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.