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  • Bob Hoffman

PERVERSE INCENTIVES & BLIND EYES

It's very hard to understand why no one in marketingland seems terribly concerned about the tens of billions of dollars that are being stolen annually by fraudsters.

 

You would think that with reputable organizations and researchers reporting somewhere in the neighborhood of $60-80 billion being stolen annually there would be howling and screaming coming out of marketing organizations. And yet... crickets. How can this be?

 

There have been a few explanations offered, but there's one that only gets whispered about. The one reason I've become most interested in lately is the potential conflict between what's good for a brand and what's good for its marketing team.

As we know, CMO is a very insecure job. Reports claim that the average life of a CMO is somewhere in the neighborhood of 24 months. According to Harvard Business Review "Eighty percent of CEOs say they don’t trust or are unimpressed by their CMOs." This is not good.

 

I am fond of ridiculing CMOs. So many of them seem to be flat tires who have memorized a lexicon of marketing clichés and just repeat them endlessly. As the great Richard Feynman once said, "The problem is not people being uneducated. The problem is that people are educated just enough to believe what they have been taught, but not educated enough to question what they have been taught."

My taunting of CMOs aside, I have to admit that it's a near impossible job, and I wouldn't do it for all the empty real estate in the metaverse.

One of a CMO's most important and difficult jobs is managing an advertising budget. If you are a big brand marketing honcho there are innumerable ways to piss away millions of ad dollars. Or even worse for your career, there innumerable way to appear to be pissing away millions. Pissing away millions is fine if you don't look like you're pissing them away.

Obviously, wasting millions of ad dollars by buying fake advertising is a terrible thing for a brand or a business. But it's not so terrible for the personal interest of a marketer. To understand why, let's first agree on a couple of unpleasant realities:  1. A marketer's first priority is to keep his/her job.  2. Trying to tease out the effect of advertising on brand health from all the other business variables  (product quality, sales force competence, operations, design, distribution, pricing, competitor activity, economic conditions, etc.) is a never-ending brain destroyer.

This is where ad fraud and perverse incentives come in. Numbers are the best friend of a CMO or anyone else who has to justify advertising expenditures. With numbers, you can demonstrate to the other C-something-Os in your organization and to your Board that you are using the money wisely and effectively.

Ad fraud provides marketers with fabulous numbers. Buying bots and other fraudulent ad inventory is wonderfully cheap. It makes reach look enviable and CPMs look wonderful. And to top it off, bots click on ads creating the illusion of "performance."

In a rational world, fraud detection software would not allow marketers to accept bogus metrics as real. But let's not kid ourselves. In 2021 it was found that Russian hackers had been outfoxing the US's most "secure" cybersecurity defenses including the military’s Cyber Command, the National Security Agency (NSA), and the Department of Homeland Security. Do you really think these dudes aren't giggling at ad fraud defenses?

So here's the conflict. Ad fraud makes marketers look good and balance sheets look bad.

Am I saying that marketing people are irresponsible and too selfishly motivated to be trusted? Not exactly. What I’m saying is that to marketers the personal incentive for unmasking the extent of fraud in the online ad ecosystem is very small, but the incentive for turning a blind eye is very high.


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