Freakonomics Radio 441. Does Advertising Actually Work? (Part 2: Digital)
10 snips
Nov 26, 2020 
Steve Tadellis, a marketing expert from UC Berkeley, and Tim Huang, a research fellow with insights into the attention economy, delve into the world of digital advertising. They tackle the effectiveness of digital ads versus traditional TV, revealing surprising truths about ad spending and consumer behavior. The discussion highlights challenges in quantifying success and skepticism around the industry's claims of engagement. They also explore the risks of a potential digital-ad bubble and emphasize the need for diverse economic strategies in marketing.
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TV Advertising Effectiveness
- TV advertising is about 15-20 times less effective than commonly believed, increasing sales by only 1% when ad spend doubles.
- Companies often justify high ad spending with brand building and competitive pressures.
Flawed Ad Measurement at eBay
- Steve Tadelis, at eBay, discovered their consultants' ad effectiveness measurements were flawed.
- The consultants used jargon like "proprietary transformation functions" and "Lagrange multipliers" to obscure their flawed methodology.
eBay's Brand Keyword Experiment
- When eBay temporarily stopped brand keyword advertising, they saw no significant drop in traffic.
- Organic search results replaced paid ads, demonstrating that people already searching for eBay didn't need ads.
