WHICH HALF IS WASTED?

N.B. (Almost) All images come from2

HI I’M RICK.

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I USED TO WORK HERE.4

THEN I DID SOME INVESTING.

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NOW I WORK HERE.6

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I’VE BEEN WORKING ON A BOOK CALLED WHICH HALF IS WASTED.

LET’S TALK ABOUT ECONOMICS

Without talking about Ron Paul or Schumpeter.

And even really not much Keynes.

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COLLEGE.

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Robert Malthus

Adam Smith

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HOMO ECONOMICUS

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“[POLITICAL ECONOMY]...IS CONCERNED WITH [MAN] SOLELY AS A BEING WHO DESIRES TO POSSESS WEALTH, AND WHO IS CAPABLE OF JUDGING THE COMPARATIVE EFFICACY OF MEANS FOR OBTAINING THAT END.”John Stuart

Mill

Mill, John Stuart. "On the Definition of Political Economy, and on the Method of Investigation Proper to It," London and Westminster Review, October 1836. Essays on Some Unsettled Questions of Political Economy, 2nd ed. London: Longmans, Green, Reader & Dyer, 1874.

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ONE PROBLEM:HOMO ECONOMICUS DOES NOT EXIST.

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Alfred Marshall

John Maynard Keynes

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AN EXTERNALITY IS A COST OR BENEFIT THAT IS NOT TRANSMITTED THROUGH PRICES.

Arthur Cecil Pigou

EXTERNALITIES CAN BE POSITIVE OR NEGATIVE.

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ADVERTISING IS AN EXTERNALITY. BUT POSITIVE OR NEGATIVE?

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A PENDULUM HAS SWUNG THROUGHOUT THE HISTORY OF ADVERTISING

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– JOHN WANAMAKER, CIRCA 1920

"HALF THE MONEY I SPEND ON ADVERTISING IS WASTED; THE TROUBLE IS I DON'T KNOW WHICH HALF."

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RATIONAL EMOTIONAL

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- DIRECT MARKETING- “SCIENCE-BASED” ADVERTISING

- “SELLING COSTS”

- BRAND MARKETING- CREATIVE ADVERTISING

- TRADEMARKS

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THEORY #1:INFORMATION

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THIS IS NOTFOR LACK OF INFORMATION

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THEORY #2:SIGNALLING

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A POSITIVE ASSOCIATION

BETWEEN ADVERTISING AND

QUALITY.ADVERTISING THUS

MAY SIGNAL QUALITY, REGARDLESS OF

WHAT THE AD SAYS.

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NOTHING KILLS A BAD PRODUCT FASTER THAN GOOD ADVERTISING.

– BILL BERNBACH

We see this in tech too find that quote

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THEORY #3:BRANDS.

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Joan Robinson

Edward Hastings

Chamberlain

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THE MOTHER AND FATHER OF ADVERTISING

ECONOMICS.

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IN 1933 CHAMBERLIN BROKE DOWN ADVERTISING’S ECONOMIC ROLE INTO TWO PARTS: THAT OF THE TRADEMARK, OR BRAND, AND THAT OF “SELLING COSTS,” OR THE SPREADING OF INFORMATION AND THE REPETITION OF THAT INFORMATION, AKA DIRECT.

Theory of Monopolistic Competition. A worthy read.

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David Ogilvy

Bill Bernbach

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David Ogilvy

Bill Bernbach

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“I WARN YOU AGAINST BELIEVING THAT ADVERTISING

IS A SCIENCE.”

— BILL BERNBACH

“I DO NOT REGARD ADVERTISING AS ENTERTAINMENT OR AN ART FORM, BUT AS A MEDIUM OF INFORMATION.”

—DAVID OGILVY

quote from confessions about headline size

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David Ogilvy

Bill Bernbach

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Howard Draft

Alex Bogusky

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BRAND + DIRECT =

360 DEGREES.

THE NAYSAYERS

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“THE QUASI-PEACEABLE GENTLEMAN OF LEISURE, THEN, NOT ONLY CONSUMES OF THE STAFF OF LIFE BEYOND THE MINIMUM REQUIRED FOR SUBSISTENCE AND PHYSICAL EFFICIENCY, BUT HIS CONSUMPTION ALSO UNDERGOES A SPECIALISATION AS REGARDS THE QUALITY OF THE GOODS CONSUMED. HE CONSUMES FREELY AND OF THE BEST, IN FOOD, DRINK, NARCOTICS, SHELTER, SERVICES, ORNAMENTS, APPAREL, WEAPONS AND ACCOUTREMENTS, AMUSEMENTS, AMULETS, AND IDOLS OR DIVINITIES.”

– THEORY OF THE LEISURE CLASS

Thorstein Veblen

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"THE MELANCHOLY DISCIPLES OF THORSTEIN VEBLEN WOULD HAVE DESPISED THIS SHIRT."

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“HARMONY THEREFORE, BETWEEN CONSUMER PREFERENCES AND THE PATTERN OF PRODUCTION MAY SIMPLY INDICATE THE ADAPTATION OF MAN'S TASTES TO THE RIGID REQUIREMENTS OF THE PRODUCTIVE SYSTEM, AND THAT WOULD HARDLY BE A CAUSE FOR SELF-CONGRATULATION.”

– THE JOYLESS ECONOMYTibor Scitovsky

ADVERTISING HAS US CHASING CARS AND CHOTHES, WORKING JOBS WE HATE SO WE CAN BUY SHIT WE DON’T NEED.

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“WHEN ANY SPACE IS BOUGHT, EVEN IF ONLY TEMPORARILY, IT CHANGES TO FIT ITS SPONSORS. AND THE MORE PREVIOUSLY PUBLIC SPACES ARE SOLD TO CORPORATIONS OR BRANDED BY THEM, THE MORE WE AS CITIZENS ARE FORCED TO PLAY BY CORPORATE RULES TO ACCESS OUR OWN CULTURE.”

– NO LOGONaomi Klein

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“THE PROTECTION GIVEN BY CLOTHES IS EXCLUSIVE TO THOSE WHO USE THEM. BUT WHEN PEOPLE ARE NOT SATISFIED WITH A MERE COVERING AND PROVIDE THEMSELVES WITH FINE CLOTHING PLEASING TO THE EYE, THE ENJOYMENT IS SHARED BY ALL WHO MEET HIM.”

– THE NEED FOR FAITHSir Ralph Hawtrey

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“MARKETERS EXPLOIT THE FOCUSING ILLUSION. WHEN PEOPLE ARE INDUCED TO BELIEVE THAT THEY “MUST HAVE” A GOOD, THEY GREATLY EXAGGERATE THE DIFFERENCE THAT THE GOOD WILL MAKE TO THE QUALITY OF THEIR LIFE.”

– THINKING FAST AND SLOWDaniel

Kahneman

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WE ALL HAVE TO COME TO TERMS WITH THESE.

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THE GOOD NEWS

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“ADVERTISING, LIKE DEMOCRACY, IS TERRIBLE IN PRINCIPLE BUT BETTER THAN ANY KNOWN ALTERNATIVE IN PRACTICE.”

Richard Schmalensee

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THE RETURN FROM ADVERTISING AND THEREBY ACHIEVING AN INITIAL SALE MAY BE GREATER FOR A HIGH-QUALITY PRODUCT, DUE TO THE GREATER REPEAT PURCHASES THAT COME FROM SATISFIED CUSTOMERS

Phillip J. Nelson

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“EVEN THE CENTRAL PLANNERS IN THE OLD SOVIET UNION HAD TO ESTABLISH ‘PRODUCTION MARKS’ TO STOP MANUFACTURERS CUTTING CORNERS ON QUALITY.”

http://www.economist.com/node/770992?story_id=770992

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ACCORDINGLY, EVEN NON-PRICE ADVERTISING CAN LOWER PRICES, AND THIS ASSOCIATION APPEARS TO DERIVE IN PART FROM THE ENTRY OF LARGE-SCALE FIRMS INTO MARKETS THAT ALLOW NON-PRICE ADVERTISING

Lee Benham

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“THE NEWSPAPER INDUSTRY PROVIDES ANOTHER EXAMPLE OF SUBSIDISED COMMODITIES, BELONGING TO THIS CLASS; HERE THE SERVICE PROVIDED TO THE PUBLIC IS SUBSIDISED (THE PAPERS ARE SOLD TO THE PUBLIC BELOW COST), IN ORDER TO ENHANCE THE DEMAND FOR ADVERTISING SPACE, BY THE ADVERTISERS.”

Nicholas Kaldor

Kaldor, N. 1950. The economic aspects of advertising. Review of Economic Studies 18, 1–27.

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UH OH.

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BUT WHAT ABOUT THE INTERNET?

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IN 2011, WEB 2.0 VISIONARY TIM O'REILLY BLITHELY COMMENTED THAT GOOGLE "SOLVED THE PROBLEM POSED BY JOHN WANAMAKER A CENTURY AGO"

https://plus.google.com/107033731246200681024/posts/2NU9pZEZ5t1

ADVERTISING IN THE US$114 Billion Total Ad Spend, web is 30% and growing

Source: Kantar Media, IAB, E-Marketer62

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

US Online Ad Spend, in BillionsProjected

BUT THAT MONEY IS COMING FROM PRINT, NOT TV

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2006 2007 2008 2009 2010 2011

Online Ad Spend Percentage Print Ad Percentage

Source: Business Insider, via Company filings

ANOTHER WAY OF LOOKING AT IT IS TO SAY THAT ONLINE AD MONEY IS

COMING FROM DIRECT AND NOT BRAND.

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THIS DOESN’T SEEM SURPRISING

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TELEVISION ADVERTISING IS ACTUALLY GROWING

66Source: Business Insider, via Company filings

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2006 2007 2008 2009 2010 2011

US Television Ad Spend as a percentage of total

(I MEAN, NOT A LOT, BUT EVERYONE THINKS IT’S SHRINKING. BUT IT ISN’T.)

67Source: Business Insider, via Company filings

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May ‘11 June ‘11 July ‘11 Sep ‘11 Oct ‘11 Nov ‘11 Dec ‘11 Jan ‘12 Feb ‘12 March ‘12

Change in Live + Same Day Ratings; Persons 2+; Total Day (percent)

AND THIS, EVEN THOUGH THEIR AUDIENCE IS

SHRINKING.

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SO $48 BILLION IS STILL BEING SPENT ON TV EVEN THOUGH THE AUDIENCE IS SHRINKING.

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WTF?

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THE INTERNET HAS CAPTURED DIRECT AD MONEY FROM PRINT, BUT IT IS STILL REALLY BAD AT BRAND MARKETING

“THE WEB HAS MEGA-OPTIMIZED THE SMALLEST CHUNK OF ADVERTISING, WHICH IS DIRECT RESPONSE... IT’S NOT INTENDED TO MAKE YOU FEEL SOMETHING FOR THE BRAND.”

DAVID KARP, TUMBLR CEO, JULY 2012

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72http://www.iab.net/about_the_iab/recent_press_releases/press_release_archive/press_release/pr-101112

81% OF ALL ONLINE AD DOLLARSARE SPENT ON SEARCH OR BANNERS.

73http://www.iab.net/about_the_iab/recent_press_releases/press_release_archive/press_release/pr-101112

THIS IS EVEN MORE DEPRESSING - THE CONCEPT OF BRAND LIFT AS A PRICING MODEL IS NON-EXISTENT.

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WEB ADS ARE NO LONGER ALIGNED WITH OUR MEDIA

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SOCIAL IS ERODING THE ABILITY FOR A BRAND TO CONTROL THE NARRATIVE.

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SOME BRANDS DO IT WELL, BUT THEY ARE THE EXCEPTION, NOT THE RULE.

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?AdWords

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The First Banner

AdWords

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THIS HAS BEEN MY JAM SINCE I GOT STARTED IN ADVERTISING.

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Viral Marketing

AdWords

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YouTubeAdWords

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BuzzfeedAdWords

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TimelineBrand Pages

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New Profile Pages

Old Twitter Pages

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THIS IS NOT ACADEMIC.

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“STUDIES... INDICATE THAT COMPANIES WITH STRONG BRANDS OUTPERFORM THE MARKET IN RESPECT OF SEVERAL INDICES. IT HAS ALSO BEEN SHOWN THAT A PORTFOLIO WEIGHTED BY THE BRAND VALUES OF THE BEST GLOBAL BRANDS PERFORMS SIGNIFICANTLY BETTER THAN MORGAN STANLEY’S GLOBAL MSCI INDEX AND THE AMERICAN-FOCUSED S&P 500 INDEX.”

BrandChannel

“ADVERTISING REALLY TURNS OUR STOMACHS.”

DAVID KARP, TUMBLR CEO, JUNE 201089

“CAN YOU REMEMBER THE LAST TWITTER AD YOU’VE SEEN, THE LAST FACEBOOK AD?”

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DAVID KARP, TUMBLR CEO

YOU’VE ALREADY SEEN OUR AD UNIT. IT’S THE TUMBLR POST.

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DAVID KARP, TUMBLR CEO

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Tumblr Search

Google Search

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adidasfootball

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adidasfootball

40,620 Notes

adidasfootball

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SOUP

Hipster Runoff

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“ADVERTISING SHOULD NOT BE ABOLISHED, BUT IT MUST BE REFORMED.”

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ADVERTISING IS THE EDGE OF WHAT PEOPLE KNOW HOW TO DO AND OF HUMAN EXPERIENCE AND IT EXPLAINS THE LATEST WAYS PROGRESS HAS CHANGED US TO OURSELVES. FOR ME, THAT DEFINITION OF ADVERTISING IS REALLY INTERESTING AND IS PROFOUNDLY DIFFERENT FROM THE LATEST SILICON VALLEY DEFINITION OF ADVERTISING – WHERE YOU HAVE PEOPLE PAY FOR WHO THEY CAN BE CONNECTED TO....Jaron Lanier

Apologies and thanks to the source: Luma Partners. Hate the game, not the player.

Apologies and thanks to the source: Luma Partners. Hate the game, not the player.

SERIOUSLY. SCREW THIS.

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THE DEFINING ADVERTISING ISSUES OF OUR TIME:

SOCIAL:BRING BRANDS TO THE PEOPLE.

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BRAND:BRING BRAND TO THE WEB.

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SOCIETAL:BRING BACK THE NEWS.

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