148: Calculating the ROI of advertising and social media

There’s two sides to advertising. Buying it, and selling it.

In terms of selling …. When a publisher is selling advertising, audience is the key. The publisher wants to convince the advertiser that the publisher has access to the audience the advertiser wants to reach.

The other part of that equation is the creative, but I’m not going to talk about that today.

I want to focus on buying advertising.

Back in the days when print advertising ruled, it was understood that the advertiser couldn't make a direct, mathematical connection between an ad and a sale. There’s that famous quote we all know about half your ads being useless, but you don’t know which half.

The Internet has led some people to believe that we can know that. That we can calculate the effect of an ad.

This is largely because the internet is just lots of computers, and they can track things. We get all this data that we can put into spreadsheets where we can sum things and do all kinds of mathematical wizardry.

But this reminds me too much of that old saying that when your only tool is a hammer, everything begins to look like a nail.

When you use computers too much, you start to think everything is math. You forget about the real world side of things. In the early days of internet advertising, an ad was considered to have been displayed to a visitor even if it was way down the page and never even seen by the visitor.

That’s what you get with the tyranny of numbers. If you can assign a number to something, it seems more reliable. That’s a type of anchoring bias, by the way.

Bob Hoffman reports some very interesting cases where advertising stats were completely wrong. Some error in the coding made people believe they were advertising on one site when all their ads were actually displayed in other places.

In addition to all this there’s regular, old-fashioned fraud.

So just because we can gather lots of stats and put them in spreadsheets doesn’t mean we really know what’s going on.

We can see a similar phenomenon in social media. My friend Matt Bailey had a post the other day about this. People want to calculate the return on investment of social media. It’s not just really possible to do that with any precision.

I think spending money on advertising and social media is just a regular business expense. We want to quantify it. We want to know if we’re spending too much, or too little. But it’s a very difficult thing to nail down. I think we have to get comfortable with the ambiguity.

Resources

How the digital revolution led to a greater justification for advertising
https://the-media-leader.com/how-the-digital-revolution-led-to-a-greater-justification-for-advertising/

Are Social Media Skills Overrated?
https://www.linkedin.com/pulse/social-media-skills-overrated-matt-bailey-t564c

Adscam, by Bob Hoffman
https://www.amazon.com/ADSCAM-Advertising-Historys-Greatest-Democracy/dp/0999230743