Hey Advertisers: The Data-Mining Emperor Has No Clothes

Authored by Charles Hugh Smith via OfTwoMinds blog,

When a big advertiser pulls its online adverts and its sales remain unchanged, that tells everyone who"s paying attention something important.

It"s an article of widespread faith that data-mining enables advertisers buying online adverts to target consumers with laser-like precision. Vast warehouses of servers grind through billions of records of consumer profiles and transactions and with a bit of algorithmic magic, distill all this data down to the prime target audience for whatever good or service you"re selling: probiotic goo, battery-powered back-scratchers, Zombiestra(tm), investment newsletters based on darts tossed by monkeys, etc.

And everybody knows online media is the place every advertiser wants to be and needs to be. By some measures, online advertising exceeded television advert spending in 2016 (around $70 billion each). Unlike traditional media advertising, which is stagnating or declining, online advertising is still expanding smartly--especially in mobile media.

Combine the promise of god-like targeting via data-mining with fast-growing online platforms, and you"ve got advertisers falling over themselves in their rush to spend billions more on online advertising.

As if that wasn"t enough to get advertisers salivating, the time consumers spend online continues to expand as well:

There"s one little problem with this narrative: online adverts don"t work as well as they"re advertised. Proctor and Gamble recently announced that a significant reduction in their online social-media advert spending had no measurable effect on sales.

The only possible conclusion (unless you"re selling online adverts for a living) is: online adverts don"t work.

There"s another little multi-billion-dollar fly in the ointment of online advertising known as click-fraud-- the clicks on adverts may not be humans actually interested in the product being advertised but automated bots skimming money from advertisers or competitors.

So all those clicks aren"t from actual consumers; they"re bots clicking on click-farm sites which send a small fee for every click to the owner of the site, which just so happens to be the owner of the bots clicking on the adverts.

Or an advertiser finds they owe $100,000 in click-fees for the tens of thousands of clicks their adverts garnered--but most of the clicks were generated by competitors seeking to bleed the advertiser of revenues and introduce false data points.

Click-fraud is the industry"s dirty little secret, and the numbers are kept secret lest the reality that the Emperor has no clothes gets out. Despite all the hoopla about mobile adverts, fast-growing market, blah blah blah, there is precious little real-world evidence that online adverts actually do the intended job of generating new sales and attracting new loyal customers.

Just look at the online advertising you"re being served. Do you get adverts promoting airline tickets to destinations you"ve just been to and that you"ll never return to, adverts promoting wrenches after you"ve just bought the only wrench you"re going to need in this life, etc.?

If this contextual advertising is the best that data-mining can do, it"s pathetically ineffectual. Assuming you haven"t installed ad-blocking software (another industry reality that is rarely mentioned), have you ever clicked on any of the adverts in the sidebars of your social media or email websites--except by accident?

But what about all those thousands of data-points Big Data has collected on us all? All our purchases, all our credit history, how much time we spend online, the sites we visit most often, and all the rest of the mind-numbing details of every day life.

All of this data-mining is predicated on a false assumption: that my past purchases predict my future purchases. Other than the most brain-dead conclusions--yes, I will buy gasoline again somewhere in the near future, probably at Costco, using either the Costco credit card or an airline mileage credit card--this data has little or no effective predictive value because our spending is tightly limited, controlled and prioritized, so there"s near-zero leeway for impulse buys or unplanned purchases.

Spending can be constrained by modest levels of disposable income (i.e. cash left after paying all the essential bills, existing debt, etc.) or by budgeting.

As for enticing me to buy gasoline elsewhere than Costco, or switching credit cards--you"re wasting your money. Giving me $1 off each gallon would work, but only as long as I got this enormous discount--a discount that will bankrupt the issuer in short order.

As for enticing me to switch credit cards--I tear up multiple card offers every week, and have done so for years. So the card offers are batting zero despite literally thousands of pitches via mail, print and online adverts. No "targeted ad" based on data-mining is going to change that.

I might switch if you give me back 10% of all purchases in cash, but that"s an offer that will bankrupt the card issuer.

The fantasy that"s repeated in every account of the staggering effectiveness of mobile advertising is this: I"m walking past a pizza shop and my mobile phone displays a coupon for that very pizza shop. Wow! Imagine the power of combining location with all the treasure trove of big-data-mining about little old me!

Here"s a credit card purchase from three years ago for a pizza shop--this guy is a pizza fan, no doubt about it. This advert is a statistical winner.

Nice, except that 1) I rarely eat pizza, and when I do, it"s generally at home; 2) I never buy meals on impulse, since that ruins my diet/fitness regime (and I"m too thrifty to buy meals on impulse anyway) and 3) my phone is often not with me, off or otherwise disabled.

What this tired narrative never includes is my dismissal of the advert as a matter of habit, and the possibility the advert alienates me in longlasting ways. Most of us never look at ads, and the more you make them intrusive, the more we hate the website, the advertiser and whatever product/service is being pitched.

Advertisers may have unwittingly poisoned themselves and their product/service. The net result of the data-mined, contextual, statistically targeted advert may well be a consumer who blacklists the pizza shop from then on.

This alienation is of course completely opaque to the data-mining software: there are no data traces left by blacklists/ alienation.

But the flaws in data-mining-yields-advertising-success are much, much deeper than this: human behavior is contingent on events that have yet to happen, and the decision process is completely invisible to data mining and algorithms.

Here"s some examples from my recent purchase history.

I recently bought an airline ticket to Switzerland. Whatever inferences the data-mining software might extract from this will necessarily be false, as the motivation was completely contingent and unpredictable: my brother was in a motorcycle accident, and he needed my help as his wife was hundreds of kilometers away caring for the grandkids.

Whatever inferences the data-mining software extracted from the meal I purchased at an Italian cafe a week later would also be intrinsically useless/ false as the only reason we went to that cafe was it was the only restaurant my brother could reach on foot with his cast and cane.

What inference could any software extract from this that would be useful because it was accurate? None. The situation, the motivation, every single part of the decision was intrinsically opaque to any data-mining software.

As for what else I bought in town--groceries, paid in cash--another zero for the data-mining software.

The only item of any value that I did buy, I bought through my brother"s account--another layer no software could possibly penetrate. Software will wrongly attribute the purchase to his profile, not mine, a totally false projection.

Virtually every inference that automated software attempted to extract from my spending would be worse than useless, as it would be misleading. The only inferences with a shred of accuracy--here is a consumer who randomly buys an airline ticket to Europe--is utterly useless to advertisers.

The only adverts that have any chance of working are the traditional variety that assume only one in 10,000 people will have a contingency-based need or desire for the product or service being advertised. So the adverts attempt to reach 1 million people in the hopes that a hundred might be interested and a handful might proceed further.

What advertisers who are shaking themselves out of the online-advert trance are discovering is that the data-mining advert Emperor has no clothes. The industry as it stands can"t identify which clicks are fraudulent or accidental, which ads actually trigger a sale, or which ads actually alienate potential customers.

When a big advertiser pulls its online adverts and its sales remain unchanged, that tells everyone who"s paying attention something important: the industry isn"t doing a very good job for the billions it"s being paid.

*  *  *

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"Major Deflationary Disruption" Looms After Amazon Purchase Of Whole Foods

Authored by Mike Shedlock via MishTalk.com,

Amazon bought Whole Foods yesterday. Widespread carnage in the grocery stock prices followed. Jim Cramer called it a major deflationary disruption saying stores cannot compete.

“If I was the Federal Reserve, I would have a meeting on this. Inflation is going to go down…. You have to rethink food … Costco knows how to compete. It will be in there tooth and nail with toilet paper and paper towels. … But Kroger, a crisis in Cincinnati, crisis.”

“Major Disruption of Society”

SupplyChain247 reports Amazon’s Move to Purchase Whole Foods Is ‘Disruption of Society’

TheStreet’s Action Alerts PLUS Portfolio Manager Jim Cramer said Amazon’s move to acquire Whole Foods is a disruption of society, “this is what I regard to be a move by Amazon to destroy the margins and own the business of food and groceries in this country,” Cramer said.

With Amazon putting down $13.7 billion to buy Whole Foods, Bezos is sending a powerful message to his retail rivals;

• Food suppliers will now be dealing with an even larger grocery store, meaning potentially pressured profit margins for organic players such as Hain Celestial.


• Amazon officially shows intent to enter bricks-and-mortar retail in a larger way than just bookstores. Combine that with its unmatched digital presence, Walmart, Target and others have been put on notice.


• Grocer stores like Kroger will now be in an even bigger price war.


• Amazon Prime integrated into Whole Foods could hurt Costco over time. Many Costco members are also Prime members.

“What Amazon did to the mall, it will now do to grocery stores,” said Cramer.

Here is a Tweet to think about:

Amazon did not just buy Whole Foods grocery stores. It bought 431 upper-income, prime-location distribution nodes for everything it does.

— Dennis K. Berman (@dkberman) June 16, 2017

A Burgeoning Growth Engine for Costco: Wanton Alcoholism

Costco has to be the single best retail business in the world. A new Costco just opened in area and I signed up for their "executive" membership card, which is something that I feel wholly ridiculous -- but I did so nevertheless.

In order to attain the privilege of shopping there, customers must pay an annual fee. In an era where every retailer is tripping over themselves to attract customers, this concept isn"t dually brilliant and absurd.

Their private brand, Kirkland"s, has also attained legendary status -- viewed by many as representative of value and quality. A new engine of growth for Costco is now enjoyed in wine, beer, and spirits.

Last year, alcohol brought in $3.8b, half coming from bullshit wine. This business has grown by 46% over the past 5 years, outpacing food and sundries.

“Private label continues to grow as a dominant strategy in retail -- especially when it migrates from being a ‘label’ to more of a ‘brand,’ which Kirkland has done,” said David Bassuk, managing director at consulting firm AlixPartners in New York. “Now it’s a well-known name and gives the consumer a perception of value and a good deal.”

 
The reason for their success lies in the perceived value. The company only marks up prices by 10-14% compared to industry norms of 25-40%.
 

“They’re doing the opposite of looking to cut corners,” he said. “They’re looking for maximum quality and minimum markup to drive value for the member.”

 
Other retailers like Whole Foods, Walmart, and Target have entered the private label business for booze too and have enjoyed success, thanks to America"s proclivity to drink themselves into stupors. Even still, Costco is widely regarded as the winner in this high growth space -- clawhammering local liquor stores into a thousand pieces wherever they encounter them.

Both the stock and revenue/earnings trends have been steady eddy, in spite of an overall lackluster retail environment.

Ancillary beneficiaries are $STZ, $DEO and BF-b.

Happy pre St. Paddy"s day.
Content originally generated at iBankCoin.com

Dear Washington Post: Costco Carrying Orwell's '1984' Is Not A F**king Joke

Authored by James Holbrooks via TheAntiMedia.org,

“Next time you’re at Costco, you can pick up a jumbo bag of Cheetos and a copy of ‘1984.’ Doubleplus good!”

That’s how the Washington Post opened its quick little entry on Wednesday. Continuing, Ron Charles, editor of Book World for the Post, wrote:

“The discount store is now stocking Orwell’s classic novel along with its usual selection of current bestsellers.”

If the significance of the fact that a dystopian masterwork can now be purchased alongside a three-ton bag of cheese puffs instantly strikes you, it should. Strangely, though, Charles and the Post don’t seem to see it.

In fact, it seemed to be a joke to them. The entry closed in the manner it opened. With humor:

“Appropriately, Costco is offering a reprint of the 2003 edition of ‘1984,’ which has a forward by Thomas Pynchon. That reclusive satirist must love the idea of hawking Orwell’s dystopian novel alongside towers of discounted toilet paper and radial tires. SHOPPING IS SAVING.”

In the one and only instance Charles even approached something that could be considered commentary, he linked the surge in the book’s sales to “alternative” news items:

“Last month, amid talk of ‘alternative facts’ from the Trump administration, Signet Classics announced that it had reprinted 500,000 copies, about twice the novel’s total sales in 2016.”

Note Charles was certain to use the word “alternative” when mentioning Trump. Why? Very clearly, “fake news” is the man’s go-to phrase when speaking of the media. So why go with “alternative” instead? Hell, the Post itself was the driving force behind the “fake news” frenzy in the first place.

I could go on about how this is the Washington Post, corporate media juggernaut, attempting, rather pathetically, to poison the notion of “alternative” in the minds of its readers — or, I should say, what’s left of them — but that’s not really what this is about.

What it’s really about is journalism. The fact that “1984” is being sold at Costco, the fact that demand for the classic tale has skyrocketed, is significant. It’s societal. And journalists are supposed to write about things like that.

And what does the Post do? They make a joke of it.

This is an organization that, as recently as January, has been busted publishing false news stories. You would think that with its credibility among a growing division of society hanging on by a thread — at best — the Post would turn an event like this into social commentary. This was an opportunity to speak about a changing world.

But instead, the Post went for laughs.

Let it sink in, friends. George Orwell’s “1984,” a dystopian tale about a society being crushed under the boot of authoritarian regime,  is, once again, flying off bookshelves. To the extent that you can now get it at Costco. Let the significance of that truly dig in deep.

Meanwhile, the Washington Post is talking about Cheetos and toilet paper.

Dear Washington Post: Costco Carrying Orwell’s ‘1984’ Is Not a F*cking Joke

(ANTIMEDIA Op-Ed) “Next time you’re at Costco, you can pick up a jumbo bag of Cheetos and a copy of ‘1984.’ Doubleplus good!”

We"re revolutionizing the news industry, but we need your help! Click here to get started.

That’s how the Washington Post opened its quick little entry on Wednesday. Continuing, Ron Charles, editor of Book World for the Post, wrote:

“The discount store is now stocking Orwell’s classic novel along with its usual selection of current bestsellers.”

If the significance of the fact that a dystopian masterwork can now be purchased alongside a three-ton bag of cheese puffs instantly strikes you, it should. Strangely, though, Charles and the Post don’t seem to see it.

In fact, it seemed to be a joke to them. The entry closed in the manner it opened. With humor:

“Appropriately, Costco is offering a reprint of the 2003 edition of ‘1984,’ which has a forward by Thomas Pynchon. That reclusive satirist must love the idea of hawking Orwell’s dystopian novel alongside towers of discounted toilet paper and radial tires. SHOPPING IS SAVING.”

In the one and only instance Charles even approached something that could be considered commentary, he linked the surge in the book’s sales to “alternative” news items:

“Last month, amid talk of ‘alternative facts’ from the Trump administration, Signet Classics announced that it had reprinted 500,000 copies, about twice the novel’s total sales in 2016.”

Note Charles was certain to use the word “alternative” when mentioning Trump. Why? Very clearly, “fake news” is the man’s go-to phrase when speaking of the media. So why go with “alternative” instead? Hell, the Post itself was the driving force behind the “fake news” frenzy in the first place.

I could go on about how this is the Washington Post, corporate media juggernaut, attempting, rather pathetically, to poison the notion of “alternative” in the minds of its readers — or, I should say, what’s left of them — but that’s not really what this is about.

What it’s really about is journalism. The fact that “1984” is being sold at Costco, the fact that demand for the classic tale has skyrocketed, is significant. It’s societal. And journalists are supposed to write about things like that.

And what does the Post do? They make a joke of it.

This is an organization that, as recently as January, has been busted publishing false news stories. You would think that with its credibility among a growing division of society hanging on by a thread — at best — the Post would turn an event like this into social commentary. This was an opportunity to speak about a changing world.

But instead, the Post went for laughs.

Let it sink in, friends. George Orwell’s “1984,” a dystopian tale about a society being crushed under the boot of authoritarian regime,  is, once again, flying off bookshelves. To the extent that you can now get it at Costco. Let the significance of that truly dig in deep.

Meanwhile, the Washington Post is talking about Cheetos and toilet paper.

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