Internet advertising is a Ponzi scheme

Bruce Philp is a brand strategy consultant and author of Consumer Republic, winner of the 2012 National Business Book Award

This story was updated at 4:30 p.m. on April 30, 2014

Timing is everything. Behavioural economics arrived in my consciousness via a 2001 piece in the New York Times Magazine profiling Richard Thaler, one of the leaders of this radical movement in the dismal science. It was called “Exuberance is Rational,” and described the lonely, heretical work of proving that value is subjective, and consumers are emotional and unpredictable about how they perceive it. It got a lot of pass-around in the ad biz at the time, because it seemed to validate once and for all that persuasion is as much art as science, and that understanding people is the key to being good at it.

Facebook wants you to believe marketing is all about measuring what consumers do—but it’s really about understanding what they want (AP)

A year later, a colleague of Thaler’s, Daniel Kahneman, won a Nobel Prize for his work on this. It should have changed marketing forever. The problem was, at that very moment, the commercial internet was achieving critical mass, and it burst into the room like a drunk during a wedding speech. Suddenly, it was all anybody could see.

That it distracted us from the revelation of consumers’ humanity only makes the internet’s current disappointing state harder to take. When marketing exchanged its cow for magical digital beans, the promise was that this new way of doing business would restore integrity and sensitivity to selling. It would give us the miraculous ability to instantly measure the impact of everything we do. And it would allow us to personalize the experience of every human so that all anyone would ever see was what was relevant to them. Taken together, those two things would not only make marketing more accountable, they would make it perfectly efficient.

Instead, it’s become a petri dish for grifters and frauds, and one of history’s great broken promises.

Related
The real problem with online ad fraud? No one cares enough to stop it

Or so it has seemed lately. In recent months, there has been a steady, ever-louder drumbeat that not only is digital marketing not the hoped-for panacea, it may actually threaten the viability of marketing itself. A respected research firm recently accused Facebook, for example, of “failing marketers” because content posted there reaches barely 16% 6% of its promised audience (and it’s trending downward). For that matter, thanks to offshore “click farms,” you can’t even believe a Facebook Like or Twitter follower count anymore. In fact, by one recent estimate, about 36% of all the traffic on the web is fake—“the product of computers hijacked by viruses and programmed to visit sites.” This spring, under the headline “Digital Ad Fraud Is Rampant,” one major marketing trade bleakly predicted nothing would be done about all this because everybody in the business was profiting, except marketers. As one executive put it, “Anyone… who is playing it straight gets screwed.” Until all the trust is gone. Then everybody’s screwed.

At a certain point, as a marketer, you have to ask yourself what you’re in this for. I don’t subscribe to the Soviet notion that marketing is about efficiently meeting needs. I think we’re here to make money by making people happy. That takes empathy and insight, and it also takes tools and processes that are themselves more subjective and less certain. We may live in a world where even our thermostats can keep track of what we do, but they can’t know why we do it, or what made us want to. And those questions are what marketing is really about. We aren’t here just to measure things. We’re here to make things happen. To do that, you have to really understand the people you want to move, and they have to trust you enough to be moved.

More from Bruce Philp
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I’m confident the marketing community will eventually fix this – with stakes this high it has no choice – but we could do more. This seems like the right moment to reset the whole way we think about selling. Business needs to stop delegating marketing to machines and use the leverage empathy gives us. It’s time we walked a mile in the consumer’s shoes, instead of just counting their footprints. It’s time we rediscovered the exuberantly irrational, subjective, emotional, chaotic splendour of the human marketplace. It’s where all the inspiration is, and so very worth the effort.

This story originally appeared in Canadian Business

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