Google, Tim Wong, Nico Newman discussed on Heartland Newsfeed Radio Network

Automatic TRANSCRIPT

How or why are you any evidence for it. Google would plainly dispute. There is no evidence for whether online ads work. Tim wong recognizes. He is tilting at windmills. Here trillion dollar windmills. But in fact he. i grew skeptical about online advertising. While still working at google he began reading trade journals and going to conferences. And i had this fascinating experience. Where one of these keynotes at this conference was given by nicole. Newman who basically is a big ad. Critic nico newman. Is a marketing professor at the melbourne business school in australia and he presented to really fascinating studies that his lab had done the first one was looking into the quality of data used in the tech industry basically demonstrating in many cases. It was incredibly inaccurate and the second one was he took dead. Aim at the hype cycle around a that exists in tech right now where people are saying if you have this latest machine learning. You have this. You'll targeting in a way that you never ever were able to do. Before and nico's lap did some experiments that demonstrated in many cases machine. Learning was finding people who would have bought the product anyways bringing this message to an ad tech conference is a bit like bringing a safety pin to a balloon conference that looked around being like ways so where people angry and it was just total dead air. No one responded no engaged with it and it got me really interested in thinking about like. Is there a bubble here. A bubble like the dot com bubble or the subprime bubble or the tulip bubble. Because this is exactly the kinds of behavior that occur in other financial bubbles where the red lights are flashing but everybody industry just refuses to take a look at the real data. Wong began thinking about how bubbles happen so the origins of every bubble come in this gap that occurs in a marketplace on one hand. You have people who believe that. An asset whether it's collateralized debt obligations or advertising inventory is extremely valuable and then on the other hand what you have is declining asset value so in the subprime mortgage crisis. We believed that mortgages bro is going to pay out regularly forever right. When next turned a package of mortgages were actually terrible asset there were toxic and about to go belly so how long justify parallel with digital advertising. I think the first piece is really the big question of do people ever see ads at all. So google actually did a fascinating study not too long ago which concluded that close to sixty percent of ads on the internet are never ever even seen the ad is delivered but it just ends up in some dumb part of the page. Just below the fold there it's alongside line. But what about the precise targeting. The digital ads are supposed to offer a two thousand and nineteen study this one done by three academic researchers addressed this question by measuring the impact of a users cookies. Those remember are the tracking codes most of us to roam our computers and phones in exchange for all the free information we get from companies like google and facebook. This study found that when users cookies were unavailable ad. Revenues only dropped by about four percent. Why would cookies be so ineffective. Tim wong argues that people pay a lot less attention to online ads and they used to. People often forget that when banner ads. Were i lost on the internet. There click through rate was fifty percent completely mind-bending right and it was just continue to fall and fall and fall and now it's like point zero one. Two point zero three percent. Some estimates of click through rates are higher than what hong sites here that said. Precise measurement is hard because there are so many bots clicking on adds a whole other problem with the digital ad universe but no matter how you measure it. Click through rates have fallen a lot as the novelty wears off habituation sets in and an ad that might have once grabbed your attention becomes invisible or worse annoying. People increasingly don't want ads. So ad blocking for example is really really increasing over time. And i think these factors not being able to see ads the questions about the effectiveness of ads and the rise of ad blocking bring into question whether thing that we think is so valuable is actually worth as much as we think it is but if there is such a big gap between the perceived and real value of digital advertising. Why are google and facebook worth so much money. Look at it this way. There are a couple trillion reasons. Why tim wong might be wrong. But he doesn't think so. His theory is that digital advertising is grotesquely overvalued because it is still so hard to measure and one reason it's hard to measure the marketplace is exceedingly opaque. So there's a fascinating incident. That i always think about which is one of the last times. That mark zuckerberg was called up to congress and one of the questions that he got from. One of the senators was well. How do you guys make money. Sustain a business model in which users don't pay for your service and mark zuckerberg was like senator. We run out and at the time. A lot of the chatter on twitter was like ha ha. Look at the super old senator. He doesn't know anything about the internet. But it's true that even if you talk to people in the tech industry and you're like okay level with me joe engineer. How do ads work on the internet. It's kind of a rumor like we know. This is how the business model works but no one can really explain how it works in detail so when i say advertising a lot of people normally think of madman right but it really looks like what the nasdaq looks like which is largely automated system moves millions and millions and billions of pieces of ad inventory on a daily basis as steve to dallas explained earlier. Most ad inventory is sold by auctions which are run by algorithms operating at phenomenal speed. This is one contributor to the obesity of the industry. for instance. It can be hard to figure out why certain ads and up on certain pages if you are a family-friendly brand like disney you don't want your ad popping up on a youtube video showing a terrorist beheading. This has been a.

Coming up next