Musing on Advertising

So I’ve been giving some thought about advertising in general. After all, for the past three years I’ve been peripherally associated with advertising of one form or another — and all of it that particular breed of advertising called local advertising. (Anything that tells you what’s going on around you is a type of advertising — so I count Geodelic as a form of advertising, though it was only handling the presentation part, not the monitization of the presentation part.)

And it’s interesting. Interesting in the sense that there is a real psychology to advertising particular to certain categories of advertisers — and that psychology is, in my opinion, not being captured in the “one size fits all” form of advertising being offered through the Internet. I contend that, in the Internet’s rush to better slice and dice the customers, to create better focused advertising for those customers based on previous purchase patterns and demographics through automated matching algorithms, the quality of the advertising offered on the Internet has become more generic and less focused on the advertiser.

In other words, in concentrating on the customer the Internet is forgetting the message.

Just sitting here at my desk, I can think of three different types of advertisers.

The first, such as restaurants, toothpaste manufacturers and providers of services we use every day, would be more interested in getting people to remember who they are so we’re more likely to buy their products when the time comes (once a week at the grocery store, or every day as we walk out of the office building to get lunch) to think of them as we make our decision. Advertisers like that are probably less concerned with things like individual conversions based on click through rates through Google — because the profit for a conversion is practically non-existant. (Do you think an ice cream store will willingly pay $20 for a single conversion — a single customer purchase based on a click through from Google — for a $5 large scoop, which nets perhaps $4 gross profit and perhaps 50 cents net?)

That type of advertiser wants repeat customers. They can’t justify a $20 conversion if that conversion only results in a single sale — they need an ongoing and constant repeat customer base.

A second type of advertiser is an advertiser who provides a service that you’re probably not going to constantly use or repeatedly call. Unless you’re a rich asshole, you’re probably not going to be a repeat customer to a divorce lawyer. Unless you’re a building contractor, you’re probably not going to need a plumber on call. Many services like this are services you don’t even think about needing until you need it: you probably aren’t going to be on first name basis with your auto mechanic — unless you either have an old car and he’s a friend, or you’re into cars and need someone constantly on call to help with your new finds.

These people are ideal targets for something like a Google SEM campaign or a Yellow Pages ad: you don’t know you need them until you need them — and when you do, you’ll explicitly search for one. Car broke down? Google “auto mechanic los angeles” and start calling.

A third type of advertiser is an advertiser who is selling an aspirational good. By “aspirational good” I mean a product which is a major purchase, but which you’re not going to immediately impulse buy. Refrigerators for a new house, a toilet for a remodeled bathroom, a car, a new computer, a new expensive watch: all these things are goods which you’ll probably do a lot of research deciding if you want to buy that good. Factors such as “am I a Toyota driver or a Honda driver, or maybe I can squeeze into a BMW” — that is, does the good match who you see yourself being — come into play. You’ll probably ask friends or muse over the purchase. Me: I tend to seem impulsive when I buy something expensive, such as an iPad or a new computer — but trust me: I only seem impulsive because I don’t share my internal thought processes. The iPad purchase only seemed impulsive because I didn’t share the fact that I was reading every rumor, every scrap of information, and scouring the iPhone OS documentation and header files for every scrap of information for a year prior to making a purchase.

When I bought my current car, I mused over that purchase for two years. Remodeling the deck? About 18 months. And so forth.

There is a real psychology to aspirational goods, by the way. Entire magazines (such as GQ or Esquire for men, or Cosmopolitan for women) exist which are essentially curated ads for various products. (GQ, for example, runs entire articles on the best watch for men to wear.) These curated magazines essentially tell people what sort of people wear what sort of products — essentially helping to define the aspiration that may cause someone to spend $2,000 on a watch or $350 on shoes. It used to be that other types of products were also advertised as aspirational products — such as air travel, with their beautiful air stewardesses in short skirts, or (in an earlier age) train travel being enjoyed by the rich and famous of their era. All BMW advertising is aspirational advertising, for example: “The Ultimate Driving Machine” is well positioned as something a wealthy but secret sports car driver wants to drive.

And aspirational advertising also serves to remind the people who already purchased their product that the purchase was a smart one by reinforcing the aspirational stereotypes associated with the product. They help confirm the purchase, and make you feel good so that, perhaps 3, 5 or 10 years from now, when the lease is up or the old car is done, you buy a newer model of the same car.

Aspirational advertising is not restricted to just a $2,000 watch or a $60,000 car, however: cooking magazines apply the same logic (aspiring to be a better cook) towards $30 cooking pans and $5 egg timers. There is a reason why a store like Sur La Table will carry things like $12 mango slicers that almost no-one will buy: it reminds us that there is a gadget for aspirational cooks that perhaps costs only a couple of dollars but which handles the single dedicated task of slicing the pit out of a mango.

Aspirational advertising can also apply to some services as well: high end restaurants can also use aspirational advertising to advertise their services. A restaurant which attempts to position itself as an expensive restaurant perhaps does not make much more money per seat/hour (dinner may cost more, but you spend more time eating it, taking up the seat during that time), but it’s simply a positioning strategy: fewer but higher-end customers. The profits are the same, but the message becomes aspirational rather than just utilitarian: you eat there because it’s a fine restaurant, not just because you’re hungry.

I don’t think Internet advertising captures any of this.

Personally I blame Google. I honestly do: Google made the ability to find something the thing that is “top of mind” for most advertising executives on the Internet. We don’t care what the message is that we send; we only care that we shove it in front of your eyeballs. The landing page that we construct for you is exactly the same if you’re a restaurant (who is struggling with your positioning: are you an aspirational restaurant or a quick eatery restaurant?), or a plumber or lawyer or a jewelry store.

If you’re a sophisticated advertiser you probably already have your own web site which reflects what you want to advertise — but, um, if you’re a sophisticated advertiser you probably don’t need help advertising.

But I blame Google because Google has a habit of reducing everything to statistics and numbers. Their designs are all data driven — is the coupon on the landing page sufficiently large enough to capture the eyes and is sufficiently related to the keywords to represent a sufficient “call to action”? Is the phone number easy to find, and routed through a call tracking service so we can capture the efficiency of the call combination? Do we have a properly located blurb, and is the uploaded video presentation well positioned for playback? Is it the right shade of blue? Let’s sample 8,000 shades to statistically determine the right shade of blue.

Google’s UIs are crap. Landing pages built based on a statistical model attempting to represent a singular call to action associated with the keywords that maximizes the ROI by maximizing the conversion rate tends to be ugly little critters that do no-one any service — except perhaps for someone who needs a plumber in a hurry because there is crap backflowing onto their pretty rugs, and they will overlook a bad color choice or a blink tag on a coupon presentation.

Of course to some extent Google search works for helping customers find the things they want. For needs-based services — for finding a plumber in a hurry — the current Internet model of impressions converting to clicks converting to conversions via calls to action works: if I need to unclog a toilet now and the guy is nearby, the model works very well, and who gives a damn that the shade of blue in the border was #0000CE instead of #020FE0.

And Google search, so long as it isn’t completely trashed by SEO campaigners who are looking to spam the Internet with useless “reviews” in order to backload the search results and skew the information we’re searching for, works for aspirational purchases: they help us define what it is we’re buying and narrow down our product choices by understanding the range of features provided on that next car, refrigerator, or laptop computer.

As a mechanism for aspirational advertising, though, the current Internet model sucks hard. At best it’s informational, not aspirational: where is the store located? What are their hours? No sense of “is this a place for a good lunch” or “will I be catered to and pampered as I drop $10k on jewelry” or “do they have affordable shoes.” A map, some text, a description about how they’ve been around since 1960 and a blinking coupon promising me 5% off on my next purchase if I mention some magic code does not work to define aspiration.

Google is not an aspirational company. Sure, for a software developer, developers aspire to work there — but that’s because Google, ironically enough, has done a fantastic job understanding the mind of developers and presenting themselves as the ideal place to work. But the developer-engineer model of looking at the world, while it works for developers and engineers, doesn’t work for everyone else. And Google is only in first place because we think “I’ll google this” instead of “I’ll search for this on the Internet” — and because, up until now, the Google search bar is the default search bar in the toolbar of most browsers.

I think if the Internet is going to improve it’s ROI for Internet advertisers, the model has to change.

Specifically we have to start understanding the advertiser message more, rather than focus on the computational processes surrounding matching consumers to advertisers — a process which is intrinsically flawed to begin with. (Even Amazon, who is supposed to be king of this process, screws up royally when it offers to sell me a second safe after buying a first one: how many blasted safes do I need in my house? Can’t someone at Amazon just add a single bit to their taxonomy to indicate categories of goods which have a low probability of repeat purchases?)

Ironically by focusing on the advertisers more and on the type of advertiser (volume business, aspirational business, or service provider), we could conceivably also better target the customers they’re trying to reach.

2 thoughts on “Musing on Advertising

  1. Perhaps it is because your job focuses on the local/SEM side, but there actually are solutions for advertisers on the internet that meet exactly those needs.

    Brand campaigns are ill suited for SEM because of a variety of reasons. Chief among them is that the a branding campaign is about making an emotional impact, and text ads aren’t the best medium (Experiments with Rich Ads in Search have been hit or miss). But additionally, the brand manager wants to pay a little to impact thousands, and SEM means bidding for fewer eyeballs against people who are bidding A LOT for clicks. The branders are going to be out-competed for that spot most of the time.

    But that leaves Display advertising, which is where Branding advertisers have a HUGE array of options. The Display advertising market is about 65% the dollar size of Search and it is growing faster. However, it is much more fragmented since nobody has the dominance in “page viewing” like Google has in “searching”. (Google gets 65% of US searches, but Facebook gets only around 25% of US page views.)

    What you call “Aspirational Purchases” are typically served by what the market calls, “Behavioral Advertising”- which is usually[1] also served through the Display Marketplace. What happens is this: A percentage of a publisher’s inventory (i.e. page views) are guaranteed to go to the Brand Advertisers. Then another percentage gets sold as Non Guaranteed Display.

    When you load a page that has sold its space to the NGD marketplace, your browser makes a series of calls to 1 or many ad servers. Those ad servers (run by different companies) all use their proprietary information about YOU to determine whether you would be a good match for their campaign. Sometimes that information is merely demographic, but increasingly it is based on your browsing behavior. If you have been researching cars- maybe visiting ford.com or edmunds.com- they know about it based on tracking on those sites. And so they will bid for the right to serve you their ad on cars.

    The NGD marketplace actually enables many advertising goals. A group of high end vendors (think Yacht Sellers, Rolex, Maserati) have combined their user lists and created an ad agency. As a result, Warren Buffet probably has a totally different browsing experience than you or I, because they are bidding crazy CPM dollars to get their ads in front of him.

    Advertisers will also pay a huge amount of money to get people BACK to their site. Try registering on Overstock.com some time, and browse for a little while on some items. Then keep an eye on sites you visit. You’ll probably find that those items you were browsing are actually featured in an ad from Overstock.

    So, long story short (too late) those types of advertising solutions exist. (I will say that serving Local in this way has proven difficult because of scale issues.) The reason you don’t see these solutions expressed in SEM is because those pages are just too valuable to advertisers hunting for conversions/clicks and so they have priced it out of the Branders and Behavioral Marketers’ reach.

    Nice thoughts though.

    -dh

    [1] Google has actually experimented with putting behavioral results on their SRPs. I’ve seen this (serving up links to sites related to my surfing behavior) when I enter a tail query that doesn’t have a lot of sponsored results. The fact that I haven’t seen this behavior recently suggests that it wasn’t as successful.

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  2. “Perhaps it is because your job focuses on the local/SEM side, but there actually are solutions for advertisers on the internet that meet exactly those needs.”

    True enough. The problem that I see, though, is that even in the local search market (which is where everyone seems to be focusing right now–“mobile local” search, for example), the mix of advertisers hasn’t changed. Restaurants who want to be top of mind or who want to position themselves as aspirational eateries (where you go to eat to be seen), the makers of local products or local artist stores which provide aspirational services such as custom artwork, local contractors who want to provide remodeling services–these are all aspirational services for which the best we can provide them in local mobile search seems to be–um, a “Find Pizza” button on a mobile app.

    And for local, unless you’re a divorce attorney or a plumber specializing in unclogging toilets, that means your ROI is going to suck rocks until we figure out a cost effective way to present more aspirational style advertising.

    And where ROI sucks, churn is going to be through the roof.

    It’s why I first wrote this little post, by the way: I was trying to think through why churn sucks in local.

    “The NGD marketplace actually enables many advertising goals. A group of high end vendors (think Yacht Sellers, Rolex, Maserati) have combined their user lists and created an ad agency. As a result, Warren Buffet probably has a totally different browsing experience than you or I, because they are bidding crazy CPM dollars to get their ads in front of him.”

    There is a real problem with this type of focused advertising in the United States (though I guess in England it’s not going to be quite so much a problem): our lack of a class structure means that you’re not paying attention to a large market segment of upper-middle class individuals who may make a large aspirational purchase (such as a Rolex watch or a Maserati GranTurismo) that represents a larger percentage of their base salary than the multi-millionares that we may think are the customary sales base. While class distinctions do exist in the United States based on socio-economic class, those class distinctions tend to be blurred by individuals who either decide their purchase patterns are going to be skewed upwards to establish themselves socially, or which may be skewed downwards because it’s not worth it to them. (Think of the multi-millionare who shops at Target, or the middle class man who goes off and buys a mid life crisis on four wheels.)

    So if it turns out Rolex or Maserati are capturing (say) mailing lists from the trading floor from Goldman Sacks and makes targeted campaign buys to just those folks, they’re overlooking both the opportunity to define their products to a larger audience (including those who may not quite be in the target demographic but who are rising to it), and to the larger audience of people who are seeking to buy “outside their bracket.”

    And I think this captures a larger problem with on-line advertising: if we silo the people we advertise to based on what we think they may want to buy right now (based on their current browsing and purchasing habits captured over the past few days), we overlook what used to be an on-going conversation that we used to have with the general audience about the products that are being sold.

    Imagine a world where products are perfectly targeted: where a person from a middle-class construction-based business who bought Ford F-150 trucks for the past 15 years and who spends a lot of time getting after-market add-ons suddenly does really well with his business. If for those 15 years he’s only seen Ford ads (and specifically Ford commercial vehicle ads), and he only vaguely knows about other products from other companies–how will he know what different “stories” are behind BMW, Mercedes Benz, Maserati, Ferrari, Porsche, and other high-end car makers that he may suddenly want to buy? How will he know, for example, that BMW is positioning itself at a younger, rich crowd, while Mercedes Benz is targeted towards older, more class conscious buyers? Or that Italian cars are being positioned for the flashy crowd (think movie stars) while Porsche is being positioned at sports car driver wannabes? How will he then identify himself (for example, his self-image as a self-made executive millionaire makes Mercedes the right image brand fit for him) and know what to buy when we have explicitly protected him from seeing those messages?

    And in all this demographic hyper-focusing, didn’t we just lose a sale as he walks away from a bewildering set of cars that are in his price range but for which he has no idea what he should be aspiring to?

    Will he just shrug his shoulders and buy another Ford F-150 instead, because we pegged him and categorized him and stereotyped him with the algorithms?

    I actually (and honestly) find that very sad.

    And this assumes that we can actually and accurately characterize their short and medium term purchase habits and make accurate predictions–unfortunately Amazon trying to sell me a second house safe after I purchased a first one tells me we’re not there yet at all. Instead, the advertising dollars are just being wasted.

    And that leads me right back to churn.

    I don’t know how you start that conversation on behalf of companies who wish to advertise with someone like an IYP provider or an SEM provider in the local space. Perhaps the hyper local space is just lost, and we haven’t figured that out yet, and all we’re doing is making money off of ignorance.

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