Rand Fishkin is a familiar name to anyone who follows SEO and the power of original content. Fishkin rose to prominence in content circles as the head of SEO firm Moz; he’s now a co-founder at audience intelligence firm SparkToro.
And he’s got something to say about the state of digital advertising.
“Where to even begin…,” Fishkin writes in What’s New In Publishing. “Should we start with the upcoming loss of third-party cookies? The bizarre Google & Facebook duopoly team up against anti-trust action? The rise of online ads as a money laundering & terrorist-funding tactic? Or maybe we should talk about brands’ ever-shrinking ability to attribute ad clicks. Hundreds of millions in provable ad fraud. Disturbing privacy issues that remain unaffected by GDPR or other government efforts.”
To put it bluntly, Fishkin calls out the stink. And the stink goes deeper than just blaming the ad agencies that make money off the rot.
“The reason CEOs, board of directors, owners, and investors are perfectly fine overspending on advertising is because nearly all of them value growth over profitability,” he writes. “That’s been how potential acquirers, public market investors, venture capitalists, and private equity firms have all valued companies for the last twenty(ish) years.”
He gives an example from his own company, MOZ, which actually went down significantly in value when the growth rate slipped to 8%/year … even while revenue more than doubled.
“My old company, Moz, was valued at $120M when it had $22M in revenue and was growing at 100%/year. A few years later, the company passed $50M in revenue, but the growth rate had slipped to ~8%/year,” he writes. “The valuation then? $90M. From the shareholder perspective, throwing $10M/year at advertising to get an incredibly unprofitable $5M more in revenue would technically make sense.”
Madness, but true story. Versions of that story are repeated time and again. Like Chase, which cut their ad exposure from 400,000 down to just 5,000 … and got the same results. Or the research that showed 88% of people who are served up retargeted ads would have (or already did) buy the product anyway. Or Proctor & Gamble, which cut $200 million in ad spend without a drop in customer acquisition.
More madness. And as Fishkin says, “[y]ou can only read so many stories about millions of wasted spend before you start to wonder if you’re one of the suckers.”
The good news is Fishkin provides some stellar advice on how to conduct an audit of your own digital advertising. It’s a good way to tame the madness and get some sanity back in your ad spend, by looking at high, mid and low opportunity optimization targets. To back it up, he includes a robust list of resources for more help.
If you’ve got any kind of serious skin in the digital ad game, you’ll want to dive deep into this. Read the full article here, and let’s get back to sanity in advertising. The ad industry isn’t going to change on its own. It’s on us.