About $600bn are invested in advertisements globally. According to data from Accenture, digital media now account for 41% of large companies’ ad spending. Money spent by some of the market leaders towards advertisement is as follow; Unilever about $8 billon; Procter & Gamble - $7.1 billion; AT&T - $3.3 billion; Walt Disney Company - $2.1 billion; L'Oréal - $2.2 billion; American Express - $2.4 billion; Verizon Communication - $2.5 billion. One most ambiguous part regarding analysis of advertisement is that it is difficult to analyze the exact efficacy of ads. One may try to arrive at a conclusion referencing various studies mentioned in the article.
Critics
about the advertisement suggest that most ads are needlessly run. This can be
established by an argument that many companies focus ads to be run around the
days where historic buying spree has been observed. E.g. Lotion ads are run
around winter, when probable demand was any which way going to be higher. There
seems to be a mismatch in understanding of causation and correlation.
Catherine
Tucker's research on advertisements using data provided by Nielson on 500 top
brands states that ad elasticity for prominent advertisers remained almost a negligible
number of 0.01 i.e. Reduction of $100mn from advertisement budget may affect
$1mn in revenue. This number is almost insignificant considering minimal ROI.
Research also found that there was no comparable change in the effectiveness of
ads that did not make explicit use private information when targeting. The
increase in effectiveness was larger for ads that used more unique private
information to personalize their message, concluding that almost all brands
were over advertising.
In digital ads, engines from the companies bid
for the keyword. Brand keyword advertisement can again be seen as unnecessary
and non-causal, as the person searching for the brand already knows where he or
she desires to go. Thus brand keyword can be easily found in organic search
results. Even if some other brands wins the bid for your keyword and that brand
is shown when your brand is searched, according to eBay research around the
same topic it was found that searcher just ignores the ad and heads for his
desired brand result. In case of non-branded keywords eBay experimented by
turning off keyword ads for 1/3rd of DMAs (Designated Market Areas) in US. The
impact of the same was again almost negligible.
Company (eBay)
earlier believed that ads drive about 5% of its sales, but this experiment
stated that the drop after stopping of ads was about 0.5%percent. Google itself
has stated that about 56% of the digital ads served are never seen. P&G in
the past cut its digital ad spending for brand safety and concerns regarding
proliferation of bots by $200mn and the resultant impact on bottom line was
found to be almost negligible. Ads may not just be ignored but may go on and
irritate a probable customer. So some watchful steps in the domain are required
to gauge the extent of utility.
Is there a
question lingering around that we are afraid to ask? Is there a bubble in the
advertisement market? An unfortunate yes may be the most probable answer. But ads
some but rather important upsides too. Most of the genuinely essential and
widely used products (Mail, Drive, Maps, Networking, etc.) are subsidized or
even made free because of the ads.
Michael
Luca’s (Assistant professor at Harvard Business School) and Daisy Dai’s
(Professor at Lehigh University) research with Yelp using randomized sample of
18,295 U.S. restaurants of which 7,210 that had never advertised on Yelp states
that when a when an ad package was delivered to them and ads run for 3 months;
while the ads were up, the restaurants in them got more page views than the
others—22% more on desktop browsers, 30% more on mobile devices, and 25% more
overall. Users requested directions to them 18% more often, made 13% more calls
to them, and clicked through to their websites 9% more often. The differences
disappeared as soon as the ads were taken down.
Major
difference between Yelp analysis and study by eBay could be that eBay being
well-known brand whose name people are likely to type into a search engine; it
makes sense that brand keyword related ads made little to no difference. At the
same time local businesses that few people have heard of; ads help them
create awareness. Although this again would be dependent on outcome of keyword
bidding.
Thus, this
bubble needs to be slowly and steadily deflated. This could be attained by
participation of industry leaders. Search ads could be best used to alert the
consumer about something they’re not already aware of. Bigger brands could use
search ads to promote things about the brand that people wouldn’t otherwise
discover. Meanwhile small business could proactively make their presence felt.
Thus positively improving bottom line and a significantly boosting the
operating margin, reducing some stress from the expectations towards higher
topline growth for David and Goliath alike.
- Anand Rananaware
References:
- Tucker, Catherine. (2011). Social Networks, Personalized Advertising, and Privacy Controls. Journal of Marketing Research. 51. 10.2139/ssrn.1694319.
- https://hbr.org/2017/03/do-search-ads-really-work
-
https://adage.com/article/digital/56-digital-ads-served-google/296062
Comments
Post a Comment