Archives for category: Business

Advertisers and publishers have been telling us for over a decade that they need to track everything we do, and gather ever more and more data about us, so they can show us “relevant ads” – ads that we want to see, about things that we’re interested in.

And after all this time, and all the data they’ve collected, they’re still really bad at it!

They’re showing us more and more ads, but they’re not relevant for the viewer, and they don’t sell product for the advertiser, so it seems like:

  • users have given up their privacy for no benefit;
  • the advertiser’s money is just going down the drain;
  • the ad networks, despite their ineffectiveness, are getting rich!

To illustrate this, I’ll share some examples from Facebook. They have an option on each ad to show “Why am I seeing this ad?” Lately, I’ve been tapping on this option (right before I hide all ads from that advertiser, forever):

I’ll start with a doozy

NSW Cancer Council in Beijing

A couple of things about this:

  • I don’t live in Beijing, and I haven’t recently been there. Facebook knows where I live, because I’ve specifically told them I live in Sydney
  • Why would the Cancer Council NSW – an Australian state – be looking to advertise to people “who live in Beijing?”

I don’t believe that Cancer Council NSW wanted to advertise to people in Beijing; that makes no sense at all! But they’re being charged money for Facebook to present ads to people it thinks (wrongly, in this case) are in Beijing. Either that, or Facebook is lying to me about why I’m seeing this ad.

Or, alternatively, that they’re not lying, per se, but instead their systems are screwed up and are just showing incorrect data… because they’re incompetent. You may think “incompetent” is too strong a word, but this is actually Facebook’s core business – knowing their viewers and matching ads to them – so any errors in their core systems are important problems.

Here’s another series of screenshots. See if you can find a theme:

Now I live in Dubai
Now in live in UAE (still in Dubai, perhaps?)
Sharjah is also in UAE
UAE! UAE! UAE!
Sharhaj again!

I should point out that, although I’ve travelled a lot, I’ve never even been to Sharjah, never lived in Dubai, and the only time I’ve ever spent in Dubai or the United Arab Emirates has been during refuelling stopovers while flying to/from Europe.

Plus, Facebook knows that I live in Sydney, Australia, because I’ve told them that!

Also, like the Cancer Council NSW targeting people in Beijing, why would Australians for Solar want to target people who live in Sharjah? Again, I find that hard to believe.

After more than 10 years of collecting our data, seriously, this is the best they can do? To me, it all looks like a scam.

The publishers tell the viewers – you and me – that they need our data to show us relevant ads, but the reality is that they just spray whatever ads they have and don’t actually care if they’re relevant or not, because they get paid anyway.

And they tell the advertisers that the ads will be shown to only people who meet the criteria the advertiser chooses, but that’s just bullshit too. And they charge the advertiser every time it gets shown.

Like all scams, it can’t go on forever, and I think we’re getting close to the point where both the viewers and the advertisers have cottoned on to the scam, and no longer want to play this game.

I really hope so!

Advertisements

Economic theory says that, in a perfect market[^1], the price of goods will fall to the marginal cost of the goods.

App stores are an example of (almost) perfect markets, so we should see the cost of apps fall to the marginal cost, which is effectively zero. And that is what we see.

The problem is that, although the cost to produce each additional copy of an app (i.e. its marginal cost) is effectively zero, the cost to produce the *first* copy of an app is actually quite expensive[^2]. There are also real costs associated with marketing, maintaining the app (fixing bugs, etc), adding additional features, and doing upgrades. Some apps also have ongoing server-side costs. The producer of the app has to recover those costs somehow.

This has become a huge problem in the industry.

***
[^1]: A market where buyers and sellers all have good information about price, quality, etc

[^2]: Typically, the cost of developing an app starts at about USD$50,000, and can go significantly higher.

I saw a recent article about carriers in Europe planning to block ads, which has prompted me to write this blog post. I’ve been thinking about advertising for quite a few years now, and I want to get this down.

The players

To start, I want to be clear about who the players are when I’m talking about them:

Advertisers

Advertisers are people/business with a product to sell.

They may also want to build up brand awareness, in order to induce future sales.

Ad Networks

These are the Googles of the world, but also some Mad Men-style advertising companies. There are the companies that can get and advertiser’s ad published in multiple sites by publishers.

Publishers

Publishers produce the thing where the ad will be viewed. It could be a billboard, newspaper, magazine, blog, web site, game, app, TV show, cinema, etc.

Viewers

I use the term “viewers” as a catch-all to mean viewers, readers, listeners, etc. It’s us, normal people, the people economists refer to as “consumers” but whom I normally refer to as “people.”

What about me?

I’m just a guy. I have no background in advertising.

I have been an advertiser; I’ve made products that I wanted to sell, and had brands I wanted people to know about. So I’ve advertised. And I can honestly say, I’m not that good at it.

I have never worked for an ad network, and I’ve never really dealt with one.

I’ve had the opportunity to be a publisher, but I chose not to be one. I’ve made apps, and one of the ways to get paid for your app is by publishing ads. However, this business model didn’t really fit with any of the apps that I’ve made, so I’ve never chosen to go this route.

And all my life, I’ve been surrounded by ads: on TV, in newspapers and magazines, on the web, in apps, along the side of roads as I drive alone, on the sides of buildings as I walk past; everywhere, always, advertisers have wanted me to look at their ads.

As part of deciding whether or not to include ads in my apps, I spent a lot of time thinking about ads and how they work. I came up with my own taxonomy of the various types of ads there are, and what they’re useful for.

Who tells who what?

WhoSaysWhat

The Truth

Viewers don’t want to see ads!

Note that the publishers never say to the viewers, “Come and view our ads!” and the viewers never say to the publishers, “I really want to see the ads you’re showing!”

The most common kind of extension installed in web browsers is an ad blocker.

Content ain’t king

Although all publishers say that they just want viewers to see their content, when push comes to shove, many publishers really just want them to see the ads. They will cover the content with pop-overs or full-screen ads or force viewers to sit through an unwanted ad to get to the content.

Most ads don’t work

Normally the word “most” means “more than 50%.” We need a new word that means “the overwhelming majority.”[1] Because ad click-through rates—the industry’s preferred metric for measuring whether an on-line ad has “worked”—are nowhere near 50%. They’re not near 5%, nor even 1%. In the USA, according to Rich Media Gallery, the rate is 0.081%! That’s less than 1 click for every 1,200 ads.

This article talks about so-called “native advertising”—ads that look like content—and says that “they work” because viewers see them. But that’s not what ads are for; ads are there to get people to buy things. What they mean by “they work” is that the publisher gets paid, not that more people buy the advertised product.

It’s not my job to make your business model work

Ben Thomson[2] has recently been making the argument (which is fairly common around the internet) that using ad-blockers is morally wrong, and that “the appropriate way to avoid advertisements is to not visit the sites that host them.”

I disagree. I think that, given the discussions in Who tells who what? above, viewers are quite entitled to take publishers at their word, and focus their attention only on the content.

Another common argument goes that, the only way publishers can monetise[3] their site/channel/newspaper/magazine/whatever through advertising.

My response is, it’s not my job, nor anyone else’s[4], to make your business model work.

Where this is all heading

I wish I knew!

You might have the impression from the above that I’m against advertising altogether. I’m not.

I’ve been an advertiser; I know what it’s like to have a product, and you want people to know about your product because it could really make their lives better, or solve a problem for them. I know what it’s like to want people to know who you are, and what your product is, so that, next time they’re looking to buy something similar, they’ll think of you. Advertising solves these problems.

They’re legitimate and reasonable desires for any business. And it’s legitimate and reasonable to go to professionals and have do this for you, just as businesses go to accountants and lawyers (and other outsourcers) to do their jobs, so the business can focus on its own products and competencies.

All of this, though, is solving a problem for the advertiser; it’s not solving a problem that the potential buyers of this product have. Sure, if they knew about it, they could buy it and be better off, but most of them are happy enough not knowing about the business or its products. So they’re not asking to be better informed. They don’t want to see these ads!

But I do think the industry—the ad networks and the publishers—are doing a really poor job.

Ad networks need to help businesses decide what kind of advertising they should do: if they’re looking for sales, focus on what I call “Yellow Pages”-type ads; to build brands, do more “Coca-Cola”-style ads.

What I think will happen

We’re already seeing some of this. People are moving away from ad-infested content. We see this with TV, where there was movement to TIVO and other DVRs, and now the move to internet-based TV, and the rise of non-ad-supported TV from Netflix, HBO and others. Newspapers and magazines, both printed and on-line, are losing readers.

When it comes to shopping, people in “buying mode” are moving to apps, especially comparison apps for each segment (e.g. Amazon, Booking.com app, etc) where you can compare and, importantly, actually buy your choice directly and immediately. I think businesses with products to sell would be well advised to ensure that their product(s) are available for comparison and purchase in the appropriate apps for their industry. Having your own app to sell your product is probably not as important as being in the apps that people are using when they’re looking for your kind of product.

For businesses that want to “build brand recognition” (which, despite its slightly wanky connotations, is actually a useful way to increase sales), I suspect that product placement will become an important part of brand advertising. Celebrity endorsement—celebrities actually being seen to actually use the product/service in public, genuinely and repeatedly—will be another form of this.

Augmented Reality products seem like a technical solution that can provide this, and will probably be sold to advertisers as a solution, but—like all forms of this kind of advertising—people don’t actually want to see these ads, so they’ll probably look for ways to block them (or choose not to use the AR products).

An interesting alternative has been taken by Red Bull with their content creation arm, Red Bull Media House), which produces content aimed at a specific demographic, in which their product features prominently.



  1. Maybe there’s a German word we can borrow?  ↩

  2. I haven’t been able to find an appropriate link for this on Ben’s site, Stratechery, as most of the discussion has been in his subscriber-only emails, and on his podcast, Exponent, both of which I can thoroughly recommend.  ↩

  3. I hate the word “monetise!” (And, in case you’re wondering why I didn’t spell it “monetize,” it’s because I’m not American.)  ↩

  4. Except yours  ↩

403 Forbidden*

Action speaks louder than words: time for more European countries to facilitate entrepreneur visas

It’s a pretty familiar story in techie circles; everyone seems to know at least one entrepreneur that has tried to set up shop in another country and has struggled to do so because of the oh-so-complicated visa application procedures and hefty requirements. … So far, only two countries have clearly defined visas for entrepreneurs: the UK and Ireland.

 — Tech.eu

You would think from the above quote that Ireland has its act together and really wants to attract entrepreneurs; that they have a positive, specific visa process to get them into the country so that they can launch their business with a minimum of fuss.

You’d be wrong.

202 Accepted*

“Action speaks louder than words” they said…

Do they really mean it? I’ve always lived by the rule, “Don’t judge people by what they say; judge them by what they do.” Here’s my actual experience:

On 7 April 2014, solicitors acting on my behalf submitted an application under the Start-up Entrepreneur Program to the Irish Nationalisation and Immigration Service (INIS), and we received a confirmation the same day in which it said the evaluation committee would consider the application “at the end of April.”

On 14 April, we received a follow-up letter (dated 11 April) which asked for more information. The letter ended, “Once in receipt of the above requested information this office should be in a position to consider his application.” We collected this additional information and provided it to the INIS on 23 April.

On 30 April, we received a follow-up letter (dated 28 April) which ended, “Applications are considered by an evaluation committee, the next meeting of the evaluation committee is scheduled during May. This office will be in contact with you in due course following that meeting.”

That is the last we have heard from the INIS.

Note that we were not told the actual dates for the meetings of the evaluation committee (even though they were “scheduled”).

417 Expectation Failed*

On 23 May, we sent a letter asking for an update on the status of the application, and asking if the INIS needed any further documentation or clarifications. We received no response.

According to the INIS website, the standard of service their customers can expect to receive from the Department include an acknowledgement of written communications within 5 working days, and an explanation of any delays:

Written Communication

We will acknowledge the majority of written communications within 5 working days of receiving them and provide a final reply within 20 working days. In cases where there is going to be a delay, we will explain this to our customers by an interim reply before the 20-day period is up. Our staff will provide our customers with full contact details and a reference number (where applicable). If the correspondence is for another Government department or body, we will pass it on directly to that department, and we will tell the customer what we have done with it. [Emphasis added]

On 10 June, we sent a follow-up letter asking for an update on the status of the application, and advising the INIS of issues their delays were causing to the applicant. We received no response.

On 16 June, I sent an email to investmentandstartup@justice.ie asking for an update on the status of the application, and advising the INIS of issues their delays were causing to me. We received no response.

At 4:29pm on 23 June, I rang the INIS Startup & Entrepreneur Unit and asked to speak with [the signatory from the previous correspondence]. He was not answering his phone, so the receptionist put me through to his voicemail. I left a voicemail for him to call me or email me, and provided the details to do so, as well as the application number. I received no response.

From the Department’s website, I expected a response the next day:

Telephone Enquiries

We will be available to answer telephone calls during normal office hours (9:15 a.m.–5:30 p.m., Monday to Thursday; 9:15 a.m.–5:15 p.m. on Friday). Our aim is to answer all calls quickly. We will identify ourselves and our area of work. We will be polite and helpful, and do our best to provide our customers with clear and correct information. If we cannot give an answer straight away, we will take the customer’s details and call the customer back at a suitable time. We will only connect callers to voicemail when the person they wish to speak to is unavailable, and we will do our best to respond to voicemail messages within one working day. [Emphasis added]

On 24 June, my solicitors tried contacting the INIS and were told, “they have recently changed their processes and do not accept telephone enquiries.” So they sent yet another follow-up letter asking for an update on the status of the application, and advising the INIS of issues their delays were causing to me. We received no response.

On 30 June, I sent in a complaint to the Department’s published complaints address, INIScustomercomplaints@justice.ie, with a cc to the Minister, and received a confirmation that they had received the complaint and that “it has been forwarded to the relevant area.”

The last I heard, my application should have been evaluated in May. It is now the beginning of July, and we have not heard from the INIS since April, despite repeated requests by mail, email and telephone. We were given no reason to expect a delay, and have received no explanation for this delay. I think this is unacceptable, and contrary to the Department’s published Customer Service guidelines.

409 Conflict*

The purpose of the application was not just to get me a residency visa, it was also to start a new business in Ireland. When I wrote the business case, I assumed several things that have turned out to be incorrect:

  • That the application could be put together within a few weeks;
  • That the assessment process would take less than a month (I was told by my solicitor that applications were being processed within two weeks); and
  • That I would be in Ireland while the application was being processed, and that my visa would be extended (if necessary) to allow that.

Instead:

  • It took almost three months to gather the required paperwork;
  • The assessment process is an ongoing black hole; and
  • I had to leave the country when my (tourist) visa expired, as the INIS refused to extend it, even though my application for residency had been submitted.

That decision is now causing problems for the business, as is the assessment time.

There are things that need to be done now so that the business can operate as a viable business, as envisaged in the Business Plan. Actually, these would have been done earlier in an ideal world, but the impact of the delay has been acceptable; we’ve passed that period now.

For example, the code for the app has reached the stage where I am able to distribute it to initial testers. Their feedback has highlighted that it really needs a professional designer (which I had accounted for in the Business Plan). And, as we’re getting closer to release date, I also urgently need to start the marketing activities, which includes getting a marketing person involved (also accounted for in the Business Plan).

But I need to have the company set up, so that the costs of hiring these people are properly accounted for, and things like VAT can be claimed appropriately.

Before I can set up the company, I need some assurance that I will be granted the visa. There is no way I’ll set up a business in a country where I’m not permitted to do business! As it is, to comply with visa restrictions for Australians, I’m not able to enter Ireland until 11 July because of the time I spent in the country earlier this year.

The initial app in my my business plan is a tourist-focussed app, and the tourist season is just around the corner. I really want it available, with marketing in place, for this summer’s tourists.

The delays while waiting for my application’s assessment are really starting to affect the business which is the basis of the application. If the app is delayed beyond summer, it will mean that income from the app will probably be delayed until around this time next year. I really want to avoid that!

100 Continue*

I’ll continue with the application process and keep this updated as it continues (hopefully, until we get a 200* response).


Footnotes – From the WWW protocols:

* A 100 Continue return code means “The client should continue with its request. This interim response is used to inform the client that the initial part of the request has been received and has not yet been rejected by the server. The client should continue by sending the remainder of the request or, if the request has already been completed, ignore this response. The server must send a final response after the request has been completed. See section 8.2.3 for detailed discussion of the use and handling of this status code.”. 

* A 200 OK return code means “The request has succeeded.”. 

* A 202 Accepted return code means “The request has been accepted for processing, but the processing has not been completed. The request might or might not eventually be acted upon, as it might be disallowed when processing actually takes place. There is no facility for re-sending a status code from an asynchronous operation such as this.”. 

* A 403 Forbidden error means “The server understood the request, but is refusing to fulfill it. Authorization will not help and the request should not be repeated. If the request method was not HEAD and the server wishes to make public why the request has not been fulfilled, it should describe the reason for the refusal in the entity. If the server does not wish to make this information available to the client, the status code 404 (Not Found) can be used instead.” It seems somewhat apt in my case. 

* A 409 Conflict error means “The request could not be completed due to a conflict with the current state of the resource. This code is only allowed in situations where it is expected that the user might be able to resolve the conflict and resubmit the request. The response body should include enough information for the user to recognize the source of the conflict. Ideally, the response entity would include enough information for the user or user agent to fix the problem; however, that might not be possible and is not required.”. 

* A 417 Expectation Failed error means “The expectation given in an Expect request-header field (see section 14.20) could not be met by this server, or, if the server is a proxy, the server has unambiguous evidence that the request could not be met by the next-hop server.”. 

You hear a lot about the different kind of advertising—TV, radio, billboards, search, mobile, social, banner, pop-overs, and so on—but, after looking at ads on all platforms, I think we can reduce the taxonomy down to just four kinds.

Four types of advertising:

Type 1: “Yellow Pages”

Customers are actively looking for something because they want to buy it. They want several options — but not too many — to allow them to compare, and for the results to be: locally available to them, show prices, give links to more information. Their priorities (not necessarily in this order) include: price, fastest, best, available here, size/colour/etc.

Other examples: classified ads, Google search results, product comparisons, professional services listings, etc

More info

Type 2: “Coca Cola”

Shows the brand, typically in a fairly passive way, so that later, when the person wants to purchase that type of product, they recognise that brand and preferentially choose it. (They may even actively seek out that brand.)

Other examples: banner advertising, sports team sponsorship, business name signs outside business premises, logos on clothing, etc.

More info

Type 3: “Catalogues”

When the advertiser advertises another company or another company’s product to try to use that company’s brand awareness.

Other examples: Retailers that put popular brand name/products prominently in their advertisements, the little “Powered by” logos on some web sites, “Authorised resellers of…” etc.

More info

Type 4: “Garage Sale”

An event that the person doesn’t know about but, once they’re told about it, may interest them.

Other examples: new product announcements, spruikers outside stores, sales and special offers, bands & sporting events, exhibitions/shows, etc.

More info

“Serendipity”

As well as the above, sometimes things happen serendipitously, eg. you were talking to your friend about their amazing vacation in Italy, and then you see an ad for cheap holidays in Italy. Normally you wouldn’t have been interested, but you’ve just been talking about it, so you are. But, even though you’ve been talking about it, you wouldn’t have gone looking for cheap holidays. But when the two happen together, you’re interested enough to follow up.

Note that, of the four types, the first three do not depend on knowing about the customer. In fact, Type 2 is really aimed at everyone, without regard to their demographics. Type 1 advertising can benefit from things like knowing the customer’s location, but it does not rely on this. It is only the fourth type that really benefits from knowing more about the customer.

I go into each of the four types in more detail in separate posts.

Note: This is part of a multi-part post about advertising. See “All About Advertising” for the start of the series, and for links to the other parts.

Type 4:  “Garage Sale” Advertising

This is typically an event that the person doesn’t know about but, if they were to be told about it, they might be interested.

This is the important bit: these are typically events; this is not business as usual. 

This is something that is new, e.g. a new product announcement, sales and special offers, bands and sporting events coming to your town, exhibitions and shows, etc.

It may also be an event that is new to you, not new to the seller. For example, if you get pregnant you might now want to know about baby products, where you wouldn’t have previously.

This is a really interesting form of advertising, and I don’t think anybody really does this very well, at the moment. This is typically the the type of advertising that gets talked about where companies think they need to know more about you so that they can target you better with this kind of advertising.

It’s very hard to do. I don’t have an answer to how to do it well. The best examples that I can give are:

  • Amazon and their “Customers who bought this also liked these other products” lists
  • Apple’s genius playlists where, if you like this music, then here are 25 other songs that go well with it

Note: This is part of a multi-part post about advertising. See “All About Advertising” for the start of the series, and for links to the other parts.

Type 3: “Catalogue” advertising

In this form of advertising, a company will advertise another company’s products. It is mainly used by retailers. Supermarkets are a good example: they will advertise many companies’ products in their catalogues.

Other examples are “Apple Authorised Resellers,” camera stores that advertise that they stock Nikon, Canon, Sony cameras, cafés that advertise that they stock a particular brand of coffee, etc.

Note: This is part of a multi-part post about advertising. See “All About Advertising” for the start of the series, and for links to the other parts.

Type 2: “Coca-Cola” advertising

“Coca-Cola” advertising shows the brand, typically in a fairly passive way. The idea is not so much to sell to you right now but to influence your buying decision at a later date/later time. The way that they do that is by creating some brand recognition.

Some really good examples are Coca-Cola, Apple, and McDonalds.

In its best form, this kind of advertising persuades you, for example, that you don’t want a drink, you want Coke; you don’t want a phone, you want an iPhone; you don’t want some food, you want McDonald’s.

Then, when you finally get into the purchasing mode, and actually go out and buy this thing that you want, instead of looking at other options you go straight to this product that you have already decided to buy, and all you’ll really be looking for are variations within the product: do you want an iPhone 5S, or an iPhone 5C, or an iPhone 4S; do you want a black one or a white one, and so on?

Another way it works is that it’s there to create brand awareness for things you might buy infrequently. For example, if you have never flown to Warsaw and may not have heard of Baltic Air but if you see ads for them and then you go and search for flights to to Warsaw then Baltic air would come up you would say, “I don’t know any of these others but I recognise this one I’ll go with them.” That’s the second-best form of this advertising working.

The important thing with this is that it’s not trying to persuade you to buy now, so they’re not looking for click-throughs, they’re looking for displays, i.e. Banner advertising, not links. They don’t really expect you to take any action right now.

Some other examples of this type of advertising are: sports-team sponsorships, business-name signs outside premises, logos on clothing, etc.

Note: This is part of a multi-part post about advertising. See “All About Advertising” for the start of the series, and for links to the other parts.

Type 1: “Yellow Pages” Advertising

This is for customers who are actively looking to buy; maybe not right this second, but they’re in buying mode and are looking at options. In the past, they would have grabbed the Yellow Pages, or looked in the classified ads, or gone to specialist stores; these days, the first stop is usually Google.

Google

Google is seen as a very successful advertising company and, by any economic measure, that is certainly the case. But do they actually do advertising well?

When Google entered the search arena, they didn’t know how they were going to monetise their search results. Eventually, with their acquisition of AdWords, they figured out how to provide relevant ads next to customers’ searches. These were non-intrusive enough for customers who were just doing general web searches but, at the same time, helpful enough for people who where looking for something to “buy.” Advertisers liked that they only paid for ads that were clicked on, and not for each display. The combination of these aspects made everyone happy, and it made Google very rich.

That was 10 years ago. The world has moved on; competitors offer the same benefits to customers and advertisers alike. However, the model hasn’t progressed. Google (and Bing, Yahoo, Baidu, etc.) still specialise in providing links to other sites, rather than satisfying the customer’s wants. But other sites do a much better job: Kayak, for example, tries to provide customers with relevant information for them to actually buy what they’re looking for. There are, in fact, many travel-related sites that do a very good job of providing relevant results complete with: prices, availability, close alternatives, descriptions, photos, customer reviews and, importantly, the opportunity to actually purchase their selection from within the site. See also: Bookings.com, Skyseeker.com, Expedia.com, etc.

It’s interesting to note that all these examples have their own smartphone apps. Customers are learning that, instead of doing a generalised search on Google, they can go directly to these apps and get the actual results they want and an easy way to purchase their chosen result.

Similar sites exist in all sorts of categories: Amazon for books, DVDs, music, and much more; iTunes for music, TV shows, movies and apps; carsales.com for cars; and so on.

If a customer is an infrequent buyer, they can go to Google and find out which site(s) provide the information they want, and then get there by a link from Google. If they are a more-frequent buyer, they often learn to go directly to the relevant site(s)/app(s).

I was recently at Úll—the excellent conference in Ireland—and gave a Lightning Talk, titled Selling Stuff, about how to make money from your app by selling real-world goods.

Here are the slides from the talk.

Selling Stuff.pdf

If video becomes available, I’ll link to it here too.