Resistance is futile. Yet, they resist: How Madison Ave. wastes clients’ money by denying reality

By Kirk Cheyfitz , written on November 5, 2012

From The News Desk

I think I just proved that Facebook is roughly 100 times more efficient than primetime TV at spreading advertising messages. Now I’m trying to figure out why almost no one in adland cares.

Along with some folks at my agency Story Worldwide, I created a mathematical model, drawing on recent research and our own experience, to directly compare the cost of delivering brand messages on TV versus Facebook. I explain it all in “Ad Battle of the Century: Facebook Crushes Primetime TV,” posted recently on Brand Republic’s social marketing blog.

Since, oddly enough, such a model had not been built before, the finding probably bears repeating, so it can sink in: Not twice as efficient. Not four times. But somewhere between 70 and 260 times, depending on numerous variables.

The secret, of course, is that digital platforms now do several things brilliantly that traditional ads do poorly or not at all. First, digital uses both paid ad forms (banners, paid search, promoted Tweets, etc.) and non-paid ad forms (blog posts, Tweets, Facebook stories, YouTube videos, and so on) where traditional uses only paid. Second, digital platforms are wired to make social sharing easy, while sharing traditional ads is not easy at all. Third, digital allows an advertiser to build its own audience and its own network; traditional requires that you rent the audience and the network, paying for both each time your message goes out.

The facts clearly show that shifting more advertising budgets to online social platforms could significantly reduce corporate marketing expenses while spreading advertising messages much more widely. This sort of analysis and the increasing body of data supporting it will undoubtedly accelerate the already healthy growth of digital media and the steady shrinkage of traditional. But this inevitable, irresistible change, which clearly could have a huge impact on global corporate profits, is happening painfully slowly in the advertising business. The question is why.

Despite the overwhelming economic advantage of socially multiplied advertising, many marketing execs have shown an alarming talent for ignoring reality when making advertising decisions. (Keep reading; there’s actually data and a rigorous study to prove that seemingly wild accusation.) The way things are going, it may take the criminalization of old-fashioned ads to force real change in how marketing budgets are over-allocated to traditional media and under-allocated to digital platforms.

Advertising ROI maven Rex Briggs estimated six years ago that “37 percent of marketing spending was wasted.” Today, the ad industry is far more sophisticated and obsessed with “Big Data” and ROI. Despite this, Briggs estimates today that in the intervening six years “waste actually increased by 6 percent.” (So we’re now closing in on retail giant John Wanamaker’s famous century-old complaint, “Half the money I spend on advertising is wasted….”)

In his new book "SIRFs Up -- Catching the Next Wave in Marketing," Briggs wonders how all this waste can still be going on. His answer is simple: bureaucratic resistance to change and willful ignorance of the new forms of valuable advertising media created by social networks online.

Since total US ad spend is roughly $150 billion, Briggs is telling us that some $65 billion of that is going down the drain every year because of adland’s denial of reality. But $65 billion is only the tip of the ad industry’s largely invisible waste iceberg, according to an academic research paper that must represent a landmark in the study of delusional group-think.

The paper, called “The Power of Inertia,” appeared in the June 2011 edition of the Journal of Advertising Research. Analyzing years of sales and marketing data across seven industries, the study concluded that marketing managers seriously and consistently misallocate their advertising spending, overspending on the wrong ad vehicles time after time. Instead of investing ad budgets primarily in the media vehicles and tactics that work the best, managers spend too much on the ad vehicles that have always been the most popular with their pals and peers. Frequently, the data shows, these traditional choices are the worst-performing choices available.

This is not always about choosing TV over digital, by the way. The traditional choices vary from industry to industry. It can be about choosing printed circulars over digital (consumer electronics) or a traditional sales force over TV and digital (pharmaceuticals), “The Power of Inertia” finds. The salient point is that the traditional choice -- the we’ve-ALWAYS-done-it-this-way choice -- is unerringly the wrong choice.

Looking at 250 marketing “projects” or campaigns, “The Power of Inertia” predicted that if marketers across America were to pay attention to real data on response and ROI, there would be “an average 14 percent profit improvement...from the improved deployment of marketing investment.” If that’s true, it makes all these bad choices a $200 billion-plus problem for the US economy.

Why this crazy waste of money? In a succinct couple of sentences that come the closest in the whole paper to plain English, the researchers conclude:

The conservatism of decision makers offers a final potential explanation for the observed overspending [on the wrong ad vehicles]. Although it may be driven by a number of related phenomena, it has its roots in one of the most prevalent characteristics of human nature: aversion to change.
Translation: fear of doing something new and different and getting fired for it is driving colossally wasteful, shortsighted, and downright dumb decision-making about marketing all across corporate America and the world.

Obviously, all of this is meaningful to me because I run an agency that excels at the most efficient, least traditional approaches to advertising. More germane, having just released a study of our own that says you can amplify the impact of each ad dollar by 100 times if you use digital social platforms and non-paid ad formats, I’ve been fascinated to hear many smart and knowledgeable advertising people react by insisting that “TV is better for driving awareness” or “TV is more powerful emotionally than digital” or “TV is better for car advertising” and so on.


The problems with these kinds of statements, of course, are manifold. But the primary difficulty is that there is not a shred of independent research to support them and, in particular, to create a credible argument for the notion that such traditional ad forms are persuasive and stimulate purchases. In fact, the evidence is increasingly to the contrary, underscoring the reality that you’ll make a far more persuasive impression if a friend or stranger shares your ad message online or in person than if you deliver the same message directly.

We’ve tried acting on our hunches; we’ve tried doing what we’ve always done. Now it’s time, at last, to follow the data.

[Illustration by Hallie Bateman]