See original post and follow up discussion on /r/slatestarcodex here
I have several friends whose job it is to sell internet advertising. Other internet advertising companies pay them to generate traffic (sometimes traffic for websites and sometimes traffic for pre-existing online advertisements). They then go out and buy Facebook and Google ads to generate clicks on the targeted URLs. My friends are not designers or creative marketers; they are buying and creating very simple text based advertisements. Why do these companies pay my friends to do this, when it seems as if they could for less money, just buy Google and Facebook ads themselves? My friends have no idea. In their world, all that matters is the cost of generating clicks and the cost of selling clicks. Selling products, brand awareness etc. all are irrelevant; they only care about clicks.
Prior to this, my friends created and operated click-farm websites (websites that no human would actually visit) where they would make money by selling advertisements on these sites based on traffic which 100% derived from buying traffic through ads.
This all seems fishy to me. Then I read stories like like Uber being defrauded of 2/3rd their ad spend (approx $100 million) without realizing it and it having no impact on their business.
https://twitter.com/nandoodles/status/1345774768746852353
Similar stories appear to be true for P&G ($200 million), Chase and other large businesses.
Freakonomics did a two part study on this question raising similar questions, finding that ads have no shown ROI on investment and that nobody really cares enough to study this problem properly:
https://freakonomics.com/podcast/advertising-part-1/
https://freakonomics.com/podcast/advertising-part-2/
So my question to this community is: what the heck is going on? Is online advertising really so terrible? What is everyone getting wrong? and if internet advertising is so often ineffective, why does nobody care?
A bit unrelated, but here are two other interesting posts on advertising:
Gwern on the tremendous cost of hosting banner ads:
Kevin Simler’s signalling theory of advertising: