Google and Facebook are worth a combined $2 trillion, with the vast majority of their revenue coming from advertising. In our previous episode, we learned that TV advertising is much less effective than the industry says. Is digital any better? Some say yes, some say no — and some say we’re in a full-blown digital-ad bubble. [...]
There are, not surprisingly, objections to this research. Especially from the marketing industry. For instance, they’ll point to the brand-building aspect of advertising: “It’s not just about short-term sales,” they’ll say. Or the game-theory aspect — that is, if you don’t advertise your product and your rivals do, where does that leave you? Still, any company that spends even thousands of dollars on TV ads, much less millions or billions, would have to be sobered by Anna Tuchman’s findings. [...]
But what about the precise targeting that digital ads are supposed to offer? A 2019 study, this one done by three academic researchers, addressed this question by measuring the impact of a user’s cookies. Those, remember, are the tracking codes that most of us allow 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 a user’s cookies were unavailable, ad revenues only dropped by around 4 percent. Why would cookies be so ineffective? Tim Hwang argues that people pay a lot less attention to online ads than they used to.
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