The goal of my discussion was to talk to someone who had "been there, done that" to get an idea of the time investment and the expected returns.

If they want to out themselves here they can. Independently they both have pretty robust tracking software to understand views, view time, clicks from views Etc[1]. Both have systems to measure $/views, and both used extensive "channelizing" to get focused on where the views came from and how their viewer found them. They both observed that if they had been "TV shows", as their ratings and viewer audience expanded their network would get more ad revenue per show, but for them they are consistently getting LESS and less revenue. It puts them on a treadmill of having to produce more videos to get more views to keep their revenue up but that also increases their costs.

It resonated pretty strongly with my experience with AdSense and web pages. We can speculate on why that trend is where it is, but it seems pretty clear that one (or maybe both) things are true; Advertisers don't see as much "value" in advertising on Youtube videos, and the revenue growth curve for at least these two content producers does not seem to match either the slope or the magnitude of the change in revenue that Google reports in its earnings.

[1] I got a good idea of how difficult this path could be when you are your own producer, accountant, and data science company.

Content creators are complaining about YouTube being strict but YouTube is strongly incentivized here to cut the supply of content. They want to raise advertising rates and charge advertisers more money! That means raising the bar of production value, etc, because YouTube wants to keep the same kind of viewership numbers. YouTube is now mainstream television.

The channels that will survive here are going to play ball and raise the quality of their content and production values. They're going to be family safe. They're going to provide lots of content and it's going to be shot multi-camera by a staff of people. Smaller creators days on the platform are numbered.

Thing is, the channels that do this best can do this for themselves. They don't need YouTube if they build a dedicated-enough audience.

I've been looking at how to make this process easier for people, using things like Cloudflare Stream, and think there may be some business opportunity here.

This doesn't make sense to me. The advertising rates are a connection between the advertiser and the consumer. If the content scales to infinity, there's still the same number of consumers that advertising dollars compete for regardless of available content.

> The channels that will survive here are going to play ball and raise the quality of their content and production values. They're going to be family safe. They're going to provide lots of content and it's going to be shot multi-camera by a staff of people. Smaller creators days on the platform are numbered.

> Thing is, the channels that do this best can do this for themselves. They don't need YouTube if they build a dedicated-enough audience.

Then that leaves room for the smaller creators.

The advertiser has a set budget and is looking at a supply of content. If there's a fixed supply of avenues to reach their customers, then they have to bid against lots of other advertisers to reach those customers. The rate to advertise goes up. If the supply of avenues to reach customers is near infinite, then the cost to reach those customers is almost nothing because there's no market driving up the cost of advertising. It doesn't make sense to spend more money to reach those customers. Reaching customers is cheap and easy. This is Supply & Demand 101.

In terrestrial advertising, there's only a small number of advertising slots that are valuable because that content is gated by place & time. This is not true online (caveat, read below).

(caveat explanation) Okay, I lied: It actually is really valuable. Joe Rogan's advertising slots are _extremely valuable_ and he uses them to to advertise businesses he has a partial ownership stake in (Onnit), which is brilliant. This is the same shit the Zuffa brothers did with the UFC & Xyience and it put millions upon millions of dollars in their pockets. But that's not advertisers paying for those slots, that's pocket A paying pocket B...and as a regular advertiser you can't buy that slot!

PewDiePie is probably making a small fortune off G Fuel, those chairs, and his phone games. These are the smart content creators today. Everyone relying on YouTube or Twitch partner programs for monetization is just on the dole or will be.

If you're a content creator with a reasonable following and not on a 2-3 year plan for productizing your brand, you're on a path to insolvency.

> Then that leaves room for the smaller creators.

Not on YouTube. And video hosting with a global CDN costs money and requires some know-how.

In other words, creator and content growth outstripped ad spend growth.

And by several orders of magnitude. I'm surprised at how many highly intelligent people out there have failed to grasp these basics.

It's also sort of a winner-take-all market. Established channels for each customer segment will capture all of the revenue. Everyone else fights for scraps.

If you look at art/culture trends through modern history, teens aspire to the accomplishments of the generation before them. The clearest sign of YouTube being "done" was all of the surveys of teenagers aspiring to be Youtubers.

If all 100 of the streamers creating content about diy synthesizers have an audience that also watches this larger channel about vintage amplifiers, I might be better consolidating my spend there...or if I'm a small advertiser with a tiny budget, I might be better off doing just the opposite and spending tiny amounts at the 100 small channels.

The point is that as an advertiser I'm almost fully in control over my own destiny, which is simply not true with television and radio networks.

Advertisers and Content Creators aren't really against each other...they're kind of following separate destinies, but if a Content Creator is entirely reliant on Advertisers for their funding model and the market is heavily skewed in favor of Advertisers like online content and newspapers are now, then Content Creators are going to have a really bad time. And there's a bloodbath just over the horizon.

If you look at Netflix, it's the opposite problem. Content Creators are reaping huge rewards and Advertisers have no power, but that's also financially untenable.

I don't see how Netflix model is financially untenable.

They won't keep paying that bill forever.

Think about that for a second. All of those Netflix subscriptions and it's still a flaming fourteen billion dollar crater.

How are they going to close the gap? Where are the new subscribers? How much will the rate go up?

The answer is neither of those. It's far more likely that the money faucet going to content will change first.

Instagram is where high quality content is migrated by virtue of the greater speciation of branding opportunities.

Google keeps things a bit messy so they can drive ad rates higher.

Sure, we have ad block, but digital advertising that performs performs amazingly. When you hit your segment, the money rolls in.

What you're describing may have been the case, in a number of companies, five years ago, but it's just not meaningful now-days. Companies spend marketing dollars because marketing dollars work.

Any other interpretation is ideology-driven wishful thinking. You might not like marketing, but it's silly for the conclusion to be "thus, the entire field is made of people who don't know what they are doing".

Anecdotally, I happen to work for a 300 people saas company who just started drastically cutting expenses with the goal of reducing burn rate and delaying the need for another round of financing in this terrible environment: ads were one of the first few things to be dramatically cut (the second one was some super inefficient AWS spending).

The ads budget shrank from 6 figures a year to near 0 overnight, and it’s unlikely to return to its former level any time soon. Also, half of the marketing team was laid off. Having 30 people in marketing for such a small company was definitely way too much (just like engineering, sales, ...), and it anecdotally proves GP’s argument. All consequences of the fact that money was free.

Do you know what the CFO is telling their lieutenants about now? Cut all superfluous spending and reduce monthly expenses. That means your sales people are going to be getting calls from their clients asking for a fee reduction or a contract revision. Very few SaaS companies are critical or defensible.

This is my last week and I’ll be starting next week in a much more solid company with a much better compensation too, wish me luck :-)

And in turn, I think you're overestimating the impact of profit-limited capital dependant companies on the advertising landscape.

I was managing a 6 figure ad budget all by myself at an established but small non-tech company and had full E2E tracking flows for pretty much every £. "Burn" isn't a thing in almost all companies out there. You want to spend a dollar, you need to tell your boss exactly how it'll make you a buck fifty.

I wouldn't extrapolate that experience to large companies that have weathered dozens of downturns. I'm not saying that large companies all have a clue what they are doing vis-a-vis marketing, but there are a few giants who understand their only asset is their brand. Think companies like P&G or Nestle. Largely, the biggests differentiating factor between toothpastes or frozen pizzas is brand awareness and distribution deals. These are the companies that know exactly how much more money they will make if they change the color red to yellow on a box for a product sold in Georgia.

All we have to go on for that is your opinion about how the company was being run, which isn't backed by any sort of data.

A couple executives just plainly admitted how crazy inefficient our spending was, so I just can’t imagine how they could possibly go back to blow nearly a million a year in ads any time soon, or ever, when 90% of our revenues come from traditional enterprise deals that don’t have anything to do with ads, for the most part. They are all just worried that they will have to accept a down round in a year, and are trying to mitigate that.

By the way, this is true for engineering as well, where I work: now that we figured out how to remain productive while cutting 40% of our AWS costs (spot instances, killing idle instances more often, ...), will we ever go back to be inefficient and leaving idle AWS clusters up at night just because “money is not an issue”? Very unlikely. And the marketing department wasn’t being run any more efficiently than engineering, budgets were just fat because money was free for nearly a decade.

Maybe for the Fortune 500 / tech startup crowd, but I work for small / medium businesses and there is still a ton of ad dollars being spent with no attribution / tracking.

I will routinely setup clients with tracking tools, which then discourages them as they finally see what their digital ads actually generate in terms of revenue. Many stop their digital campaigns and increase their traditional tv/radio/print budgets or, fall back to running digital campaigns with no tracking.

AKA "Brand Awareness".

Many of my small business owner clients hear anecdotes where a business was able to use targeting to create a veritable "money machine". The problem is these scnerios are fleetingly rare, complete bullshit or only apply to a specific niche.

The anecdote often glazes over the thousands of wasted dollars spent trying to perfect the model and a hundred other details that factored into the success.

The good thing for most is that digital advertising is no less effective than traditional advertising. Even if there's little to no targeting, or no tracking in place it's not any worse than tv/radio/print.

I can count on one hand the number of clients in my 20 years of web work that have created a model where they dump money in the top, and are able to extract more out the bottom. In all cases it didn't last more than a couple years at most.

For any small business considering hiring an ad agency that claims to have mastered this model ask yourself this: Why aren't they doing it themselves?

I think now the move is to go after territories that the major brands/agencies are afraid of. Tik Tok? I don't know, but I would trust doing DIY and examining the real numbers, I used to sell agency services, I'd say anything to win business. And 30% of the time we actually overdelivered on my absurd promises.

Given that you were probably smaller and not commodity priced to move I guess that sort of "honesty" helped move it better if people could closer to try before they buy.

Not for things like cars and toothpaste but for things like online services/games, fashion, homeware, etc

And a third, and possibly the biggest, is that it may be perfectly rational to pull ads now. There are whole classes of things that people can't really consume right now. All travel. All entertainment. For many, anything they have to leave the house to get, including big-ticket items like cars. And consumer psychology in a recession drives people to minimize discretionary purchasing, stick with familiar brands, and be more skeptical of anything new or unfamiliar.

It's also important to realize that advertising is an arms race. A lot of advertising spending is only required because other people are also spending. E.g., everybody in the world already knows what Coca Cola is; they advertise not to inform, but to maintain dominance. So it's perfectly plausible that a lot of places will cut spending and see nothing change because their competitors cut spending too.

Most incremental lift studies I've seen are valid, looking at CTR and A/B testing as you mentioned. But as soon as you start looking at revenue and brand lift, all studies seem to come to the same conclusion - the higher the spend, the better.

Don't get me started on multi-channel attribution... garbage.

Marketing is still very much spray and pray with diminishing returns. And in most cases, marketers will claim otherwise.

I got tired of drinking the koolaid. Modern marketing is just as fraudulent as ever. Agencies are just getting better at lying.

Any DSP that could advance client goals but wasn't part of the inner circle would be overruled by senior management. Total gaslighting.

Everything goes to AppNexus or AppNexus partners. Because the parent company owns 20% or so of AppNexus. I got downvoted yesterday for this but I'll say it again, the mafia is in the tech, the tech is in the mafia. I have so many stories.

edit: The funniest bit was when I would take thoughtful, younger clients out to dinner who understood the business model. They would laugh and say "don't tell me too much, just hit the artificial KPIs and make me look good for my Christmas bonus.".

Yeah, principal-agent problem. At a previous job there was a case where we sent partial refunds to advertisers because we noticed we hadn't delivered as many impressions as they had paid for. Some of them were upset that by that, and would have preferred that we had just kept the full amount.

Companies do tons of things that don't make financial sense. And metrics can paint 100 pictures, including the picture the advertiser wants to paint. Not to mention it's in the best interest of the marketing department of a company and the advertising liaison within the company to continue spending money in advertising whether it works or not, if they want to have a job...

I'd be interested in an argument over whether more marketers are competent versus not, but any argument that presupposes uniformity among marketers is just silly.

Furthermore I'd say most people with deep knowledge of the field (assuming they don't have a vested interest in arguing otherwise) would agree in a heartbeat.

I don't know if this rhetorical device has a name, but basically saying "and other smart people would agree with me unless they had a sneaky reason not to" doesn't seem like supportive evidence of your point.. (... and I suspect most people would agree in a heartbeat.. sorry! ;-))

A sudden drop in revenue may adjust the economy of bidding and show a potential bubble. The tiny budgets and one click campaigns (with platforms inventing unique metrics & targeting woo) in social media marketing compared to traditional marketing (huge barrier to entry) feel like penny stocks vs traditional stocks. You can easily mislead individuals and tiny businesses.

there certainly are a lot of numbers in adtech and marketing. whether or not those actually relate to causal impact, across the industry, is not definitively answered. very few players (on the supply and demand side) have the scale and ability to properly do incrementality testing.

personally, i think people don't want to know the real results. if the numbers say it's not broken, why risk your job?

https://support.google.com/google-ads/answer/6394265

Actually Google is preparing it as a product, so I would guess the result was generally positive? FB also has a similar product as well.

the google page you linked also says, "you won't be able to continue using this model if your data drops below 10,000 clicks on Google Search or below 400 conversions for the conversion action within 30 days." depends on what your market/CTA is, but a lot of SMB likely don't hit these thresholds. similarly with FB, my understanding is that you have to go through an account rep to set it up and that the minimum spend is fairly high to qualify.

i think that these measurements are possible to do with a reasonable level of certainty, but they require a particular set of circumstances to pull off.

mcdonalds is actually one of the savvier players here, they know that it's hard to quantify brand advertising if you only go off in-store purchases, so they spent very heavily to promote their app and develop a consumer-brand relationship there. now, if you see a mcdonalds ad on youtube, they can (try to) match your youtube ad impression to a purchase done through the app / credit card / other PII.

It's not silly. Personally, I believe just that. Just because marketers use "conversion rates, A/B tests, attribution, and a lot of other techniques", doesn't mean they actually "calculate the ROI of advertising". They may be - and I believe are - mostly bullshitting themselves. Attribution is a hard problem. Doing an A/B test correctly is a specialized skill that requires some understanding of statistics most people in the industry don't have. And even the tools don't help, as evidenced by the famous case of Optimizely designing their product in a way that made people do A/B tests wrong - and in the exactly wrong way that made them feel Optimizely is helping them[0].

You can't seriously claim that all these small companies are hiring top STEM grads to trace ad spend and verify the work of top STEM grads working in small ad agencies.

--

[0] - https://news.ycombinator.com/item?id=10872359

Many big campaigns are just brand awareness, or are poorly implemented with lots of supply-chain and measurement overhead competing for the cheapest impressions. Video content is increasing and leading to an oversupply of inventory. There's competition from connected TV and streaming services. Privacy regulations are affecting targeting and measurement.

A lot of budgets are also just paused in response to consumer demand, with uncertainty around the economy and shifting strategies to conserve cash and move to more efficient ads.

I also know of several (3 that I can think of on top of my head) companies who went bankrupt from buying inefficient ads.

During this time what is the motivation for companies to spend on internet advertising for "non-essential" goods/services.

The longer consumers are given to adapt to a lifestyle of purchasing only "essential" goods/services, spending more time with family, cooking for themselves, staying local, enjoying simpler, less expensive pleasures and leaving a lighter environmental footprint, how susceptible will they be, in the long-term, to internet advertising that aims to motivate them to purchase non-essential goods/services.

Perhaps it is only temporary, but lockdowns are providing a paradigm shift away from internet advertising and toward increased non-commercial use of the internet.

Those who advocate web advertising as necessary in order to support a functioning internet may have to change their arguments in the event that the internet does not become "useless" as advertising spend decreases.

No, eating out is more expensive. Cooking is just as cheap as before.

If you are at-risk, there are huge groups doing mutual aid all across the city on a volunteer basis that are more than happy to do grocery runs for you. I'm in a slack group for Bed Stuy and I am seeing requests come in and get delivered all day long.

The idea that you need to rely on SV companies like Amazon or Instacart to bring you groceries is madness.

Most of that traffic is trash, yet companies still pay a lot for it.

A similar situation happened on Google Search, I believe.

I have certainly switched brands or variants of laundry detergent, toothpaste, deodorant, etc. because I saw an ad that let me know there was something "better" to try out.

The common denominator here is that these are products I don't care that much about and am not going to invest that much time in researching. I don't really want to spend much time thinking about mattresses or toothpaste, and so I'm perfectly willing to rely on advertising as a passive way of getting information about what's available.

On the other hand - I would never buy a smartphone, or a laptop, or a car from an advertisement, because these are things I'm passionate about and I already know the market and what fits my requirements.

I'm genuinely fascinated to know what kind of support (no pun intended) you would expect for this product.

"Did you ever buy a tooth paste brand that didn't advertise?"

Ideally you answer "no...", while a look of sudden realization comes over your face. Individual results may vary.

Or why doesn't one of the marketed brands stop the advertising? If it doesn't affect sales, it's a useless expense, and any profit maximizing entity would cut it.

To me, the obvious answer is that advertising does work. Without it people don't by your product that much, and you get replaced on the store shelves by brands that produce sales.

Also note that the store brands are being advertised when the store markets itself. They're not unadvertised.

Facebook also spread mostly through word of mouth and only started doing ads when its public image deteriorated.

(Side-note: I'm in Germany, so this is about German ad campaigns. Also I have had adblockers for a long time, so when I say "they run ads", I mostly mean TV, print and billboards.)

Then again, when I google tom's of maine advertising, I get many hits saying the opposite, like

https://www.youtube.com/channel/UCcfhusG_iJcQyFSBEOyeucA

I didn't check the other brands

I doubt it's financially feasible to advertise on TV for the sales they expect in their niche. I'm not sure if it's the best way to reach people interested in natural toothpaste. I don't know whether consumers would think they stand out for not advertising, but it's possible that some customers prefer a a less known brand for some sort of feeling of exclusivity.

On this subject, though, there is more at play than just advertising. First is availability; smaller stores won't have a private label option available at all, so some chink of the market is not open to them.

Second is quality; this is not as much an issue with OTC pharmaceuticals since it's all about the active ingredient, but for products where more than just the active ingredient matters (like flavor or consistency) there is sometimes a quality difference. There definitely is with food.

That said, I frequently buy store brands over name brands. I also buy some "name brands" that I have never seen an advertisement for.

That was in the days when I did watch adverts.

I certainly do see adverts nowadays - when I take the tube at Euston for example. Sometimes I seek adverts out (Christmas). No doubt there’s some product placement too, but I can’t think of any that is toothpaste.

I have used other toothpaste on occasion (hotels etc), but I stick with Colgate as the taste is acceptable and I’ve used it for many many years. Why would I change?

Google sells ad sales services utilising, in part, data collected on YouTube visitors.

An old saw amongst internet marketers was that "traffic" was the single most metric behind the financial success of any website. That idea only makes sense if the plan is to sell online ads or, in Google's case, provide online ad sales services. In lockdown, arguably the best "business plan" for a website is to sell essential goods/services.

What consumers might be reminded or become aware of during lockdown is that the internet, including the web, still continuses to work without any online ads. Ad buyers might not be buying onlne ads, but consumers are still paying for home internet access. Lo and behold, even when online ads are diminished, creative and generous people still create content and use the internet to share it.

Well, millions with a “b”.

> Perhaps it could pay YouTube content creators.

It...does.

> What consumers might become aware of during lockdown is that the internet, including the web, still continuses to work without any online ads.

It doesn't work without a revenue stream for the online service providers, whether that's ads (regular, “free” YouTube) or membership fees (YouTube Premium).

Ad spending is an arms race and Google has very deliberately set it up so that the only way to succeed on their near-monopoly platform is to out-spend your competitors who are also trying to do the same to you. But it’s a zero sum game the end state of which is Google captures all of your profits while you scramble to cut costs in a race to the bottom.

The only way to win is not to play.

The only way to win is for everyone to agree as a society that advertising is harmful, and have nobody play. Enforcing that is difficult, but I think it's the right direction.

The real truth of advertising is that it is engineered to exploit flaws in the human psyche to hack a human into acting against their own best interests. To buy a product they don’t need, or to vote for a candidate that will harm them. It is toxic, and those who create it and distribute it are toxic.