Here’s what I learned this week

I did a lot of thinking this week about the inefficiency of the ecommerce ecosystem today.

It’s been something that’s really been bothering me that there really isn’t any transparency across different parts of the industry.

The entire industry is predatory and difficult to navigate.

Let’s talk about Facebook

The defacto advertising platform that nearly every ecommerce company uses to advertise their products.

Facebook is an amazing company for pulling off what it’s pulled off, they make just under $300 million dollars a day on advertising.

You as the advertiser have absolutely no way of knowing if your ads are seen by the right people, have no idea who your ads are being shown to, and happily pay your Facebook Ads bill every single day, week, month etc with no questions.

They’ve won.

They have found a way to say “Trust me bro” and take your money without having to prove anything is working.

In fact most of their reporting even in ads manager isn’t entirely accurate they even tell you that it’s not entirely accurate.

If something doesn’t work, it was bad creative.

It’s you not them.

It couldn’t possibly be that Facebook was showing the ad to the wrong people.

No one will ever know.

Then there’s the sheer amount of bot accounts that exist that are likely being shown your ads too.

In fact, a lot of advertising spend is being eaten up by bots.

But this is the “cost of doing business” and “priced in”.

Facebook has zero incentive to actively crack down on this behavior.

I’m not saying that Facebook is 90% bots, but I am saying that there is a percentage of your ad spend that isn’t actually going to a real audience.

This is the problem with digital advertising generally.

So what do we do?

This was the question that I was thinking about over the last week, what can actually be done to remedy this massive issue?

Honestly, I don’t think there’s much that we can do.

Social media and advertising networks are established players and for a lot of brands part of the growth playbook is to run ads.

But it got me thinking more broadly about the sheer inefficiency that exists across a lot of ecommerce companies and the sheer overcomplication of the industry generally.

There’s been a bunch of attribution companies that have popped up over the last few years that are trying to solve for a problem that Facebook themselves can’t really solve for.

Which led me to ask but does any of it matter?

The biggest threat to a lot of ads and ad networks is actually the rise in bot farms and the decreasing price of technology. Yet I haven’t come across one attribution platform that actually filters this out, because those on the other side have gotten good at hiding it.

You couldn’t run the type of sophisticated setups that people have today 10 years ago, now phones are more powerful than laptops 10 years ago, a script, browser, and a phone is all you need to power a bot army.

I have the feeling that the price of advertising is increasing not only because of the increase in number of people advertising but also because with digital there’s a lot of fraud out there.

When there’s an angle to be played, organized crime will play it.

Can anyone compete?

I’m honestly not sure. Watching what TikTok has done (Byte Dance really) and other large Chinese led companies of Temu and Shein, you know their next step is going to be more of an advertising play.

But they’ve already led with cheap stuff and are grabbing enough market share that Amazon just opened a program to do what they are doing and bring those suppliers directly onto Amazon.

We’re also seeing Walmart open up ad inventory and Apple has been quietly looking to get in on the game too.

Because the profit margins are HUGE, the reporting not remotely accurate, and the results, questionable.

Think about it this way, most brands are happy with anything over 2x ROAS, larger brands are comfortable with 1x ROAS.

That means that they are OK with losing money on their ads from a profit perspective to play the long game.

A system where there are no guarantees, there are no checks and balances, the fines they pay are a “cost of doing business” and these businesses are so big, they have no incentive to clean up this behavior.

What happens to companies when they are middled out? What happens when these other companies are spending billions of dollars a year selling the same products that other brands are for a fraction of the price?

What happens when the large marketplaces can outspend all the mom and pops combined multiple times over?

Should we compete?

This is the next question that comes to mind, is it that we’re just not using social media correctly?

Do we shift to quality of communities and publications over quantity as most have consolidated to put out utter crap over the last 10 years?

Should we instead be using the same concept of bots and scrapers to create lifestyle pages that aggregate and post different pieces of content and post to various social media properties instead?

If social media has largely become about entertainment, should we be treating it differently as an entertainment channel rather than a sales channel, with the goal of collecting an audience around an interest rather than just selling products?

Results are mixed when it comes to monetizing audiences like these and as anyone knows a lot of followers are in fact bots too.

I don’t have answers to this one quite yet, but I’m interested in having more of the discussion because it’s a discussion worth having.

The Takeaway

I’ve been thinking about how you can game the social networks to build valuable audiences, we’ve tried a few times, but it really has to be from an entertainment and value exchange perspective, this is what got us thinking about politics.

I haven’t figured out a good way to do this yet, but I’m working on it.

Have a great week!

-Jon

Catch up on past posts: https://ecomwithjon.beehiiv.com/