Tim Wong, Steve Levitt, Procter discussed on Freakonomics Radio


Protect brand safety. I didn't Today. Everyone wants a well functioning Internet on everyone wants it to have a positive impact on the world and not to have some of the issues were resting with right now. I think that path has not been easy so far. This September. After months of advertiser boycotts Facebook, Twitter and YouTube agreed to adopt a common set of definitions for hate speech and developed tools to let advertisers have Mork control over where their ads show up. Tim Wong thinks the longstanding capacity of the online ad marketplace is just one reason we might be in a digital advertising bubble. I think a second thing is a little bit like in the subprime mortgage crisis. You do have people who have very perverse incentives. I think to push the effectiveness of all my nads. That's the ad agencies. The ad platforms themselves. The people who run at technology All these people, I think have a very strong incentive to say no. This stuff is way better than earlier generations of advertising, and this is why you should use it. If you've been listening closely, you will notice. This is the exact same problem Steve Levitt talked about regarding the TV ad ecosystem. Human beings generally make decisions based on self interest. No chief marketing officer is ever going to say. Hey, I don't know. Maybe ads don't work. Let's not do him and see what happens. Or as the author Upton Sinclair once wrote. It is difficult to get a man to understand something when his salary depends on his not understanding it so there is a common practice, which is not very well disclosed in the ad industry. Whereby an ad tech company will basically offer ad inventory at a cheap price to the advertising agency. The agency remember is paid by you, the client who hired them to help you sell what you're selling. And then the agency will turn around and say you should you really use this ad tech product and sell it at a higher price? And one of the worries about this is that it changes the incentives right, which is typically the ad agency should be working on behalf of the client. But in these cases they have very perverse incentives to push a distribution of a message that might not otherwise be rational or even useful to them. All of these issues and all the new empirical evidence we've been discussing about the ineffectiveness of advertising. Persuaded Tim Wong that yes, the online ad marketplace is a bubble, and it might soon pop. In fact, the deflation may have already begun a few years back Procter and Gamble, which is one of the largest advertisers in the world. Decided that they would run a little experiment. They were going to take about $200 million of their digital ad spending and just cut it out of their budget to see what happens. Procter and Gamble said they were doing this because of concerns over brand safety and the proliferation of bots, which can pollute the data on ad impressions. And the end result was fascinating. Basically, they said that there was no noticeable impact on their bottom line..

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