Matt Yglesias notes that the business community might have finally caught on to the idea that advertising doesn’t really work – at least the way they though it did.
One possibility that’s disturbing for people who work in the media but probably worthy of being taken more seriously is that the reason ad rates for web ads are so low is that advertising is actually much less effective than people have historically thought, and the greater measurability associated with web advertising is just revealing that fact.
When I went through grad school this was the conventional wisdom. Advertising is mainly about conveying information. People are not really swayed.
When asked why there was a massive media industry predicated on advertising most people just shrugged and said, “Well, information on the nuances of various breakfast cereals must be really important.”
The real answer is probably that markets can stay irrational long enough for generations of media giants to stay solvent.
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Tuesday ~ August 4th, 2009 at 6:00 pm
TGGP
What I had heard is that marketing primarily just gets the brand name in your head, so when you deciding which to buy its the first thing that comes to your head. For web ads in particular it may be that web-surfers are active choosers of viewed content, rather than passive tv watchers you just soak the ad in (admittedly, tivo changes this). The idea that “they were dumb, now they’ve all of a sudden got smart” strikes me as odd. Advertising has been around a loooong time.
A possible Hansonian theory: companies want to seem impressive, and so will spend money on ads that don’t actually improve the bottom line, just as they pursue mergers to signal CEO dominance.
Wednesday ~ August 5th, 2009 at 11:56 am
Roland Stephen
I like the Hansonian theory above, certainly advertising has stopped working *as well as it used to work* (which may not have been as well as it was … er … advertised ) the information environment has become incredible fragmented and chaotic, and the way we respond to it it not yet well understood..