[AnthonyMouse]

It's possible for both 1 and 2 to be right.

Suppose that if you're peddling cheap junk and snake oil, advertising is effective, because nobody will have heard of your product by word of mouth (no one would recommend it and previous victims are ashamed to admit being suckered), but if you spam enough people you'll reach enough suckers to exceed the advertising expense.

But if you're peddling a popular and quality product, everyone has already heard of it and additional advertising has low marginal utility because you were going to get most of the sales anyway.

This furthermore doesn't get you out of the prisoner's dilemma, because even if buying advertising is only break-even rather than profitable, your competitor is doing it so you have to do it too or they gain a volume advantage over you and use that to kill you on unit pricing. But then you all do it and all that happens is that everyone pays money to cancel each other out.

[cletus]

I appreciate the attempt at reconciling these this contradiction but I don't think it holds up.

For one, if you accept that advertising can sell "cheap junk" or "snake oil" then you've accepted that advertising can sell something. That could just as easily be a useful product no one has heard of so the issue isn't the advertising, it's what's being sold and advertising is effective (which invalidates (2)).

For another, you use the example of a product "everyone has already heard of". You could point to something like Coca-Cola here. But this argument has two problems:

1. There are variations companies make to keep their product "fresh". Think Vanilla Coke, Cherry Coke, Coke Zero (or whatever the current form is) and so on. By virtue of them being new, potential customers won't have heard of them and advertising solves that problem; and

2. A lot of advertising isn't about direct customer conversion but "brand lift". Now companies have dreamed of the ability to accurately measure the brand lift of advertising spend but it hasn't materialized yet.

This is also why common comments here like "I don't ever click on an ad" don't really mean anything. Now you can argue that the ability to make you desire something you don't need is "evil", which is a reasonable argument to have. I think there are cases where this is true, such as advertising to children, and these should be restricted as some countries have done.

[AnthonyMouse]

> For one, if you accept that advertising can sell "cheap junk" or "snake oil" then you've accepted that advertising can sell something. That could just as easily be a useful product no one has heard of so the issue isn't the advertising, it's what's being sold and advertising is effective (which invalidates (2)).

It can sell something unknown, because then the advertising makes it sound good, they don't know anything else about it, and they wouldn't have heard of it otherwise.

Which is the opposite of what's happening in case 2 when the product being advertised is well known. It's not causing you to hear about it for the first time and if the product is low quality then the advertising is less able to overcome your existing negative impression of it than for something you've never heard of.

> There are variations companies make to keep their product "fresh". Think Vanilla Coke, Cherry Coke, Coke Zero (or whatever the current form is) and so on. By virtue of them being new, potential customers won't have heard of them and advertising solves that problem

This doesn't really explain all the ads for Coke Classic, or for that matter why so much advertising even for new products emphasizes characteristics that are either meaningless or unrelated to the product. There isn't really any information content in telling the customer that a new cola is "refreshing" or showing random people dancing.

> A lot of advertising isn't about direct customer conversion but "brand lift". Now companies have dreamed of the ability to accurately measure the brand lift of advertising spend but it hasn't materialized yet.

"Brand lift" is the prisoner's dilemma thing. When everybody does it they just cancel each other out.

[coliveira]

The reality of advertisement for established products is that they need to do it to maintain good will from the media. For example, in the aftermath of the Deepwater Horizon oil spill in 2010, BP spent billions of dollars in advertisement in all kinds of media. It became very difficult for the media to be too harsh on BP, since in the midsts of the Great Recession, they were one or the largest advertisers. Similarly it is very difficult for the media to say bad things about Coke or the Big automakers when so much of their revenue comes from these big accounts.

Another example (this one not in advertisement) is the situation of Bloomberg. They have one of the largest financial journalism organizations and, AT THE SAME TIME, they sell overvalued software to the largest financial companies in the world. One can only guess what can happen to a financial company that stops paying the fees to Bloomberg. Even though there is no real threat (and most certainly this was never expressed by the company), every financial outlet wants to be on the good side of Bloomberg reporting. The conclusion is that having a journalist institution receiving money from companies that they are covering is a kind of moral hazard that very few people understand, unless you are part of the business.

[pembrook]

Except, in the real world there's more than just A) unknown snake oil and B) high quality products with perfect awareness.

Your model only includes products on the narrows of each extreme. In the middle is the wide spectrum of most products...the ones that don't meet either description.

Even if you make the exact same product as a competitor, there is no prisoner's dilemma if you're targeting a different niche market to sell that product to. Perfect competition does not exist in the real world. The only thing that comes close might be a commodity like oil or water. But even water can be targeted to different segments of the market.

[AnthonyMouse]

> Except, in the real world there's more than just A) unknown snake oil and B) high quality products with perfect awareness.

There doesn't have to not exist more than A and B. If A and B both exist then 1 and 2 are each true and the further existence of C and 3 don't change that.

Moreover, even if some additional classes exist, the two examples are still central and problematic, not least because they're more likely to represent a higher percentage of ad spending.

The first because advertising is the only way to sell crummy products, since the only way to get anyone to recommend it is to pay them to, so their incentives to use it are higher.

And the second because the existence of the prisoner's dilemma is what drives up the ad spend on both sides. If you're targeting a niche that no one else is then you buy a small amount of advertising, reach those customers, make your sales and are done. If you're locked in a prisoner's dilemma with a direct competitor, you spend a little so they spend a little so you spend a little more until you're all spending a huge amount. And the fact that you're selling Fords and they're selling Chevys and they're not completely identical products doesn't really matter when they're both still cars.

[ethbro]

Relevant: https://en.m.wikipedia.org/wiki/The_Market_for_Lemons

The presence of pure mercenary advertising increases the global noise floor, which increases the information asymmetry by decreasing the visibility of quality signals.

The irony is that Google sees itself as a company that increases access to information.

You know what that would look like in the ad space? Product testing, reviews, and endorsements. Something like "Verified by Google" (aka Wirecutter).

Instead, Google absolves itself of responsibility via algorithms, steered by marketing folks in charge of their primary profit center.

And we're surprised by the corporate decisions they make?

[6510]

What nice way of putting it. Google has indeed suppressed quality signals to the point you don't have to bother creating one. Making peoples homepage invisible was hard, some had to be hoarded into the walled gardens. Wait a few years then shut them down with very little effort.

I was naively surprised one time when I see quality writers shout down rating systems. Apparently making a popular quality product doesn't make scrutiny desirable.

[TeMPOraL]

Rating systems are universally garbage. They're thoroughly gamed and create their own shadow economy of paid reviews, spam, and bribes to take down negative reviews.

[6510]

The baby was tossed with the bath water. There are countless possibilities to create a rating system (or a system that describes the qualities of an article) I have only seen a tiny number.

The shortest description of the thought is: The meta data is more important than the data.

Back when google indexed peoples websites the organic ranking wasn't bad at all. People wrote niche articles about original topics, if you searched for one you would find those blog postings. I was often amazed by how specific the content addressed what I was looking for.

How well it works depends on the type of rating. It should probably start with things so obvious they are hard to game. Even self rating could work, something like: professionally affiliated with the topic 0-5 in the range 2-5 you get to provide an url.

I liked parts of PICS3.

I could see a system where we run our own rating service and rate things with a mix of original and unoriginal qualities. You use the bookmark list it generates or enjoy the persons work then subscribe to their ratings and add weight to it. We make collections of such subscriptions and use them the same way. When visiting a page the url (or other identifier) is passed around and a rating is returned. Similarly, people you've subscribed to crawl around the web and we arrive at a set of pages you should probably visit. If there is crap in the list a single click reduces weight on everything that endorses it.

[viraptor]

Another way both can be true is that many/most companies just post an ad because they need to to get started, but don't actually optimise how it works. You can easily confirm this by looking at some discussion boards about google ads, where people often ask how to fix a very bad / accidental ad placement decisions which burned through their whole budget.

On the other hand, there are companies with teams dedicated to make their ads as effective as possible and track/raise the ROI.

There's likely lots of companies even in between those extremes which don't even break even on the ads they pay for. (or don't know if they do or not) They may pull the ads and realise nothing changed.

[Polylactic_acid]

This doesn't seem right.

>quality product, everyone has already heard of

They reached this status due to advertising, Its likely they could drop advertising for a while and coast along fine but eventually that brand recognition will start to drop.

There is also the fact that a lot of products are purchased not based on fixed needs but flexible wants. Maybe I haven't purchased a soft drink in a while and I don't think about it, an advert could make me think about it and make me want it again.

[friedman23]

It's amazing the lengths people go to reduce things into two dimensions.

popular and quality product vs cheap junk and snake oil (and presumable unpopular)

An honest person would note all possible combinations in their simplified model of businesses seeking advertising

1. popular products with bad quality

2. popular products with good quality

3. unpopular (or unknown) products with good quality

4. unpopular products with bad quality

And of course the real world is more complex than this.

your analysis is bad and wrong.

[wdevanny]

The parent comment was presenting one possible reason to explain the grandparent's observation. They were not trying to perfectly describe the real world, but only to point out that two seemingly conflicting points of view can be reconciled. I think the parent probably wrote their comment starting with the same thought as you: that the real world is more complex than a simply stated opinion.

Saying "your analysis is bad and wrong." comes off as dismissive and I think you should read the HN Guidelines.