Mr Hoffman is a long-term ad man with credentials in the marketing and advertising business that most in the industry would dream of.
He made the point that others in the industry (myself and my colleagues included) have been highlighting for a couple of years now. That the whole online advertising ad market is a business that simply sucks in our advertising and marketing dollars and wastes the bulk of it.
Programmatic Advertising Syphons Money
For example, in programmatic advertising somewhere between 40% and 70% of advertising spend goes into the pockets of the middlemen and the Martech stack rather than the front line ad itself.
When, in 2016, the Guardian ran an experiment to see where their online ad cost went they found ‘a host of adtech businesses operating within the supply chain are extracting up to 70% of advertisers’ money without being able to quantify the value they provide to the brand’. Only 30% of the total ad spend went to the publisher.
And even when an ad does appear ‘out there’ what’s to say that it’s being seen by human beings, let alone being clicked on by them?
Non-Human Clicks Direct A Lot Of Traffic
Industry statistics estimate that between 5% and a massive 50% of online traffic is non-human ad-fraud.
Our independent findings gathered over several years show that at up to 50% of all clicks on links were non human – even if you paid for them. There is a very large difference between ‘cost per click’ and ‘cost per engaged human visitor’!
Visitor Metrics Aren’t Justifiable Either
What about the metrics that we love to use?
For too long the online advertising industry has got away with taking our money and justifying the spend on irrelevant metrics.
Clicks, impressions, views, likes, and so on are, at their core, worthless if you can’t measure spend vs tangible, business-driven results within a meaningful timeframe. So, what’s the answer?
It seems to me that there are three simple but obvious things that everyone who spends money on online promotion should do:
- Know your human clicks from the non-human ones (bots don’t buy!). Understand the impact of fake clicks at the atomic level. Which ads drive more bots than others? What content drives more fake clicks? What geography seems to attract more bots? And so on. Only when you understand the impact of fake clicks on your own budget can you work through strategies to start to avoid them and waste less budget.
- Measure the right things. Was that visitor a real human being? Did I actually sell a product? Did I capture a willing enquiry? Did I really make that booking? Learn what combination of content, channel, geography, etc actually drives the desired business result. Compare ROI by ad, message, link, channel. Use independent metrics, not just the ones from the ad channels themselves. Don’t be duped into thinking that lots of impressions or app downloads is a measure of success – especially if most of them were bot clicks or humans simply rushing past in their hurry to get to the next thing.
- Demand transparency in your relationships. With the middlemen and AdTech/MarTech stack taking so much of the budget before your message even gets to the front line and then a dubious set of success metrics at best, you should demand transparency in where your budget is actually going. If the agencies are getting rich on your dollar, at least know they are making you rich as well. Otherwise you may be better off bringing most of it in house and only working with trusted transparent partners for those bits you can’t do internally.
This all reminds me of the wonderful example of Kevin Fritch when he was at Uber, remarking on the results from their performance marketing and online advertising. “We turned off $100 million of the annual spend out of $150 million and basically saw no change . . .”.
I will close with another quote, this time from Professor Roberto Cavazos (Executive in Residence at the University of Baltimore’s Merrick School of Business and a veteran economic analyst with extensive experience in financial, data and health care fraud): “I have studied the economic costs of fraud in many sectors for decades, and I was left stunned by the scale of fraud in online advertising.”
So, are we being conned investing in online advertising? Over to you.