Comment by Quanttek | Hacker News Reader

Comment by Quanttek | Hacker News Reader

Crucial quote:

But in one of the first empirical studies of the impacts of behaviorally targeted advertising on online publishers’ revenue, researchers at the University of Minnesota, University of California, Irvine, and Carnegie Mellon University suggest publishers only get about 4% more revenue for an ad impression that has a cookie enabled than for one that doesn’t. The study tracked millions of ad transactions at a large U.S. media company over the course of one week.

That modest gain for publishers stands in contrast to the vastly larger sums advertisers are willing to pay for behaviorally targeted ads. A 2009 study by Howard Beales, a professor at George Washington University School of Business and a former director of the Bureau of Consumer Protection at the Federal Trade Commission, found advertisers are willing to pay 2.68 times more for a behaviorally targeted ad than one that wasn’t.

Much of the premium likely is being eaten up by the so-called “ad tech tax,” the middlemen’s fees that eat up 60 cents of every dollar spent on programmatic ads, according to marketing intelligence firm Warc.

The average cookie doesn't belong to a high-value segment, explaining why the average benefit is limited.

Of course Mercedes wants to reach people shopping for a BMW and will pay substantially more for it. They are paying extra to reach a small subset of users.

No conflict here at all

But are targeted ads worth more? Yes, if I'm shopping for a BMW then Mercedes definitely wants to advertise to me. However, targeted ads don't seem to work as well as Google/Facebook would like advertisers to think. Mercedes can just advertise if I'm searching duckduckgo for BMW, rather than pay to advertise to me for 2 months after I bought a BMW.

Note that this is how targeted advertising currently works, I see ads for products I have already purchased, which is just wasted money.

They work great for first-party networks like Facebook and Google. They just don't pay out well for 3rd-party publishers.

While I agree with a lot of what you said (Mercedes can just pay for keyword searches on BMW or similar to still target and be effective with cheaper and "old school" methods). But I don't think a lot of the advertisements for already purchased products is wasteful.

See Coke (and what follows is overly simplified).

Everyone already knows who they are and their opinions on them. You might ask "Why does Coke advertise?" and it'd be a good question. Sriracha doesn't and they are a household name, surely Coke has more standing than them. Coke advertises not only to influence you from a young age (getting new generation of coke drinkers) but to ensure that you associate a good feeling with your purchase. This is apparent in car commercials too (especially in America). That BMW commercial isn't to convince people to buy a new BMW, kinda ridiculous when you think about it and the money that you have to spend on a car like that (consider how often you see commercials for high end cars that the general public can't afford). Luxury car makers sure do want you to feel superior about your decision to buy their car though (which there's connection with "my next car will be X so I'm superior).

Compare this to McDonalds, who knows you'll be hungry soon and wants you to visit them for your next meal. These companies have different goals, and of course their advertising will be performed in just as differing ways. Not all advertising is the same. Though I'm not sure this is the best strategy for Amazon when I buy a deck of cards, I don't need 20 more types. But maybe it is effective and that's why they keep doing it.

Yes, such second order effects are important and often overlooked. One thing is to confirm that the recent buyer's decision was right.

But also, these ads create a general impression of high quality for a brand, and for this to be effective, everyone needs to know about this. Status symbols can only be status symbols if they are recognized by both the people who can and cannot afford it.

Therefore ads of luxury items viewed by people who will never buy it is still valuable to the company because they set the stage for the status associated with the brand.

This is a second order effect of crucial importance that people often overlook when only looking at first order effects.

>I'm not sure this is the best strategy for Amazon when I buy a deck of cards, I don't need 20 more types. But maybe it is effective and that's why they keep doing it.

For standard playing cards, probably not, but for collectible card games, tarot cards, the blank cards used by game designers when building prototypes, card driven board games, etc. it might be significantly more effective. Those are all "cards" things where customers are likely to be repeat buyers or interested in trying other options.

They were laughably bad about distinguishing those sorts of different types/audiences in the past, and as in your example still aren't always good, but anecdotally seem to be gradually getting better. Maybe the gradual investment in development of machine learning and accumulation of data over time will result in less ridiculous suggestions in a decade or two.

Oh I fully agree with this. I think they keep suggesting playing cards because I have bought a ton of board games from them. But I just bought a single deck of bicycle cards and I get way more suggestions for cards than games or other categories of stuff I buy. But I think that is just a categorical distinction that they haven't made and might be hard for ML to pick up on because of the nuances involved.

If you are seeing ads for stuff you already purchased, it could be that the ad network tracked that you have viewed the item but didn't properly track the purchase.

The tracking isn't perfect and not every targeted ad you see is intentional.

'The tracking isn't perfect and not every targeted ad you see is intentional.'

Admittedly based purely on anecdotal evidence; this is something of an understatement.

'But are targeted ads worth more? Yes, if I'm shopping for a BMW then Mercedes definitely wants to advertise to me.'

Since you are likely already aware of Mercedes and have opted for BMW instead, I'd question the logic of Mercedes spending good money to continue advertising to you?

Because they're not BMW customers yet. Until that cash is spent, they are still a potential sale for you.

You see a lot of comparison ads at this level, trying to sway purchasers.

Let me know if I'm wrong but content providers are paid a flat rate for inpressions, are they not? It would be interesting to pay forward high value impressions. Would you start to see content providers fishing for ad whales?

Check out realtime bidding[1]. About 5 million impressions per second are bid upon by hundreds of ad companies. Yes they all see all the data, including IP, cookie, useragent, url, etc.

[1] https://en.wikipedia.org/wiki/Real-time_bidding

> Yes they all see all the data, including IP, cookie, useragent, url, etc.

Are you sure about that? That would widen the tracking scope by a lot, and would surely make adsense/adwords completely GDPR-incompatible.

AdSense and AdWords work a bit differently and aren't exactly "real time bidding" in the industry terminology sense of the word. By that I mean they are real time and there is a bidding element, but AdWords for example stays under the Google roof and typically does not go on a real time bidding ad exchange. Contextual targeting is definitely kosher under GDPR, so Adwords and Adsense likely fall under that umbrella, for the most part.

AdX is Google's ad exchange. Over there, you do see a lot of data. However, I would bet that the personally identifying data is mostly scrubbed in the EU. User agent and page URL are not identifying enough, so they're probably included in the data.

No, most ad impressions are transacted in real-time through an auction where they receive bids from dozens of adtech companies representing thousands of advertisers and millions of campaigns.

Sometimes campaigns are bought on a flat-rate basis for a certain amount of impressions but as of 2019, these are just treated as any other bid in the auction and only override the bid price where there's danger of not meeting the final quantity.

It’s important to realize that this way of advertising is definitely important for advertisers, and adds a lot of value to them. It’s just that it’s not visible to publishers.

Having said that, 2009 is a long time ago, and I would like to see this study repeated before drawing conclusions about the current ad landscape.

That's a typo. It's a 2019 paper. See the link elsewhere in the thread

Exactly. This study completely ignores the fact that retargeting through the Facebook and Google pixels is highly effective for advertisers. I have run retargeting campaigns with ROAS (return on ad spend) as high as 30x.

Without the ability to retarget, advertising revenue at both Facebook and Google would plummet. The majority of conversions for advertisers come from retargeting (behavioral) campaigns. Advertisers run cold traffic campaigns (non behavioral) just to be able to cookie a group of users interested in their niche of product or service. They then show a different set of ads to those that clicked on the initial ad and met some behavioral criteria - for example they read to the bottom of the landing page or watched more than 1/2 of a sales video. It is this second set of ads that results in most conversions from new customers.

So the entire model falls apart if we lose the ability to run retargeting (behavioral) campaigns. Most advertisers lose money on cold traffic campaigns, and make up for it with behavioral campaigns. When behavioral advertising stops, so does non-behavioral, and the whole Facebook and Google house of cards comes crumbling down in a hurry.

The money could have been eaten up by the advertiser.

If the untargeted ads lead to less valuable placements, then it will hurt the revenue of the advertiser.

Short term, both the ad network and publisher can get away with bad placement and make the same amount of money. It will take longer for the advertiser to see the loss in conversion and reduce their spend accordingly.

I think statistics wins here vs collecting and computing everything. Google has search intent so as long as you keep searching for something you are still interested. Same with Amazon. FB is more demographic based. I mean I guess you Google could just retarget you in every search query or in gmail but you might be off put when you get BMW ads when you search for vitamins. I've been retargeted by Amazon on FB but it's been pretty comical. Those ads have largely stopped so my guess is that Amazon did not find a positive ROI.

Search intent (behavioral) and demographic both suck compared to contextual. Contextual advertising is the "premium" ad space sold directly by publishers. An car maker says "I want to be in Car + Driver" and they put their ad there and it's the most expensive type of buy but it outperforms everything else by a wide margin.

The reason "targeted" ads exist is not because they work better, but because they create more inventory that would otherwise not have been sold.

I mean that is obvious. Here you own the market basically. Your competition is other content providers.

well that's what happens when you launder dark money with the info gathered

Exactly. If the public justification for a behavior doesn't actually make sense and the behavior continues then there's probably another private motivation which is being satisfied.

I find this quote very odd. I mean, 4% advantage in a winner take all economy can be the difference between boom and bust.

How strange would it be for me to write the same article, wondering why elite athletes go through all the trouble they do to get an 'only 4% advantage'.

There is no "ad tech tax". It's called a supply chain. The end product costs more than the raw parts in every industry.

The issue for publishers here is lack of scale, no cookies, and 2nd-price auctions, meaning they don't get enough high bids and don't get the full price for those bids when they do happen.

More to the point, revenue doesn’t include expenses, so it doesn’t matter that the targeted ads cost more....

It seems disingenuous to compare something abstract like advertising to the process of adding value in manufacturing. They are concepts in two different classes.

I don't think it's disingenuous. The advertiser is willing to pay a lot more for the ad after the extra tech is added on. That's a pretty clear case that the extra tech makes the same ad impression more valuable.

I don't agree that it's value add since the advertiser pays the publisher directly, and the advertiser then slaps on all of the extra bells and whistles, so the impression isn't modified to be more valuable before it gets to the advertiser.

However, the comparison is not disingenuous. Even though I disagree with the parent poster, there is a clear perspective where the two are comparable.

There is some confusion about what a "publisher" means. A publisher is either an SSP (a platform where publishers are aggregated by flat contract fee on a time or traffic basis with guarantees) or a singular site.

> There is no "ad tech tax"

That is correct. You might get better revenues (as a publisher) dealing with SpotX (an exchange) over say...Viant (a reseller who acts as a publisher to SpotX), but probably won't do better on volume, which directly correlates to payout. Then again, SpotX may not pay you as much for your average demographic and volume as Viant, who wants your business more than SpotX. None of this is supply chain. The chain is not a chain, but more of an amalgam of situations that is affected by the market, as much as personal relationships. Conceptually, an ecosystem where anyone can consume from anyone (as a publisher) and feed from anyone (as an exchange).

> The issue for publishers here is lack of scale

You don't know that. In 2009, the economy was still recovering and ad-tech had been slapped hard in 2008, leaving banner ads at fractions of the previous years. They have slowly floated down a few more cents to where they are today, primarily due to better targeting, ad fraud, video, mobile browser support, and clickbait (er native) ads.

> no cookies

This was the comparison that led to the 4% revenue bump. If platforms do not pay forward to the publishers (because why bother, the platforms set their own cookies anyway), it suggests that publishers shouldn't bother with targeting. That's exactly what has happened. No platform consumes publisher targeting data in arbitrage, because it might be faked. Using something like Zvelo for context and your own cookies, you get a much better view of the client.

> 2nd-price auctions, meaning they don't get enough high bids and don't get the full price for those bids

Whatever "high bids" or "full price" means here, is nebulous. How an exchange decides to run auctions is often negotiated up front but is, ultimately, black box. What this has to do with publishers is confusing. Publishers rarely get paid off what the platform makes. You sign an order for a set period of time or slice of impressions unless you have traffic that is hundreds of thousands per day (an exeedingly small number of sites). In the case where you run a Real Time Bidding auction (header bidding), you might make some variable money. It's rare and wasn't even seen in the wild (ie IAB) till well after 2009.

See this more recent breakdown: https://www.emarketer.com/content/why-tech-firms-obtain-most...

Do you have any good links to industry sticks and studies for publisher/platform deal pricing scenarios or ballpark rates for those pubs in the several hundred thousand impressions/day range?

Nobody in adtech confuses publisher and SSP. And why are you mentioning 2009? The paper is about data from a single week in 2016 from a single publisher. Did you actually read it?

Scale is the main issue because publishers need to have users with cookies, then match cookies to high-value bids, and then receive enough competing bids from advertisers to see a real difference in rates. This is fundamental market mechanics. Publishers getting flat-rate deals is rare, not common. Most of the time they get paid on variable programmatic basis with some take rate by the upstream SSP.

It's a supply chain because these vendors facilitate the buying of media inventory. That's the definition of a supply chain. You can build your own car after buying raw parts but that doesn't mean that there's no supply chain that lets you buy the finished product from Ford. The article you linked shows exactly where the money goes to in the chain. DSPs, DMPs, verification vendors are used to buy ads and they need to be paid. You can easily avoid it and deal with the publisher if you want, but advertisers don't because of the value they get from those vendors.

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