Is the digital ad market overvalued?
Business Daily
BBC
4.4 • 816 Ratings
🗓️ 22 April 2021
⏱️ 17 minutes
🧾️ Download transcript
Summary
Large companies have slashed their digital marketing budget. Airbnb and Procter & Gamble made such a cut in recent years, after coming to believe the cost doesn’t necessarily translate to increased sales. They follow in the footsteps of eBay who, in 2013, announced it would cease paying for ad sponsorship on Google. Economics professor Steve Tadelis, who led eBay’s research into this, explains how they came to conclude advertising wasn’t worth it. Also in the programme, brand safety advocate and co-founder of Check My Ads Nandini Jammi explains how the modern digital ad market works, and where some doubts lay about its effectiveness. Luke Smith of marketing consultancy Croud says companies need to be clearer in what they want from digital marketing, in order to get the most out of it. But what if the market is overvalued as a whole? Former Google employee Tim Hwang, author of ‘Subprime Attention Crisis’ says we might be looking at an inflated market that could threaten a financial crash online. Producer: Frey Lindsay. (Picture credit: Getty Creative)
Transcript
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| 0:00.0 | Hello there, I'm Ed Butler and welcome to Business Daily from the BBC. |
| 0:05.2 | Today we're asking, is online advertising the economic model on which Google and Facebook have built their empires? |
| 0:12.3 | Is it fundamentally flawed? |
| 0:14.6 | There's no way for us to verify Google's analytics at this time. |
| 0:19.7 | There's no way for us to know that Google is ever telling us |
| 0:22.7 | a truth about views and clicks and impressions. And if that's true, doesn't that mean there's a huge |
| 0:28.2 | overvaluing of the global ad industry? Could this amount to a huge tech bubble? I do think that |
| 0:34.7 | there are a lot of dynamics that are like market bubbles we've seen in the past, |
| 0:37.8 | where cognitive dissonance actually drives mass behavior and the whole market is going to break down. |
| 0:42.9 | That's all to come in Business Daily from the BBC. |
| 0:48.1 | Well, it all started after a conversation I had with a consulting company that eBay hired to help them measure their |
| 0:57.4 | returns on advertising, I came to the conclusion that they are great at marketing themselves, |
| 1:04.6 | but they really don't understand the subtleties of measuring the returns to marketing. |
| 1:10.8 | That's an economist called Steve Tedlis, who back in 2012 was working for the retail and |
| 1:16.3 | auction giant eBay. Based on the hunches that he formed around this marketing consultancy |
| 1:22.3 | that eBay was paying hundreds of millions of dollars to annually for its online marketing, |
| 1:28.7 | he presented a theory to his employers that basically they were wasting much of their money. |
| 1:33.5 | The theory was proven in two steps, one where they shut off paid search for their own |
| 1:39.4 | keyword, keyword eBay, which any sensible theorizing would suggest that that is completely wasted because |
| 1:46.8 | anybody who types the keyword eBay in a search engine clearly knows where they're going. |
| 1:52.5 | And when they did that little experiment and shut it off, we were able to see on that channel |
| 1:59.0 | that all of the traffic that was lost from paid search keyword eBay was gained through organic search. |
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