Internet advertising is a Ponzi scheme: Bruce Philp

A petri dish of grifters and frauds

Mark Zuckerberg in front of a map of the Facebook "Social Graph"

Facebook wants you to believe marketing is all about measuring what consumers do—but it’s really about understanding what they want. (Justin Sullivan/Getty)

Timing is everything. Behavioural economics arrived in my consciousness via a 2001 piece in the New York Times Magazine profiling Richard Thaler, one of the leaders of this radical movement in the dismal science. It was called “Exuberance is Rational,” and described the lonely, heretical work of proving that value is subjective, and consumers are emotional and unpredictable about how they perceive it. It got a lot of pass-around in the ad biz at the time, because it seemed to validate once and for all that persuasion is as much art as science, and that understanding people is the key to being good at it.

A year later, a colleague of Thaler’s, Daniel Kahneman, won a Nobel Prize for his work on this. It should have changed marketing forever. The problem was, at that very moment, the commercial Internet was achieving critical mass, and it burst into the room like a drunk during a wedding speech. Suddenly, it was all anybody could see.

That it distracted us from the revelation of consumers’ humanity only makes the Internet’s current disappointing state harder to take. When marketing exchanged its cow for magical digital beans, the promise was that this new way of doing business would restore integrity and sensitivity to selling. It would give us the miraculous ability to instantly measure the impact of everything we do. And it would allow us to personalize the experience of every human so that all anyone would ever see was what was relevant to them. Taken together, those two things would not only make marketing more accountable, they would make it perfectly efficient.

Instead, it’s become a petri dish for grifters and frauds, and one of history’s great broken promises.

Or so it has seemed lately. In recent months, there has been a steady, ever-louder drumbeat that not only is digital marketing not the hoped-for panacea, it may actually threaten the viability of marketing itself. A respected research firm recently accused Facebook, for example, of “failing marketers” because content posted there reaches barely 6% of its promised audience (and it’s trending downward). For that matter, thanks to offshore “click farms,” you can’t even believe a Facebook Like or Twitter follower count anymore. In fact, by one recent estimate, about 36% of all the traffic on the web is fake—“the product of computers hijacked by viruses and programmed to visit sites.” This spring, under the headline “Digital Ad Fraud Is Rampant,” one major marketing trade bleakly predicted nothing would be done about all this because everybody in the business was profiting, except marketers. As one executive put it, “Anyone…who is playing it straight gets screwed.” Until all the trust is gone. Then everybody’s screwed.

At a certain point, as a marketer, you have to ask yourself what you’re in this for. I don’t subscribe to the Soviet notion that marketing is about efficiently meeting needs. I think we’re here to make money by making people happy. That takes empathy and insight, and it also takes tools and processes that are themselves more subjective and less certain. We may live in a world where even our thermostats can keep track of what we do, but they can’t know why we do it, or what made us want to. And those questions are what marketing is really about. We aren’t here just to measure things. We’re here to make things happen. To do that, you have to really understand the people you want to move, and they have to trust you enough to be moved.

I’m confident the marketing community will eventually fix this—with stakes this high it has no choice—but we could do more. This seems like the right moment to reset the whole way we think about selling. Business needs to stop delegating marketing to machines and use the leverage empathy gives us. It’s time we walked a mile in the consumer’s shoes, instead of just counting their footprints. It’s time we rediscovered the exuberantly irrational, subjective, emotional, chaotic splendour of the human marketplace. It’s where all the inspiration is, and so very worth the effort.

Bruce Philp is a brand strategy consultant and author of Consumer Republic, winner of the 2012 National Business Book Award

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10 comments on “Internet advertising is a Ponzi scheme: Bruce Philp

  1. How about taking a crack at State sponsored Central Banking as a Ponzi scheme? It’s the biggest rigged racket going.

  2. You’re close on this, but I’m not sure if you missed the mark by accident or intent. “Not only is digital marketing not the hoped-for panacea, it may actually threaten the viability of marketing itself.” Substitute advertising for marketing in that sentence and it’s bang on. Marketing is, however, alive and well. But advertising — a scheme that’s been pumped up on its own bogus self-referential and wholly invalid metrics for decades — well that, to use a term from the finance sector is long overdue for a major correction. Online advertising is proving that although advertising does work, it’s nowhere near to the extent that the ad business would have you believe. In fact it’s good creative married to a product that people want that works, not ad spend, not brand equity, none of that smoke and mirrors hogwash.

    Marketers need to reduce their drug-dependency and get back to marketing. “Marketers” who equate advertising and marketing should be shipped to museums for display purposes. Once can only hope that eventually the insane levels of messaging noise in our society will be reduced, that the creativity in those messages will improve, and that they’ll be about products that actually meet a consumer need. Not holding my breath, after all this news is pushing 15 years old now.

    • More than 15, I’d wager.

      I passionately agree that the distinction between marketing and promotion (which includes advertising of all stripes) is important, and I used the terms mindfully here. The promise of the web was not just that it would make advertising more efficient, but that it would somehow allow us to automate all four Ps to perfection.

      But here’s a statement that will probably shock you: I have been in this game for more than 30 years, and have been immersed in digital culture and its marketing applications literally since its pre-web beginnings in the early 90s. I can tell you, hand on heart, I was required to be more accountable and to live with more brutally objective measurement standards selling TV commercials to P&G than i have ever been – or seen – with digital media. It’s a pernicious myth that promotion in the mass media era was unaccountable. In fact, only the second rate crap was. For real marketers, the massive cost and risk in old fashioned promotion forced circumspection and heavy accountability. Most CMOs and probably nearly all CEOs today find digital media a mystery, which is handy for practitioners. But everybody knew then what a Nielsen report meant, and understood the implications of a tracking study’s purchase intent scores. We could use a little more of that, if you ask me. A little less gameified, forgotten-in-a-month scorekeeping and a little more facing the truth about the consequences of what we do as marketers.

  3. It makes my teeth grind when people refer to things as “pyramid schemes” or “Ponzi schemes” that are clearly not those specific sort of confidence schemes.

    It would be more apt to refer to online advertising as a shell game.

    • You are correct, of course, but Ponzi Scheme is better SEO (insert ironic winkie emoticon here).

  4. I was disappointed that the article didn’t try to prove it’s premise. Social marketing may well be a kind of Ponzi scheme, or at least have an unintended Ponzi effect. Tech visionary Jaron Lanier seems to believe something like this. In his book “Who Owns the Future,” he says that social platforms are rigged to succeed on the backs of individual contributors, who are at the mercy of increasingly powerful feudal lords such as Facebook and Google.

    • The headline (I don’t write those, my editor does) was a delicious irony, given the subject matter, since it ended up getting fantastic pass-around online. I’m interested in the book you mention, and will track it down. But i have to say, that seems more to me how social platforms were working in the 2007-2010 period, when it all went parabolic and bubbly.. I have this nagging feeling that we’ve moved past Ponzi and on to outright fairy tale – and sometimes flat out lies – in what marketers are told is going on out there. There was unfortunately not room to deal with it in the piece, but a surprising number of CMOs in North America have very low confidence in their own ability to keep up with and understand digital platforms… if that doesn’t describe fertile ground for bad behavior on the part of the industry, I don’t know what does. Thanks for the comment!