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The Law of Shitty Clickthroughs
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The first banner ad ever, on HotWired in 1994, debuted with a clickthrough rate of 78% (thanks @ottotimmons)
First it works, and then it doesn’t
After months of iterating on different marketing strategies, you finally find something that works. However, the moment you start to scale it, the effectiveness of your marketing grinds to a halt. Sound familiar?
Welcome to the Law of Shitty Clickthroughs:
Over time, all marketing strategies result in shitty clickthrough rates.
Here’s a real example – let’s compare the average clickthrough rates of banner ads when debuted on HotWired in 1994 versus Facebook in 2011:
HotWired CTR, 1994: 78%
Facebook CTR, 2011: 0.05%
That’s a 1500X difference. While there are many factors that influence this difference, the basic premise is sound – the clickthrough rates of banner ads, email invites, and many other marketing channels on the web have decayed every year since they were invented.
Here’s another channel, which is email open rates over time, according to eMarketer:
While this graph shows a decline, the other graph (which I don’t have handy) is that the number of emails sent out has increased up to 30+ billion per day.
All these channels are decaying over time, and what’s saving us is the new marketing channels are constantly getting unveiled, too. These new channels offer high performance, because of a lack of competition, big opportunities for novel marketing techniques, and these days, the cutting edge is about optimizing your mobile notifications, not your banner placements.
There are a few drivers for the Law of Shitty Clickthroughs, and here’s a summary of the top ones:
Customers respond to novelty, which inevitably fades
First-to-market never lasts
More scale means less qualified customers
Let’s examine each in more detail, and then discuss the options for combatting this force of gravity in marketing.
Novelty
Without a doubt, one of the key drivers of engagement for marketing is that customers respond to novelty. When HotWired showed banner ads for the first time in history, people clicked just to check out the experience. Same for being the first web product to email people invites to a website – it works for a while, until your customers get used to the effect, and start ignoring it.
One of the most important tools you have at your disposal is the creative and calls to action that you use in your marketing – this might be like "X has invited you to Y" or it might be the headline you use in your banner ads. Recently, Retargeter posted an interesting analysis on the Importance of Rotating Creatives, which showed how keeping the same ad creative led to declining CTRs over time:
Publishers often have a similar problem in consumers ignoring the advertising on their site, which drives down clickthrough rates for both of them (bad for CPMs). This problem is often described as banner blindness, and you can see it clearly here in an eye-tracking study by Jakob Nielsen:
You can see here how users, almost comically, avoid looking at any banners.
The point is, humans seek novelty yet are pattern-recognition machines. Your initial marketing strategy will work quite well as your users try it for the first time, but afterwards, they learn to filter your marketing efforts out unless they are genuinely useful (more on that later).
First-to-market never lasts
It’s bad enough that your own marketing efforts drive down channel performance, but usually once your marketing efforts are working, your competitors quickly follow. There’s a whole cottage industry of companies that provide competitive research in the area of how their competitors are advertising and give you the information needed to fast-follow their marketing efforts.
For example, with a quick query, I know how much Airbnb is spending on search marketing (turns out, millions per year) what keywords they are buying ads on, and who their competitors are. And this is just a free service! There are much more sophisticated products for every established marketing channel:
Airbnb Search Engine Marketing
Daily ad budget: $10,638
Keywords: 62,729
Example ad: Find Affordable Rooms Starting From $20/Day. Browse & Book Online Now!
Main competitors: Expedia.com, booking.com, hotels.com, Marriott.com
Any clone of their business can quickly fast-follow their marketing efforts and use the same ads in the same marketing channels. This quickly degrades the performance of the marketing channel as the novelty wears off and clickthroughs plummet.
Any product that is first to market has a limited window where they will enjoy...