Don Marti

Thu 24 May 2012 06:20:30 PM PDT

Small businesses and targeting

Great comment from Theodore Ts'o on my "Ad targeting: better is worse?" piece. It's good to see people thinking about this stuff.

If the only value that an advertiser can give to a consumer is that they can afford to spend money on advertising, that's a pretty lousy signal.

Signaling about a product or service by "wasting" money on advertising is like signaling about link congestion by "dropping" packets. It's apparently inefficient, but somehow necessary, and the solution is worse than the problem. (Unfortunately, The Waste in Advertising Is the Part That Works and other papers on the subject are behind journal paywalls.) Signaling by advertising, for a business, is like growing an attractive tail if you're a male peacock: something you can only afford to do if you're healthy and fit.

It seems like a lot of people who are trying to reinvent advertising are doing so without understanding the most solid model for why advertising even works. Of course, you don't need to spend the money on dudes in tight pants throwing a ball around. The best signal is one that your potential buyer will interpret as expensive. You can sponsor an OK Go video or an autonomous vehicle.

I can think of tons and tons of Superbowl ads where the product was crap. And it doesn't necessarily mean that the company is even profitable; it might just mean that it's a startup who was able to pull the wool on some spectacularly clueless VC's.

Also true. Any signal attracts false signalers. If the laws and norms around the business are solid, though, only a truthful signaler will be able to afford to sustain a signal.

One of the reasons why I like targeted ads is that they don't shut out a small business.

This is a hard one. Pizza Delicious Bought An Ad On Facebook. How'd It Do?

A small business can't make a big advertising buy, but it can buy a niche based on targeted content, or targeting users.

Search ads are the niche-iest form of targeting content, and they seem to perform well so far. But in a medium where it's common to combine both user and content targeting, it's hard for users to tell how much signal the advertiser is really sending. (That's why it's encouraging to see Google supporting Do Not Track—by limiting the amount of user tracking that's possible, the user can get more signal and make the content tracking more effective.)