Don't you want to find out which half of your advertising is wasted?

Some time in the early 20th Century, John Wanamaker, one of the fathers of the U.S. department store business, said "Half the money I spend on advertising is wasted; the trouble is I don't know which half." Kantar Media Intelligence reports that $144 billion dollars was spent on advertising in the U.S. last year. If Wanamaker's Rule is still in effect, that means that $72 billion was wasted.

How much television advertising do you pay attention to? Do you mute your television when the ads come on? Do you prefer to watch television from your DVR and skip over the ads? How about radio--like me, have you given up on commercial broadcast radio because there are simply too many ads? Do you instead listen to satellite radio (which still has ads, but fewer of them), a service like Pandora, or music on your iPod or phone? How many print ads in magazines do you pay attention to? When was the last time that you paid attention to a newspaper ad, or looked through the classified ads? Do you read the flyers and other junk mail you receive, or do you throw them in the recycling bin as soon as they arrive? When you're browsing the web, do you use an ad blocker?

The fact is that, with a few exceptions, we really have no way of directly measuring advertising effectiveness--no way of knowing how much of our advertising is wasted. The only way to scientifically test is to not only compare one ad against another, but to also test against a control of no advertising whatsoever--and no company is going to risk the potential harm of eliminating all advertising in order to test the difference between some form of advertising and none at all. While you're testing, you'd better account for macroeconomic effects as well: A test in 2007 would have had very different results than the same test in 2009.

So, we're at the same place as the ancient Egyptians and Greeks were when they performed highly symbolic, but ultimately ineffective, animal sacrifices. We don't sacrifice animals anymore; instead, we waste tens of billions of dollars that could be used for other, more productive, activities. Could we do without it? If we did, what horrors would the gods rain down upon us?

I'd argue that most large advertisers could cut their advertising expenditures by 50% with little or no effect on sales, and a big positive effect on their bottom lines. And, I believe that we're heading in that direction. Marketers are finding success with approaches that look little or nothing like conventional advertising, such as product placement and social media.

Advertisers who do try to cut their expenditures on conventional media in half are going to face tremendous pushback. Ad agencies and media buyers will tell them that their plan is risky, if not insane. (Ad agencies and media buyers get a large portion of their income from purchase of advertising space.) Media companies will sow fear, uncertainty and doubt within advertisers' management. Even advertisers' managers may fear that cutting the expenditures in half may result in "turning the field over" to their competitors. Making such a decision is going to take enormous courage on the part of executives. However, if it causes earnings before advertising and promotion expenses to fall more than the savings from the decrease in ad expenditures, companies can always ramp advertising back up.

For their part, media companies have to prepare for a future where they get the majority of their revenues from subscriptions and other income instead of advertising. As for media startups, building your business plan solely, or even primarily, on advertising revenues is a fool's game.

Patron-driven library acquisition could hurt some university presses

Department store magnate John Wanamaker is quoted as saying "Half the money I spend on advertising is wasted; the trouble is, I don't know which half." Some librarians feel much the same way about their collections--and they're starting to do something about it. According to Inside Higher Ed, library inventory research suggests that as much as half the holdings of university libraries never circulate. To cut down on waste, 400 to 600 university libraries worldwide have implemented patron-driven acquisition (PDA) strategies, in which they get access to eBook vendors' entire collections but are charged only when patrons actually use the eBooks. Consultant Joseph Esposito expects the number of libraries using PDA strategies to double in the next 18 months.

For example, the library at Grand Valley State University in Michigan started using a PDA program from Ebook Library in 2009. That year, library patrons used 6,239 eBooks, but only 343 of them were used enough to trigger an automatic purchase. Grand Valley paid Ebook Library $69,000, but if it had purchased all the eBooks that were skimmed, it would have paid $550,000.

So, if libraries shift to a model where they only pay for titles that they actually use, how will that affect university presses, for which a significant amount of their output comes from scholarly monographs that are rarely read? Esposito estimates that approximately 25% of university press sales (which total $320 million) go to libraries, or about $80 million in sales. Roughly 40% of all library book sales in an average general research library would be eliminated with a PDA strategy in the most extreme case, which would result in $32 million in lost revenue for university presses, or 10% of their total sales.

Rick Anderson, Associate Dean for Scholarly Resources and Collections at the University of Utah, said the following at a panel at the Association of American University Presses' annual meeting in Chicago last Tuesday: “When you describe the current situation as a partnership between libraries and university presses, that makes it sound very good and noble. Here’s another way of expressing it. University presses publish books that are no freaking good to anybody, libraries buy them and put them on the shelves, where they sit and are never used by anyone, and with the money that we used to buy them, university presses publish more books that are no use to anybody. The question becomes what should be the criteria according to which we discriminate. Should it be on the basis of what our patrons demonstrably need, or should it be on the basis of what we consider to be of high quality?”