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Comment by soared | Hacker News Reader

I don't understand this line of reasoning. P&G, Unilever, Cocacola, etc have never, not once in history, had a gung-ho C level exec who said "Screw it, I'm going to find out if our advertising works". And then either found it works and kept spending, or found out it doesn't work and saved literally billions of dollars.

There is so much money at stake that could be either saved or generated, its simply not possible that no one has looked at it. I used to help Pepsi/Fritolay set up tracking to tie advertising on youtube to in-store sales. They spent millions of dollars to measure their ads, Google had a clean-room data center specifically for pepsi/frito. The idea that no one actually checked if this system works is simply not possible.

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The trick isn't figuring out whether advertising in general influences people's behavior. The trick is in figuring out if any particular advertising campaign generated more profit than it cost to run.

Also, there's one alternative that's often forgotten in these discussions: Perhaps game theory is at play. It may be, for example, that, across entire industries, advertising costs more money than it's worth. But that everyone has to do it anyway, because anyone who chooses not to will start losing ground to everyone else. IOW, just like in the standard prisoner's dilemma, choosing to act is less about increasing your potential gains than it is about limiting your potential losses.

There is an interesting long-running natural experiment in the pharmaceutical industry that suggests, albeit inconclusively, that this is the case.

Distilling it down into "any particular advertising campaign" is pretty myopic in this world. It's about strategy as a whole over decades. Not every ad campaign is to drive immediate sales or signups (direct response). Branding and awareness campaigns can take years to run, and these are ALL diligently measured at every stage. Losses do occur do to negligence, malice, and poor execution all the time, but the brands should take some blame as well as they often feel compelled to spend. They have huge budgets that they NEED to spend regardless of they perform - sometimes due to accounting shenanigans, sometimes because they don't know any better, etc.

No matter what time scale you pick, there's still a point where ad spending costs more than you benefit. As time passes, the boost from any campaign decays. For any particular person you only need to show them so many ads to maintain awareness.

> these are ALL diligently measured at every stage

Mmm. Sometimes. Sure, you can obsessively measure audience and sales numbers, but if you don't have any controls then it becomes nearly impossible to figure out how much of that came from ads and how much came from everything else in the entire world.

it is true that that profit/loss point exists, but it may be impossible to measure. But it's very clear that 75+ years of Coca Cola marketing strategy has produced the situation where any human on earth immediately associates "Coca Cola" with soft drink.

If Coca Cola cut advertising 90% this afternoon, they likely wouldn't see the consequences until a new generation or two grew up.

I suspect that a similar dynamic can be in effect with many industry events. Everyone would collectively perhaps be better off with pulling out of or at least scaling back on big industry shows. But that doesn't mean it makes sense for just you to pull out. (And, certainly, your events team probably isn't going to push for scaling back.)

There's also a huge mutual back-scatching thing going on. I remember in a former life we wanted to pass on a big software vendor's user group show because, while we sort of needed their software for some important customers, we got very little traffic at this expensive event. Their CEO called our CEO and basically said to him "Be a pity if something happened to our partnership."

> IOW, just like in the standard prisoner's dilemma, choosing to act is less about increasing your potential gains than it is about limiting your potential losses.

You seem to be assuming that the potential gains are limited to current players of the game in this comparison.

It's possible that Coke, Pepsi etc. are all losing more money on ads than they're gaining in market share against their current competitors and in increased sales. But that doesn't begin to address the question of whether advertising is a net loss.

For one, the advertising also serves as a collective moat against new competitors, which could enter the market and eat up both Coke and Pepsi's market share. Maybe their biggest gain from it is that a bankrupt soda company from the 80s didn't replace them, and that a similar company today wouldn't have room to enter the market.

It also doesn't account for more complex effects like a net increase in sales for all companies in that market. E.g. maybe Rolex, TAG Heuer etc. all benefit in the long term from expensive watches being seen as fashion accessories.

If Rolex stopped their advertising spend one month and saw little immediate change, then TAG Heuer etc. might follow suit. But both might only experience the real loss years later as "luxury watches = must buy" faded from the psyche of their current and potential customers.

Fortune 500 is a cesspool of insane inefficiency balanced by equally ~~insane rent seeking~~ insanely secure revenue. The sooner everyone understands this, the better.

First, care to define your terms?

Second, inefficient relative to what?

Third, so far, what you've written here looks like a rant, not a predictive theory nor a powerful explanatory theory.

Would you like to quantify your claim? Or at least make it more precise? As it is, I don't think it advances your argument.

I'm interested in strong logic, data, explanations, and persuasion. I see none yet.

> Second, inefficient relative to what?

The sad thing is it's not inefficiency relative comparable things. But anyone that has worked at these places or sold B2B to them just knows it on intuitive level that they are garbage, and need a heavy sedative to think there are no alternative.

> not a predictive theory nor a powerful explanatory theory

It's not. It's about letting go of some efficient market ideal and then finding new ideas.

We can look at Fortune 500 case-by-case to learn new things

> Cola cola

Sugar drug cartel. Despicable business with very stable revenue despite being a net drag on society. (At least "regular" drugs have a lot more upside!)

> Proctor and Gamble

Just as restaurants are reaching down market, and the inefficiency of everyone cooking and cleaning is starting to have market implications, we should see their reign finally dwindle. Wash-and-Fold should follow laundromats. The specialization means that stupid differentiation between products for uninformative consumers (c.f. https://en.wikipedia.org/wiki/Monopolistic_competition) should go away and restaurants and laundromats optimize.

Personal soaps and cosmetics (of course many soaps are cosmetics) however will stay as cultural reasons ensure people will continue to clean themselves and not contract that out for the foreseeable future.

Thanks for elaborating. I don't think I disagree with many or most of the points you've made.

It might be interesting to define a systematic and testable definition of organizational efficiency relative to an ideal market. Just like combustion engines can be compared to their theoretical maximum efficiency, it would be interesting to compare a particular organization against its maximum potential.

Here is another angle on the topic of relative efficiency. Consider a particular organization. Coca Cola will do as an example. Given its environment (financial incentives, regulations, cultural norms, etc), are we surprised by its behavior? This raises the question of how much an organization's particulars (e.g. leadership, history) affect its efficiency.

I suppose I take a systems view of it. Many deplorable businesses survive in niches. But can you "blame" them? It is a matter of perspective: organizations, like life, adapt to their environment and modify it to their liking. Such organizations can stretch the environment to or past its breaking point for a relative long period of time before having to deal with the downstream consequences.

> the inefficiency of everyone cooking and cleaning is starting to have market implications

Elaborate on your reasoning here? While I can maybe imagine a more centralized food preparation system being more efficient, the currently growing market solutions (DoorDash, etc.) are certainly not, and I can't think of a system in which transporting clothing somewhere for someone else to clean would be more efficient than an in-home washing machine. The wasted energy alone would be colossal.

How is Coca Cola rent seeking? How about Apple? I suspect you aren’t using that term correctly but maybe I’m missing something.

Effectively every restaurant in the US has to pay either PepsiCo or Coca Cola. Similarly, if you want to buy a non-alcoholic beverage at the grocery store it's mostly down to those two (with Dr. Pepper having a much smaller but still significant stake). Any competitor that emerges just gets bought up by one of the three.

Apple's half of the phone Duopoly. Either you pay them or pay Google if you want a phone and want to buy software for it.

Yes. But in fairness I retracted rent sneaking as a combination of monopolization, bonafied rents, addiction, and just shear damn inertia contributes to the malaise.

Calling it all "rent seeking" is not a hill I want to die one.

"Rent sneaking" is an interesting typo. Going to have to give some thought to how to use that term in appropriate context.

Restaurants only pay because consumers demand it and would not visit the restaurant otherwise. That’s not rent seeking. That’s market forces. And what they pay correlates with how much their customers demand coke/Pepsi.

The rent seeking is buying up competitors until its a duopoly and then protecting that through shenanigans like exclusive agreements. It has nothing to do with consumer demand.

Buying up competitor does not immediately make it a monopoly or duopoly. Especially in industry where barrier of entry are low.

Exclusive / Special agreement with serving only one kind of Soda ( or no Pepsi where there is Coke ) are Anti-Competitive arrangement. Not Rent Seeking.

The exclusivity contracts are what some consider to be rent seeking. I don't know if this is the correct term, but I do believe they are anti-capitalist and shouldn't be allowed in a capitalist economy. If freedom of choice is so important, than large businesses shouldn't be able to use their ability to corner the market to force you into exclusivity agreements.

I'm not sure this is quite right. I would have thought that most restaurants very much WANT to sell sodas, as the margins are enormous--much, much higher than the margins on cooked food.

This page [0], for instance, says the cost of goods sold for the soda itself is a penny an ounce for the syrup and CO2. Iced tea is apparently the margin champion, as the same page indicates it can cost as little as a penny per glass.

[0] https://www.restaurantowner.com/public/Restaurant-Rules-of-T...

Coca Cola sells water with flavouring and quite astonishing amounts of sugar. Apple sells nice devices made by what might as well be slave labour.

Both are propped up - actually maintained - by huge and vastly expensive brand management strategies.

The criticisms of individual campaigns here are missing the point. It's not about micro ad spend, but the perception of value and manipulation of behaviour created by the combined effect of multiple PR and advertising efforts - which include traditional print and TV/radio ad campaigns, guided advertorials disguised as news in the MSM, interviews with prominent figures, political campaigns of more or less obvious relevance to the core business activity, state, national, and international political lobbying, direct political campaign donations, advertorials masquerading as "freelance" journalism and blogging, managed astroturfing on social media, shareholder relationship management, product placements in movies and music promo videos, articles about commercial visual design elements in trade journals. And on and on.

That perception of value is - unsurprisingly - extremely valuable. And it's very much a US way of doing business. Instead of producing products that are inherently superior, produce something that is functional but glossily packaged, brand it as a premium lifestyle commodity, and charge exorbitant prices for it.,

The prices are traditionally far out of proportion to its actual utility. In fact real utility may well be negative - see also diabetes and any number of other health issues, depression associated with social media use, debt-driven spending on lifestyle products. Etc.

So the rent seeking comes from a kind of cultural squatting. There is value in dominating discourse in all of these different ways, because discourse and narrative define markets and ultimately control behaviour. And while this is happening other kinds of discourse - which may well have more real utility - are diminished at best and crowded out at worst.

So in this case it doesn't matter if Uber "wasted" their money. Uber have their own branding thing going, and explicit ad spend is a tiny part of that.

And even if all online ad spending ended tomorrow, a small number of corporations would have a difficult time for a while, but the marketing industry as a whole would inevitably interpret the change as minor damage and route around it.

Because the ideology of capitalism is "cooridation failure, whatever", It sure would be nice to find a way for one of those companies to freeload off the culture-shaping the others do, and bring the whole enterprise crashing down!

Trademark laws exist to prevent such freeloading. In this context, they ensure only the ones paying for the culture-shaping can benefit from it.

> Both are propped up - actually maintained - by huge and vastly expensive brand management strategies.

In the case of Coca Cola, I agree - in the case of Apple, not at all. "Keyboardgate" aside, their products are vastly superior to the competition in build quality and life time. A typical Windows laptop is unusable after two, three years (almost all are made from plastic which breaks or looks extremely ugly rather sooner than later), and has next to no resale value while in contrast even old cheesegrater Mac Pro's fetch many hundreds of dollars today. iPhones are supplied with firmware updates far longer than most Android phones outside the flagship Pixel line are. OS X is, while it has gotten locked down a fair bit over the last years, still way better than Windows as it doesn't do tracking bullshit and start menu ads and decently better than Linux because no matter which device, stuff usually Just Works (tm) without having to fiddle for hours to get something as basic as a Bluetooth headset working.

Apple built themselves a loyal following with pure quality superiority over the competition, unlike HP or Dell who are only surviving because of enterprises who follow the "no one got fired for buying IBM" line.

And that doesn't even touch that it's Apple who's at the forefront of innovation. iPods, iPhones, iPads, Apple Watch, AirPods, now the M1 CPU - these entire device classes were created by Apple. When was the last time you heard about something truly innovative from the Windows/MS/Google side of IT? Only thing I can remember is the Google Glass.

What Apple is doing is not a "brand management strategy" per se - it is delivering actual value and innovation instead of rent-seeking. And for what it's worth Tesla are doing the same thing.

Apple isn't repairable. Apple devices have high prices simply because of the brand ecosystem. Old Thinkpads use commodity parts - but they command good prices because they are repairable.

Marketing the new thing is what Apple does. It is good at it. That is not the entire spectrum of customer value.

Thinkpads are pretty much the worst form factor for a laptop that doesn't transition into "toy" space.

Source: forced to use one daily. If I could get a Mac laptop running Linux but with the input smarts of the Apple trackpad and keyboard, I would in a heartbeat.

That shows that 1) people are different or 2) you are a fan of Apple hardware. It doesn't show that Thinkpads are bad. IMO they are light-years ahead of anything Apple sells.

Source: Me.

Out of curiosity, how do use it without bumping the trackpad while typing?

My trackpad is automatically muted/unresponsive while I'm typing. I suggest you figure out how to get palm rejection to activate/work on your setup, and to look if a different Thinkpad series might better fit your body (ergonomics wise).

There is no option to enable "palm rejection" in the Settings dialog on Ubuntu under "Mouse and Trackpad", as far as I can tell.

It might not be that easy, and could require manually installing some packages.

I recommend a dell xps 13 developer edition

The trackpad is superior to apples and it can come preloaded with linux

I've been using my windows laptop daily for 5.5 years without issue.

>A typical Windows laptop is unusable after two, three years

This shows that you are just spreading FUD. A Windows machine is no slower after 10 years than it is the day you bought it. Sure you might have added so much software-crap that the software runs slow (which is easily fixed) but the hardware is exactly as fast after 10 years as Apple hardware is. Do you think Apple builds their hardware out of magic and unicorns?

>but the hardware is exactly as fast after 10 years as Apple hardware is.

Capacitor, DRAM, Heat Sink, etc.... There are quality difference in hardware. Although the two / three years remarks were definitely exaggerated.

> A typical Windows laptop is unusable after two, three years (almost all are made from plastic which breaks or looks extremely ugly rather sooner than later), and has next to no resale value while in contrast even old cheesegrater Mac Pro's fetch many hundreds of dollars today.

By "typical windows laptop" do you mean a cheap model where the macbook equivalent is buying nothing at all? Of course it's going to be lacking in that case.

Well-made windows laptops exist, and hold plenty of value. But you have to pay for that, no matter what brand you choose.

> tracking bullshit

Like checking signing certificates by pinging servers almost every time you run a program?

This analysis excludes glossy packaging and status signalling from the inherent superiority, when (in terms of overall market value) they're part of the superiority.

And in Coca-Cola's case (among others) the advertising is much of what creates the value. When you know it's a Coke, it tastes better. I've had a lifetime of absorbing ads that make me think of good things whenever I know I'm drinking a Coke.

That’s not rent seeking by any accepted definition.

The answer is not complicated, and the logic on this board is strained by people I think that don't work in marketing.

1) Advertising works.

2) Coke, a sugary drink, is largely kept alive by smart marketing, that involves mostly advertising in the end.

3) Much of advertising is quite wasteful, because it is a fuzzy instrument - but on the whole, good marketing works.

4) There is a lot of self-awareness in the industry on this, and no doubt, a lot of borderline fraudulent actions by participants willingly spending money they know doesn't work.

5) Ad networks will happily sell you ads that don't work, and look the other way when there are shenanigans.

The problem here in the thread, is that people are having a hard time grasping how all of these things can be true at the same time, but it's not that hard really.

That some ad spending turned out to be 'not useful' is 'not news' when everyone knows that easily 50% of ad spending is probably wasted, we usually just don't know which 50%.

Agree with most,

>2) Coke, a sugary drink, is largely kept alive by smart marketing, that involves mostly advertising in the end.

Not sure I agree. I haven't seen any Coke Cola Ads for years, not online digital Ads and I rarely consume any traditional media. But I will still buy Coke Cola every once in a while.

They are also on all of the convenience store with decent positional shelf space or visual merchandising. Something I learned that no one on HN actually knows anything about during the discussions of App Store.

Edit: All of my friends can taste the difference between Coke and Pepsi. It is just different. So I was surprised to read comments and youtube video about "blind tasting" on the two. No, I didn't drink Coke because of Ads, I drink it because it taste better. (And some people prefer Pepsi )

Your personal situation doesn't represent the market, moreover, you spent 20 years watching coke ads growing up and having coke, it's impossible to tell how that affected you.

You saw 1000 'product placements' for coke without being aware of it in films other things. Taste is associated with familiarity and comfort.

> Taste is associated with familiarity and comfort.

I respectfully disagree, I used to work in F&B industry. And product marketing and placement has absolutely no affect on how one think something taste is good or bad. It does however remind anyone next time the walk into store they should buy coke, which does affect sales number. But not taste difference.

My 7 years old nephew hasn't watched a single Coca Cola coke in his life time, but he prefer coke over Pepsi. While my friends daughter ( and her mum ) prefer Pepsi.

"And product marketing and placement has absolutely no affect on how one think something taste is good or bad"

Yes it odes.

"My 7 years old nephew hasn't watched a single Coca Cola coke in his life time"

1) It's ridiculous to say a 7 year old 'has never seen an add for coke'.

How would you possibly know that? Unless they are living as the Amish, that kid as seen ads.

2) That someone will prefer one drink over another is not relevant to the argument.

Nobody is making the claim that 'ads make you do stuff'. No Coke ad is going to 'force Pepsi drinkers to like Coke'.

Ads are influential. They root the product in feelings, emotions, those have impact, which is why advertising is there.

3) Your nephew was probably drinking code from some age, maybe as a treat. It was Coke and not some Italian cola, because Coke has such a powerful market position.

In Italy, they drink Brio and it's quite good, you can't even get it here, if you could, people would drink it.

Coke spends billions on ads because they work not because they don't.

Part of the claim is that the people who are checking are ad execs who, if PepsiCo stopped buying ads, would shortly be out of a job (or have their budget and influence slashed). A counter to this might be that different advertising channels are likely not identically effective, and a TV ad exec has a big incentive to poke holes in non-TV ads.

PepsiCo has third-party auditors that they employ to check the checkers.

Yeah that is what is usually given as the reason so I was getting at a gung-ho CEO, CFO, CRO, Consultant, etc.

See the Pepsi Refresh Project of 2010. Where Pepsi redirected a sizable amount of ad budget (including super bowl ads) to community projects. They abandonded this strategy after a while because they lost market share.

This is the biggest large scale test of advertising I'm aware of. But it probably doesn't apply to all products.

They only lost market share because everybody else was still using advertising. Therefore, this is not a test in favor of advertising (only in the prisoner's dilemma sense).

So advertising works? If it didn't, those buying ads would not take the pepsi market share

If advertising is an arms race with more total cost than total benefit, that would be an argument that advertising works. Because anyone, at any given time, will benefit from running advertising.

It also means advertising is a net loss to society, but that is separate from the question 'does advertising work'

I think you rephrased my comment, yes.

> net loss to society

Not so clear, especially before internet search engines existed. As a consumer, I find it useful to know what's available for me to purchase.

If you're running a company, "just stop being in a prisoner's dilemma" is not one of your options.

How do you look into it though? I don't know, so i'm asking - but my immediate thought is that you treat it like science. You isolate an environment, advertise, and see if it has an affect. But the implication there is that if it doesn't have an affect, money is on the table.

If this is even remotely close to reality then it makes sense to me. Companies are more concerned with constant growth than strict efficiency, imo. They're throw as much money around as possible, and every cent lost or left on the table is panic inducing.

I also imagine different types or products and/or markets behave quite differently. Eg a new product might very well benefit from advertising - since no one can buy your product or visit your store if they don't know it exists.

For brands that large the majority of their spend isn't campaigns specific to new products, but overall brand management. The experiments would need to run for years or decades and if the prevailing belief that these are Red Queen's Races is correct, the cost if they're wrong could be the whole company.

> Google had a clean-room data center specifically for pepsi/frito.

Why?

My company provided sales data from stores to a specific team on google that compares it to users who’d been advertised to. This team didn’t want my company to influence results, and didn’t want YouTube to influence results.

More complicated since there are multiple device graphs/etc in play, but effectively tens/hundreds of millions of dollars at play and no one trusted anyone. The largest thing at risk was YouTube’s ad revenue.

But does it need dedicated datacenter? I wonder they just run different service instance rather than datacenter.

>> The idea that no one actually checked if this system works is simply not possible.

Have definitely heard that one before. No disrespect.

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