paying off when the majority of needles were of incomparably higher marginal value than they are now: consumer goods clicks, say, are lower value than commercial equipment sales clicks, yet you still have to put an equivalent or greater effort to datamine somebody to make them buy an accursed face lotion even if the number of face lotion buyers is 1000 times bigger.

This is a tragedy of the Internet ad industry. There is a finite amount of eyeballs, and the amount of companies with a substantial money wanting to sell you a face lotion will always eclipse the amount of companies who market unique, relevant, specialty products one may actually be actively looking to buy.

[pmcgrathm]

>This is a tragedy of the Internet ad industry. There is a finite amount of eyeballs, and the amount of companies with a substantial money wanting to sell you a face lotion will always eclipse the amount of companies who market unique, relevant, specialty products one may actually be actively looking to buy.

It has little to do with having a large amount of money to spend on ads and more the level of severity of the problem your product solves for the 'eyeball.'

Humans have some needs that are greater than others, and ad dollars spent at alleviating pain or providing for those needs will always get at the most eyeballs. Entire industries - born online - have developed around capitalizing on solving for these needs.

I need money - Predatory loans and credit card offers. I need to be skinnier - Nutraceuticals (Dr. Oz), weight loss, vitamin crazes. I need to be beautiful - Skin care, facial lotions. I need to be less lonely - Online dating, pornography.

The list goes on. The point is - there are more people looking to be skinny, beautiful, rich, and married with children than there are people looking for 'commercial equipment sales.'For now, and until targeting gets smarter and consumers opt to share more data about themselves, those products will win the majority of ad clicks.

We'll get there. (eye roll) Maybe decentralization is the way? :). I'd love to give the Google/FB duopoly a kick in their 'walled garden.'

[soared]

I don't understand your critique:

>unique, relevant, specialty products one may actually be actively looking to buy

This is because the number of people who buy normal lotion is 1000x the number of people who buy unique specialty lotion. Why would the advertising be different than the market?

>First generation internet users were mostly highly technically literate, high income professionals. Now, the user ratio has reversed.

The internet reached the masses - how is that a negative for advertisers? They have more people to advertise to.

>yet you still have to put an equivalent or greater effort to datamine

This isn't true. For lotion you buy lotion related keywords, for commercial equipment you need in-depth research about those products, use cases, industry terms, and the queries people use.

[baybal2]

>This is because the number of people who buy normal lotion is 1000x the number of people who buy unique specialty lotion. Why would the advertising be different than the market?

No, I can't imagine anybody randomly buying a random face lotion online, and I say that as somebody who did a stint in adtech for a few years with access to "crown jewels" of a major advertising brokerage conglomerate. People barely click on FMGC ads even if being force fed, I would've shown you the digits if not for NDA. Their purpose is impressions, even if they are not explicitly billed on PPM basis.

The lion share of ad inventory of any tier 1 ad vendor are for "stuff people buy in Walmarts," and yes the total revenue from FMCG ads is mind boggling and defies any attempt at rational understanding.

Even if the sole point of an ad is to keep the product on top of somebody's mind, it will be of very very little payoff to an advertiser. Though, one can reason that a gigantic big fat FMCG co. bathing in cash can still easily afford doing so even if is patently stupid. This is because even if their bang for buck is approaching zero, it is still better than none for them.

>This isn't true. For lotion you buy lotion related keywords, for commercial equipment you need in-depth research about those products, use cases, industry terms, and the queries people use.

I counter your argument. In both cases, the adtech efforts needed to sustain a barely functioning campaign eclipse all other hurdles. Extreme targeting is the key - even if it sucks, it sucks less than investment in almost anything else including £1k per hour big name marketing consultants.

How it looks on technical side: huge effort at industrial scale purchasing of "cubes" - huge databases of cookies with their statistical and fuzzy logic data from thousands of companies, including the black hat scene. Other than cookies, analogous data come from email list vendors, IMEI/phone number db vendors, vendors of stolen contact lists, search histories, GPS data and etc. All of this is barely enough to for a sustained campaign for F500 FMCG.

[rhizome]

putting efforts to find a needle in a haystack was still paying off when the majority of needles were of incomparably higher marginal value than they are now

Was this back when Google included the referrer URL with each needle?

[baybal2]

Partially due to that too

[libertine]

As a former fellow digital media manager who worked for a WPP agency - you're right.

I would just add that, agencies have clients that are nice to have in their portfolio but they give more work than they invest.

So you have a business model built on % of investment - something that worked very well for massive TV Campaigns budgets (plus the rappel you'd get from TV Networks) - applied to time consuming campaigns that required a lot of FTAs.

I just don't agree much on the "ease of use" - the digital media landscape is quite complex.

A proper digital media campaign (part of a media campaign) has media managers, digital media managers, PPC Managers (let's say they manage FB and Google advertising for the sake of simplicity), AdOps, and Programmatic Teams - you can add on top of this SEO teams, Social Media teams, etc.

Yet advertisers don't want to move one inch on this business model - let me tell you i've seen them criticizing how many hours a proper Search campaign takes, with no knowledge of the matter. Some, like you've said, are bringing in people for digital media management, campaign management ... hell some are building their own PBUs!

I don't think it will work. It's not something new: it was done in the past with TV, and they come to realize the cost of the know how being stuck on their end it's too expensive.

Oh and P&G, and many other advertisers are to blame here as well - the marketing/brand managers don't want cuts on their budgets, so they make reckless decisions, wasting money just to claim they invested it and will require more budget in the next fiscal year.

Media owners are also suspects, the greed made them dependent on Google and Facebook... now their brands are diluted.

Unfortunately agencies failed with the golden egg goose - attribution modeling... attempts were made but it's not something trivial.

[gargarplex]

I'd like to network with you. Would you send me an email? My contact info is in my HN profile, https://news.ycombinator.com/user?id=gargarplex

[libertine]

Sure, just sent you an email!

[tonyedgecombe]

the less likely it is that we as consumers will see an irrelevant ad

As a consumer I don't want to see any ads, in particular I don't want to see well targeted ads because they are the ones most likely to change my behavior.

[golergka]

Why would you see such change in behaviour as something bad? Personally, I'm thankful for targeted ads from companies that I love about new products that I don't follow myself. What's your experience with them that is so negative?

[juliushuijnk]

If you only had perfectly targeted advertisements, you would continuously be pushed to spend more money and attention to products and services. You might say 'I am in control', but at the minimum it wears you down to stay disciplined. Since time and mental clarity are rather high on my list of important things to protect, I view all push-advertisement is a problem. But I prefer badly targeted ones.

It's different when you want to research something, like buying a mobile phone, when you go to their channels and pull in reviews, advertisements, etc.

[golergka]

You're all pushed towards something all the time by everyone around you. Trying to be in complete control feels weird, to be honest — are you sure it's worth it? Yes, I know that I am sometimes convinced to buy something I wouldn't think of buying otherwise, but the outcome is usually not half bad and I don't understand why I should guard myself from it.

[juliushuijnk]

"are you sure it's worth it" It is for me.

I think advertisement should be taught at school, so everybody can recognize when they are being pushed/nudged into feeling something. Because I think it does a whole lot of damage to society (obesity, stress, debt, etc).

I know it sounds depressing like that, but have a nice day :)

[tonyedgecombe]

Because the purpose of my life is not to fill some corporation's pockets.

[Feniks]

Yep, I'm the one who decides when and what to buy. No manipulation needed.

[snissn]

Do you ever watch movie trailers before watching a movie? Do you buy things and want to research your purchases?

[juliushuijnk]

Would you like Netflix to show you trailers before you could watch a movie?

Come to think of it, they do. They show you trailers at the top of the page. I'd rather they just had a 'show me trailers' button, I would probably click that every now and then.