Rethinking John Wanamaker
[This is adapted from a post I made to a list I’m on, and then put up on my blog. Other parties are in italics. I’m not.]
If you work in advertising or marketing, kill yourself — Bill Hicks
Brilliant bit. Watch it here. The dude was also deep.
…or, from The Economist in 2013, a wonderful article which draws attention to research which counters the common view about search engine advertising.
(which says, among other things…)
…search ads appear to solve a puzzle that has preoccupied advertisers since John Wanamaker, the 19th-century founding father of marketing, reportedly declared: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
Two problems with that oft-quoted one-liner. One is that Wanamaker didn’t say it. From The Intention Economy:
While this line is customarily attributed to John Wanamaker, he was neither the first nor the only source. In The Quote Verifier: Who Said What, Where, and When (New York: St. Martin’s Press, 2006), Ralph Keys writes, ‘In the United States this business truism is most often attributed to department store magnate John Wanamaker (1838–1922), in England to Lord Leverhulme (William H. Lever, founder of Lever Brothers, 1851–1925). The maxim has also been ascribed to chewing gum magnate William Wrigley, adman George Washington Hill, and adman David Ogilvy. In Confessions of an Advertising Man (1963), Ogilvy himself gave the nod to his fellow Englishman Lord Leverhulme (Lever Brothers was an Ogilvy client), adding that John Wanamaker later made the same observation. Since Wanamaker founded his first department store in 1861, when Lever was ten, this seems unlikely. Fortune magazine thought Wanamaker expressed the famous adage in 1885, but it gave no context. While researching John Wanamaker, King of Merchants (1993), biographer William Allen Zulker found the adage typed on a sheet of paper in Wanamaker’s archives, but without a name or source. Wanamaker usually wrote his own material longhand. Verdict: A maxim of obscure origins, put in famous mouths.’
The other is that it isn’t true. In terms of direct effects (what direct response marketing wants, and the Economist piece concerns itself with), 99.x% of advertising is wasted. In terms of indirect effects (which old fashioned brand advertising wants), 100% might be effective.
In the old analog world, the difference between direct response and brand advertising was obvious and verged on the absolute. On one side you had junk mail just for you, on the other you had print and broadcast ads for whole populations. But in the new digital world, both are called advertising, and they’re difficult or impossible to tell apart. The GMC ad you see on Huffington Post might be there just for you (because some tracking-based targeting mechanism has put it there for you), or for everybody. The purposes and metrics of the two are also different, even if the ads look the same.
Perhaps the biggest difference — the one that confounds the ghost of John Wanamaker most — is waste and what it’s for.
In “The Waste in Advertising is the Part That Works,” (Journal of Advertising Research, December, 2004, pp. 375–390.), Tim Ambler and E. Ann Hollier say brand advertising has the effect of making a company familiar, whether the audience likes it or not, and that this is a requirement for any large company selling to a large market. You may never buy a Ford F-150 truck, but you’re damn sure going to know about it if you watch football on TV (and don’t skip the ads). In other words, it doesn’t hurt to have everybody know who you are and what you sell.
In terms of signaling theory in economics (for which Michael Spence won a Nobel prize), “the firm signals the quality of its product to consumers by its willingness to spend money on advertising.” (N. Gregory Mankiw: Principles of Economics, p. 401.)
This was taken for granted in the advertising business for generations. But today it’s being forgotten because advertising is also now digital, and leading the digital craze is the four dimensional shell game called adtech, which is thick with fraud, malware and world-class rudeness — such as planting tracking beacons on your digital person to follow you around the Net and report your activities to parties unknown, all the better to plant crosshairs on your eyeballs as you go about your private business.
Lately individuals have been putting a stop to all forms of advertising, with ad and tracking blockers. According to PageFair and Adobe, the number of people blocking ads passed 200 million worldwide last June, with increase rates in the prior year of 41% worldwide, 48% in the U.S. and 82% in the U.K. If this be a boycott, it’s the biggest in human history. There is also a high correlation between the increase in tracking and ad blocking itself. (For more on that, check the charts in this HBR piece.)
Most of the whining about ad blocking has been from those directly affected: publishers and ad agencies, since ad blocking costs them exposure and therefore income. Approximately no whining is coming from actual advertisers. (Who don’t call themselves that, by the way. They call themselves retailers, car makers, brewers and bankers.) For them advertising is just a line item on the expense side of the balance sheet. They can cut it or re-deploy it in other ways. For example, they can spend on the kind of old-fashioned non-tracking-based advertising they did before direct response marketing (best known as junk mail) body-snatched Madison Avenue, making it “digital” at all costs, including the good will of advertising’s consumers, who now have a valve to shut it off. (Or just to shut off the tracking. The valves are getting better every day.)
Naturally this has caused a “war” to break out. (FWIW, I’ve been covering this for some time. Here’s a list of posts and articles. Three of the most recent are in HBR, MIT Technology Review and Linux Journal.)
This conflation of direct response marketing with old fashioned Madison Avenue brand advertising has too many of us judging the latter by the metrics of the former. Among those is the author of this Economist piece. Let’s continue…
But new research shows that the simple measures often used to assess the impact of search ads may be exaggerating their effectiveness.
Again, while search ads are called ads, but they’re really direct marketing. They are data-driven, want to get personal, and are looking for a direct response. Brand advertising is also data-driven, but the data is always in aggregate form, because the targets are populations, not individuals. Brand advertising doesn’t want to get personal. That would be too expensive, might creep people out, and isn’t the idea anyway, because brand advertising isn’t looking for a direct response. All it wants is to make an impression. Not a sale.
Establishing cause and effect in offline advertising is hard. Ads are difficult to target: space on billboards and in newspapers is seen by lots of shoppers. Some of these eyeballs are worth spending money on; others, either because they belong to existing customers or to people who never will be, are not.
But the whole point of billboards is to be “the waste that works.” If you’re McDonalds (the biggest outdoor advertiser in the U.S.), you want every driver to know they serve more kinds of coffee now. If you’re Geico, they want to maintain top-of-mind consideration for when people (and not just you) get around to buying insurance again.
And even when big ad campaigns are followed by strong conclusion — that rising sales are the result of good budgets often rise in good times so that spending and sales grow together, even if the advertisements are useless. The ads and the sales have a common cause — strong demand — but may have no causal link.
Right. And that is not necessarily a problem if you’re McDonalds or Geico.
Internet advertising seems to offer a solution to both these problems.
Again, for brand advertising, those aren’t necessarily problems.
First, internet search ads are targeted: the links that search engines show are based on a combination of the search term a user has typed in and his browsing history. Second, because firms can track whether visitors to their websites come from search-engine links they have paid for, they can work out whether ads convert into sales…
The most tendentious adtech assumption is that everybody is buying something all the time. Most of the time we are not. When I looked up the Bill Hicks videos above, I wasn’t buying anything. In fact when I look through my browsing history over the past week, I find only one shopping example, and that was the exercise in futility that led me to post my buying intentions on my blog. So far the response has been nil. Nobody wants to fix a ten-year-old subwoofer, least of all from a company that’s out of business.
Now here’s what matters about brand advertising, and why the waste in it is the part that works: when replace my busted subwoofer, I am far more likely to be attracted to brands I know than to be swayed by advertising targeted at me because robots that follow me suspect I’m looking for a subwoofer at this moment in time. (None do, by the way. I’m seeing no ads anywhere for subwoofers — something I’m ready to buy, right now. Hear that, adtech bots? I’m a qualified lead!)
Another false adtech assumption is that “big data” can “know us better than we know ourselves.” This is worse than wrong: it is delusional and an insult to our sovereign humanity. All of us are not only different from each other, but from how we were ten minutes ago. To be fully human is to learn and change constantly. “I know this orbit of mine cannot be swept by a carpenter’s compass,” Whitman writes. “I do not trouble my spirit to vindicate itself or be understood… I was never measured, and never will be measured… The spotted hawk swoops by and accuses me. He complains of my gab and my loitering. I too am not a bit tamed. I too am untranslatable. I sound my barbaric yawp over the roofs of the world.”
No direct response advertising system, no big data algorithms, can begin to comprehend the wild, free, untamed and untranslatable spotted hawk in each of us. But brand ads can still make us aware that Geico will save you 15% in 15 minutes.
(The next paragraph refers back to an earlier one I snipped.)
To test this problem of “activity bias”, the authors recruited volunteers online and split them into two groups. The first group watched a video promoting Yahoo, and the other group watched a political broadcast. The first group used Yahoo around three times more after seeing the ad, giving the impression it was very influential. But the control group — those subjected to a bout of politics but no Yahoo promotion — also used Yahoo a lot more. Both groups happened to be in an active period of internet use. This is why they were recruited in the first place and why they used Yahoo sense of advertising impact…
Three years ago I was invited to a Yahoo offsite in the Caribbean to give a talk to their biggest advertisers, plus a bunch of celebrities who came along for the junket. I told them the future was one of liberated individuals who would only increase their agency (the power to act with full effect in the world), and that they should place their bets on the side of those individuals, rather than only on adtech, which was all the rage at the time (and still is, although now it’s looking more like a cancer). I also pointed at the rise in ad blocking and its inevitable effect on Yahoo’s business. There was a lot of agreement, but no action. My influence on Yahoo, paid though it was, came to naught.
Bosses should still take Wanamaker’s fear seriously: a rise in sales after an ad campaign does not automatically mean that the ads worked. But it also shows how the online world is getting closer to solving the conundrum he posed. Far from being an industry where cause and effect remain murky, online advertising may yet become one area where the dismal science can predict how to get costs down and profits up.
It would have helped this piece if the signaling corner of the dismal science were sourced as well. So I advise The Economist and others covering advertising to look for signaling in the jewel case that is Don Marti’s blog. On the subject of advertising, there’s none better.