The Advertising Industry Contains a Nightmare Pet No One Wants But Keeps Anyway

Since the beginning of time (or the turn of the 19th century, to be exact), the advertising industry has been at war with it’s reputation. Executives have fought off countless criticisms, from fraud to ethical concerns regarding exaggerated truths to hyper-materialism.

And as time passed, these critiques continued to arise. In the 1960’s, concerns around  materialism (which contributed to the “creative revolution” of that same decade) arised, leading to a moral backlash over subliminal messaging in the 1970s. Shortly after, the late 20th and early 21st century received increased awareness around advertising’s proclivity towards stereotyping, exclusion, and misrepresentation.

One criticism, however became accepted as part of the discipline’s identity: Advertising is wasteful.

From the beginning of time until now, this has been the elephant in the room. Also known as the massive, lumbering pet we’ve all become too familiar with having around the house, even though he vigorously stops on all our things.

This notion was first clearly articulated over a century ago by John Wanamaker, the department store magnet and “marketing pioneer.” Most notably, he coined the phrase, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”

In his 1919 book, Industry and Trade, the great economist Alfred Marshall echoed Wanamaker’s concerns, remarking that:

“On the other hand, some sorts of private retail trade are spending lavishly on competitive advertisements, most of which waste much of their force in neutralizing the force of rivals. In America, where they have been developed with more energy and inventive force than anywhere else, it has been said recently by a high authority that it is to the field of cooperative trading on the British plan, which shuns advertising in all its forms, that Americans ‘may look for very important developments of retail trade within a comparatively few years.”

Marshall goes so far as to suggest that Americans, who are “spending lavishly on competitive advertisements” could learn a thing or two from their British counterpart who “shuns advertising in all its forms.”

Obviously, that didn’t happen. As the American economy grew, so too did the advertising industry. By the 1960s, the American advertising industry was spending nearly $20 billion a year, leading to the golden era of creative expression and experimentation.

While concerns around economic waste were overshadowed by most, there were a select few, including NYU economist Jules Backman, who made his voice on the topic heard. In his 1968 article, “Is Advertising Wasteful?”  He summarized the main criticisms as follows:

Advertising may be wasteful in several ways: by adding unnecessarily to costs, by an inefficient use of resources, by promoting excess competition, and by causing consumers to buy items they do not need.

But without the massive amounts of data we have at our fingertips today, the conversation around advertising’s waste was focused solely on broader socioeconomic implications. Do ads lead to or create demand? Or are businesses better off repurposing their advertising budget and resources for a different department? Ultimately, marketers couldn’t quantitatively answer many of these questions due to the lack of data and provable results. Backman himself acknowledges that for those who insist advertising is wasteful, “precise data are not available.” That fact, combined with the massive growth in American commercialism during the 20th century made it far too easy to brush away such concerns.

Enter the Internet boom, which began to change the way we advertised. Data provided us with the opportunity to segment different markets, and evaluate entire businesses. We now had actual results at our fingertips that can prove whether current ads are contributing to growth and profit. As Marketo stated, 2018 is “all about measurement” and marketers, with the massive amounts of metrics available, are under more pressure than ever.

With the increase in metrics and reporting, uncounted dollars and fraudulent activity has created a tipping point. Major brands like P&G need to understand where their dollars are going, and are beginning to slash ad spending entirely.

“Clean up advertising” is now the new motto for an age-old industry. But what does this mean? The truth is, it varies for different groups.

Industry trade associations, like the IAB, have became the leader on such matters. The recent OpenRTB 3.0 framework makes leeway in meeting “the market’s demand for security, transparency, authentication, and trust in programmatic advertising” through the signing and validation of individual bid requests.

But the biggest problem is IAB and other similar organizations can’t do it alone. They need buy in from all parts of the ad industry, including major brands, publishers, and technology platforms.

And most notably, the industry needs buy in from Facebook and Google. These two titans control a significant portion of the available ad spend and data that many believe they’re actually incentivized to have things stay as opaque as they are.

So what’s the future hold? We need to speak out and create the change. Sometimes the push to fix the problem is ignited simply by attaching a number to it. Now that brands have the ability to quantify their waste and see the billions of dollars lost, changing things up may no longer be in question.

This nightmare pet we’ve kept for way too long is no longer wanted. It needs to leave.