On this episode, we're in conversation with our third special guest, the source of truth and the mad men and women of advertising, Mr. Mike Follett. The point where quantity goes up and quality goes down, we call that hyper competition, and certainly there's a lot of advertising competing for our time.
On this episode, we're in conversation with our third special guest, the source of truth and the mad men and women of advertising, Mr. Mike Follett. The point where quantity goes up and quality goes down, we call that hyper competition, and certainly there's a lot of advertising competing for our time. (Repeat)
Richard Kramer: Welcome to Bubble Trouble, conversations between the economist and author Will Page and me, independent analyst Richard Kramer, where we lay out some inconvenient truths about how financial markets really work. Today we're in conversation with our third special guest, the source of truth and the mad men and women of advertising, Mr. Mike Follett. The point where quantity goes up and quality goes down, we call that hyper competition, and certainly there's a lot of advertising competing for our time, more in a moment.
Welcome to Bubble Trouble, today we're in conversation with our third special guest, discussing hyper competition and advertising, Mike Follett, head of Lumen Research, will join us, and Mike, let us know what Lumen does and your specific insights you can provide on this wild world of advertising.
Mike Follett: Well thanks very much for having me on, Richard, Will, Lumen is an eye tracking company, we've developed, uh, technology that turns your phone or your desktop, uh, webcam into an eye tracking camera, this monitors, uh, what people could see on their phones, and what in actual fact they do end up looking at. We do this with their permission, we pay people money for their time, we're not spying on them, but this gives us amazing insights into the difference between the opportunity to see stuff, what was there to be seen, and then in actual fact what does get looked at.
Will Page: what I'm going to do to bridge you into this [inaudible 00:01:32] here is to echo three past wisdom that you gave me one, you'll be pleased to know that I was sober enough to write this down and remember it, I'm just asking for a tweet length comment on where these remarks came from. First one, I remember once you said to me that people with a megaphones have the greatest interesting in saying megaphones are important, tweet that one Mike.
Mike Follett: Well that one is about who you should believe when it comes to talk about how important advertising is. Turns out the people who makes the ads and the people who sell the ads think that advertising is really important, but perhaps it's not quite as important as they think it is.
Will Page: Second up, you once said to me, "Society requires a clarity that supports itself by mutual delusion." Tweet that one.
Mike Follett: That [laughs] this is turning into, uh, the record of a very drunken conversation here, God that sounds pretty [crosstalk 00:02:24].
Will Page: [laughs], I, I got all this information from [inaudible 00:02:26] Police Station, you know. [laughs]
Mike Follett: [laughs] well what we have again here is, uh, the situation where we have a load of people who work in marketing and advertising who are paid to think that marketing and advertising is really important. And all societies have this sort of clerecy, this group of people that don't actually make anything who, who, who tell us stories about ourselves, be there priesthood or poet hood, and it turns out that once society has told, um, marketers and advertisers that that's the role they hold, uh, so that's what I meant there. And there's always been marketers, sometimes they've been priests, sometimes they're poets, and now they're actually working in marketing departments.
Will Page: I have to press pause and ask our co-host [inaudible 00:03:08] Richard Kramer, does that give you a sense of de ja vu with financial markets, Richard?
Richard Kramer: Mike, we've talked a lot about the way in which financial markets are often full of self interested communication, and clearly there is nothing but self interested communication in the marketing world.
Mike Follett: Oh, well absolutely, I think that like I said if, if what you've got is a megaphone, then you're very keen to, for other people to know that megaphones are, are very important. Uh, it's, it's, some of it is talking up your own game, and, uh, selling your own stuff and talking your own book, but I think some of it is also in that sort of Gillian Tett sort of anthropology of finance and anthropology of mind, uh, it's sort of like the assumptions that we have, we, we who work in marketing, and I am one of them, do think that we're doing, um, good stuff. It's, it's not entirely cynical, it's just that it is pretty self interested.
Richard Kramer: I'm gonna push back a little bit on this, that the idea of an advertising consumes less than 1% of our daily attention, and even this may not have any impact. Now I guess the, the question for me is, how long does it take to get a brand message into your mind and, and have it be there to retrieve at that point of sale moment when you're thinking, "Well, which deodorant, soap powder, or running shoe brand I might want to buy."
Mike Follett: Well this data I here, see I reckon this is where Will's drunken notes have fallen down, because I can definitely remember saying, uh, that advertising consumes less than 1% of our daily attention, in actual fact I think it's probably less than that from our data. Um, but it does have an impact, it just doesn't have an impact in the way that we think it does when we work in, in, in advertising. So that data comes from Lumen's eye tracking panels, uh, Lumen, which is the company I work for, is a, a eye tracking company, uh, we developed some technology that turns people's webcams or like desktops, m-, mobiles, into an eye tracking camera. Um, with their permission, we're not spying on anyone, don't worry, it doesn't work unless people, uh, uh, want to work in this way.
We take this data, we work out what it is that everyone is exposed to during the course of their day, you know, not on, on their phones or when they're watching TV, [inaudible 00:05:17] and then what people actually look at. And there is an enormous difference, and absolutely vast difference between what people could see and what they do end up looking at. And so we are exposed to perhaps tens of thousands of ads each and every day, uh, but we have this amazing magic superpower of ignoring all of this bullshit. [laughs]
We sometimes think that we are at the mercy of these brands who are constantly bombarding us with advertising, and the truth of the matter is in actual fact the power resides the other way round, because people are just brilliant at ignoring stuff, and they're ignoring loads of things, now just advertising, it's just advertising is one of the things that they're particularly good at ignoring. They do notice it a bit, and advertising does work, it just works in a slightly different way. We are not Clockwork Orange style, uh, strapped into a chair, uh, and, uh, and forced to watch this stuff when, and these messages coming in at us and we have no, no volition in that as that uh, it at all. Instead our relationship with advertising is far more even, uh, handed than we think, and, and like I say, it's predicated on this amazing superpower that we have as consumers or as humans in general, which is the power to ignore stuff.
Will Page: could you just help our listeners image a scenario where this has happened, where ads dominated the beat but they are not dominating our attention? Just sort of give some sort of street level example so the listener to understand the work of Lumen Research is doing on this.
Mike Follett: Well let's start with a street level, because that's the oldest form of advertising-
Will Page: Correct.
Mike Follett: ... and is probably the basis of all this, which is just thinking about out of home advertising. Picture yourself in Time Square in New York, you will be surrounded by ads, hundreds of the things, massive great ads, and yet your attention is probably at street level, making sure that you're not gonna get run over by, uh, what, one of the dwindling number of yellow cabs that are still hurtling around, uh, 42nd Street. Here we have a perfect example of a million different ads, uh, oh not a million, I mean, probably hundreds of different ads, all fighting for your attention, and you may not really look at any of them.
That is the, the stereotypical experience of a cluttered ad environment where there are tons and tons of ads, but there may not be, anyway, there might be an infinite number of ads, but attention is very definitely finite. It is not infinite, we are, our heads are only so big, our brains can only take in so much information, we have selective attention, and we select what to look at, and we, and, and what we look at his significance and meaning to us and often we have been trained not to look at things that we know are probably not very significant.
Will Page: Richard, we may have our first example there are of hyper competition, where the quantity of ads that surrounds up goes up and the quality of attention given to them goes down.
Richard Kramer: Yeah, I mean Mike, I, I wanna drill in on our theme of our podcast here, which is where the bubbles are forming, and what I've seen in digital advertising certainly in the past 10 to 15 years is you've had this tremendous ideration of the notion of programmatic ad buying and targeted ads, um, well you've had a ton of new formats, we didn't have live streaming five years ago, we didn't have these out stream videos ads and all of these other fairly intrusive ad formats, but they are the shiny new toys of the digital marketing world. But what you're suggesting to us is most of that no one really pays attention to. So how do you think of this industry with respect to bubbles where all of these new formats are being promised to have higher efficacy than the last set of formats, than the linear TV ads, the radio ads, or the out of home, digital out of home ads that we would have seen on the way to work, uh, how do you assess the efficacy of all of these new and improved versions of the same old marketing?
Mike Follett: Well one bit of that is just, is just ludicrous isn't it? The idea that more is more. And we live in a fallen, finite universe, they're not mint, they may make new ads, but they're not mint, minting any new times anytime, uh, soon.
Richard Kramer: Yeah.
Mike Follett: So it is just axiomatic that, uh, a wealth of, uh, information presupposes a poverty of attention, uh, and that's a line from, uh, uh, the great behavioral economic economist Herb Simon who taught, uh, uh, [inaudible 00:09:52] his craft and won the Novel Prize in '73, and that's the sort of thing that you'd expect a Nobel Prize winner to say, but it's also something that you'd expect, I don't know, a seven year old.
Richard Kramer: [laughs]
Mike Follett: [crosstalk 00:10:02] it's so obvious that it's frustrating that we don't realize that, you know, on my website I've now put 12 ads all firing at the same time, and guess what? No one has looked at any of those things. You know, that is pretty, pretty obvious. The-, there is a slight more sophisticated, uh, point here, which is that people have been promising that the new forms of ads that we are making are more intrusive, and, and more attention grabbing than the old forms of, of ads.
Richard Kramer: Hm.
Mike Follett: And they make a sort of historical argument, in the old days people just, I presume this is what they're saying, nobody says it's like this, in the old days people, uh, glanced at advertising very, very quickly, but not thanks to the wonder that is, you know, platform X and, you know, social network Y, people are far more deeply engaged with the ads. I think this is certainly something that Mark Zuckerberg used to say, used to, no longer says, that ads on Facebook are not like your old, you know, your grandfather, your father's ads, these are new things that people want to engage with and they want to befriend brands on Facebook and things like that.
The evidence for that is resoundingly, no they don't. I cannot, we didn't do eye tracking back in the 60s, or the 80s, we didn't, our company started in, in two, 2013, we have not noticed any secular trends in people engaging with ads more or engaging with ads less, uh, than they were. What we do notice is a tremendous consistency in the data that people are just very good at ignoring this stuff in general. If, if there are, is a, a decline in attention to advertising, and I do not know if there is one or not, but if there is, it's not because ads themselves are getting less efficacious, it's probably that, or, or, or people's attention spans are going down, whatever bloody Hell an attention span is, and that's shoddy science, you know, just in itself, it's probably not that, it's probably just what exactly it's probably this, this podcast, it's probably just far too much sub prime advertiser going out there.
When we do see that advertising effectiveness in western markets is going down, it may be because partly, not just, but, but in part, because of a massive profusion of low quality media inventory that's going out there.
Will Page: That takes us to the end of part one, and what I'm feeling here is that what Mike Follett and his company Lumen Research is doing is a perfect fit for Bubble Trouble, and their advertising is dependent on bubbles, they can't create bubbles, and advertising finds itself in a whole lot of trouble. Back in a moment with part two.
Richard Kramer: Welcome back to Bubble Trouble, we're here with Mike Follett of Lumen Research talking about the efficacy of advertising. Now Mike, you've laid out a few reasons why we might be looking at a bubble in advertising, or just the sheer fire hose of ads we're exposed to all day long, and I guess a couple things come to mind, are we just addicted to the shock of the new as we might say in another context, we're always inclined to chase the next new things, and are we all somehow vulnerable to imposter syndrome? If we don't know that we've got that great new thing, if we aren't certain that the research shows that the ads are, are, are working, we're gonna go along with it and we're gonna say, well, let's not hand back that marketing budget, we may as well spend it and see what comes what may?
So I guess my question is, aren't we always going to be wasting a big chunk of our advertising because it's always a speculative effort to en-, entice you into the new, and aren't we always gonna have to be comfortable with the wooliness or all that research around those ads just because we'll never really know what goes on into that, the 30 billion neurons we've got firing away in our brain every second?
Mike Follett: Well I think that this is a very sophisticated point indeed, I, I do agree that we just have to be better sitting with a certain amount of uncertainty in our lives. When you're doing marketing, what you're trying to do usually is introduce people to something that they might not have known already or, or, or might not have considered already. The new is risky. [laughs] uh, and, and as a result it might work and it, and it might not, and when we're doing marketing it's not just the messaging that's new, but it's also sometimes the media that's new. Companies can gain a tremendous advantage if they can find a new and better way of, of, uh, uh, getting their message out there. TikTok is growing tremendously fast and if you can get your ads to be perfected and, and, and perfect for TikTok right now, you stand to have an advantage over, uh, your competitors. But again, that is risky. Because doing things for the first time, it means you don't necessarily know what you're doing, so new messages and new media always in, inh-, have an inherent amount of risk about them, and that sometimes means that that risk will, uh, uh, pay off and sometimes not.
So yes, absolutely, we should, uh, uh, embrace that uncertainty, but again, we shouldn't just throw up our arms in despair and just go, "Well we'll give it a go anyway." You know, smart people go in to risky situations with the best information that they can. They know that it might not have all the information, that their predictions are not gonna be perfect, but having some information is a damn sight better than having none.
Richard Kramer: Uh, how do you think about this process of marking your own homework and measuring the efficacy of ads when you're, you're looking at it at the very human, were someone's eyes focused on the screen level?
Mike Follett: Yeah, well, uh, my advice to marketers about getting people m-, to mark their own homework is to stop getting people to mark their own homework. I think that that's [laughs] a silly thing to do. By far the, uh, most efficacious way for, uh, understanding if your ads are working is to, uh, employ a research company, it might be Lumen, might be someone else, to offer you some, uh, third party data on this rather than going to the platforms to say if, if they, if, if, if their ads worked or to go to your advertising agency and to say, "Well, you know, you tell me then if, if the ads worked."
No, no, go to an indepedent third party source, and there are hundreds of these things out there, [Cantar 00:16:50], Ipsos, Nielsen, System One, dare I say it, Lumen, we're all in the business of giving you indepedent insight into how your campaigns are working. And that of course costs money, and this is the, the debate that you have to have. Is it better to get a whole load of free research from the people you were already giving money to to say, uh, you know, I, I, are your ads working? Or is it better to pay money to a third party to get real data about, um, the efficacy of your ads?
Richard Kramer: Hm.
Will Page: Mike, just sort of want to comment at a higher level here, when I, when I understand your fantastic work Lumen Research is doing, and the knee jerk reaction from me is, there's just too much advertising, and we talked about hyper competition in part one, when the quantity of ads goes up so much like your wonderful Times Square example, the quality of attention could go down. So the gut in me is telling me that what you've introduced the world of advertising is too much supply and the economist in me says, the response there is to yield back supply. Would you s-, how do you do that? Is there not a bit of a dilemma here if we're all advertising too much, if we're all spending too much and advertising too much and creating too many impressions, how do you reduce that when there's a kind of dilemma of fear of missing out? That is, if I reduce my ad spend, somebody else would capture that space too? Can you just kind of untangle my scrambled eggs thoughts here for a second in terms of, how does the market fix itself if it is indeed broken?
Mike Follett: No, I think that's a very good w-, point, Will, because markets currently seem to be fairly inefficient, but we have to remember that there is a signal when you're ads work or, or not which is a sale, uh, and that means that have this indepedent variable or, uh, sales or actions that you want that we can look to, and use that to help us in our yield management, because what you're talking about here is optimal yield management, I could make tons and tons of money I suppose by having one single ad exposed to people, I could make more if I had two, I could make more if I had three, but if I expose 100 ads to people, then I will actually make less money in both as a publisher and certainly as an advertiser.
Working at what that equilibrium is impossible to do if you just look at the price paid for these ads. If you start looking at the outcomes that they're in, you can start working at not just the cost of attention, but the value of attention, and you can use that as an important signal to help you as a behavioral economist or, or even as an evolutionary economist to help you work out where the good stuff is and where the bad stuff is.
Will Page: I love that, I love that. It just reminds of, um, that famous quote from Barry Schwartz, "Some choice is better than none, but it doesn't necessarily follow that more is better than some." If there is an antidote to hyper competition, it might just be that and it might well fit nicely in your world of advertising.
Richard, I think it's time to get Mike smoking.
Richard Kramer: Yup, Mike as we always do every week on Bubble Trouble, we try to pull out a few smoke signals, the kinds of things that you ought to be watching out for, for signs of incipient bonfires which may consumer your lifesaving or, or just your sanity. So-
Mike Follett: [laughs]
Richard Kramer: ... can you give us a couple of things to watch out for in this crazy world of digital advertising, things that just make you go, ugh, every time you see it-
Mike Follett: [laughs]
Richard Kramer: ... [crosstalk 00:20:16] by a particular platform, or particular advertiser, or an agency, what are the kind of things that you think people, ordinary people, need to be on the lookout for when they think about how to treat this bombardment of advertising that they get day in and day out?
Mike Follett: Well I think the first thing that you should be looking at is not just how many ads you buys, but how, how many ads that are there to be bought, but how much time exists in the world for them to be looked at.
Richard Kramer: Hm.
Mike Follett: That is the finite resource, attention and then the cognition that goes with it, so what I find frustrating is when you end up looking at data that suggests that advertising inventory is essentially infinite, that is exactly the time to ask some questions about-
Richard Kramer: Hm.
Mike Follett: ... the people doing the selling to you. If you can't put a cap on the amount of at-, ads that are out there, then probably the ads are gonna be worthless, so that's one thing.
Richard Kramer: By the way there is a terrific quote which is, "Every economy is an economy of time."
Mike Follett: Oh.
Richard Kramer: And that's by Karl Marx of all people. One of the currencies that was frequently cited in the past decade with read to anything digital is time spent, and I'm sure you can rift on this one for a while, the notion that we're all spending time doing one or another activity as if it captures our undivided attention, and what you rapidly find out in time spent when you add up mobile and, and TV, and radio, and print, and all the other things, is that they add up to more hours in the day than people really have in leisure time and, and people are multitasking, clearly not spending attention, their full attention, on any of those media in particular. Have you got another smoke signal for us?
Mike Follett: So a second smoke signal I think is about the engagement that we think that we're getting from advertising. Lots of people, with again, with lots of people in the marketing community and beyond will tell you that the most important thing that we're all trying to do is get people to deeply engage with our advertising. This I think is probably a fool's errand-
Richard Kramer: Hm.
Mike Follett: ... because I'm not entirely sure that people do want to engage with your advertising. [laughs] they want to engage with whatever it is that they want to engage with, advertising can still work as a poster or as a, a slight influence behind a decision, and it is very powerful, uh, in exactly that form, but when you're talking to marketers, when you're talking to advertising agencies, they may say that what you're after is deep, deep, you know, emotional engagement with your brand or with your advertising, and I usually find that that is evidence that people don't actually know how advertising works.
Richard Kramer: Hm.
Mike Follett: So that would be a, another sort of smoke signal mainly of, of, uh, advertising agencies often trying to big up their role in things and, and their contribution which is, which is very, very important, but bloody sake, [inaudible 00:23:14] really important in a way that is different from the ad agencies themselves think it is.
Richard Kramer: Yeah, just wrapping up it makes me think of these heartwarming John Lewis Christmas ads and whether they actually led to John Lewis getting more sales or not. It, it it's certainly important for the agencies to have those ads which win awards and capture the industry's attention, but what's not clear is whether they're capturing the real attention of the consumer that they're targeting as opposed to just their fellow [inaudible 00:23:46] in the ad industry.
With that I'd like to thank Mike Follett for giving us a few insights into how little attention we actually pay to ads, and maybe how we ought to be a little more cautious in the billions of digital advertising impressions that get bought everyday and, and how they should be valued. Thanks very much, Mike.
Mike Follett: Thanks very much, guys.
Richard Kramer: Thank you.
If you're new to Bubble Trouble, we hope you'll follow the show wherever you listen to podcasts, Bubble Trouble is produced Eric [Newson 00:24:18], Jesse Baker, and Julia [Nat 00:24:20] at Magnificent Noise. You can learn more at BubbleTroublePodcast.com, we'll be with you next time.
Will Page: Okay, so Richard, a hat tip to you too for introducing the work of Karl Marx to this podcast, Karl Marx by the way was a regular of [inaudible 00:24:35], he lived just at the end of Palm Hill Running Track, the athletics track, where I first met yourself and it's interesting that he was on the running track, because his sister was responsible for starting the first race on that running track. It's true, her name was Anya.
Richard Kramer: [laughs] that is weak. [laughs]
Speaker 4: We're definitely cutting that out.
Richard Kramer: [laughs]
Will Page: Leave it in baby, leave it in.