The Taxman Cometh

Since the stupidity of the I.R.S. is all over the news, I thought I'd weigh in with my own I.R.S. story.

This probably means they'll come to my house in the middle of the night and drag me off. But, as I'm sure you know, my dedication to my readers is more important than my freedom.

So it's about 4 or 5 years ago and the I.R.S. decides to audit my agency. They came into the agency and went through every piece of paper and every email and every memo and every invoice and every leftover cranberry bagel in the joint. As the majority shareholder, they also demanded my personal tax returns for the previous year.

We had the best CFO in the history of the world. Seriously. After going over everything, we came out of this inquisition 100% clean and lovely.

So they packed up their calculators and their microscopes and went home.

A week later I get a phone call...

THEM: Mr. Hoffman, during our audit I noticed that you had sold some of your shares in Hoffman/Lewis back to the company.

ME: That's correct.

THEM: I need to confirm that you paid proper taxes on the sale of your shares.

ME: Okay, well you have my tax retu....

THEM: So I need your tax returns for last year.

ME: You have my tax returns for last year. I gave them to you during the audit.

THEM: Yes, but they are in someone else's office.

ME: Excuse me?

THEM: They are in another office so I need for you to send me another copy of your tax returns.

ME: Wait a second. May I suggest something? What if you call down to the other office and get them?

THEM: To get your file from the other office to my office I have to apply for a file transfer and that will take about four months.

ME: WHAT? Four months to get a file from one office to another? I can send a refrigerator to Denmark over night...

THEM: Please send me another copy of your tax returns.

ME: I don't have another copy of my tax returns. You have my tax ...

THEM: No, I don't, Mr. Hoffman. It's in someone else's office. This will go a lot smoother if you cooperate with us.

I wish I could say I made this up, but you cannot make this shit up.
  
We posted something on our business website yesterday that's been very popular. If you're interested, it's called "Agencies Never Take Their Own Advice" and you can find it here.

Native Advertising: Traditional Advertising On Line

Last week, Mashable asked the question, "Is Native Advertising Just Another Term For Good Advertising?" The answer is no, not quite.

From what I can tell, native advertising is a horrible and misleading term that is being used to describe something that may actually turn out to be a good idea -- the application of traditional advertising principles to online advertising. Let me explain.

Online advertising was supposed to be interactive. It was supposed to rescue us from having to force people into looking at our ads. Consumers were going to want to interact with us, they were going to want to have conversations with marketers, they were going to want to have relationships with brands.

It was all fantasies and delusions based on naive interpretations of consumer behavior by people who had a whole lot of ideological commitment to the web, and very little experience with real world marketing.

Now we’ve learned that, for the most part, consumers want no part of interacting with online advertising. What we are calling "native advertising" is a recent reaction to this realization and to the very disappointing history of online advertising, particularly banner advertising.

Nobody seems quite sure what they mean by native advertising. But I think I know what they mean. They don't know it yet, but they mean using traditional advertising strategy on the web.

They mean that if you insert advertising into an appealing environment and you make the advertising entertaining or beautiful or interesting, you’re more likely to attract some attention from consumers. Which is the exact premise on which traditional advertising is built.

What is TV advertising about? It is about finding the most appealing programming and inserting into that programming messages that are either entertaining or interesting or beautiful.

Native advertising represents the marketing industry finally starting to grasp that consumers do not want to interact with banner ads, do not want to have conversations with brands, and do not want to have relationships with marketers.

It is still early days for this realization, and marketers don't quite know yet what they've realized. They think they have to trick people into seeing their advertising by pretending it's part of the content.

They don't yet understand that the effectiveness of "native advertising" -- just like all other forms of advertising --  is going to be proportional to how interesting, entertaining or beautiful they can make it.

Native advertising may represent the first stage of the marketing and advertising industry growing up and coming to terms with the fact that the best hope for online advertising is not pie-in-the-sky nonsense about conversations and relationships.

It is taking the traditional principles of interrupting and grabbing attention, and applying them to the web.

For more, check out the BeanCast podcast which I was on last night discussing this and other subjects.

Display: A House Of Cards

Despite its dismal track record, spending on display advertising keeps growing at an astonishing rate. Forrester Research is projecting a 17% compound annual growth over the next 5 years.

As far as I'm concerned, it's a house of cards. And if the house goes down, it will take a lot of advertising-supported online businesses with it.

Here are some reasons I believe display is a house of cards:

• Interactivity has proven to be a joke. Nobody interacts with display advertising. Click through rates are abysmal and keep dropping.

• The promise of precision targeting has also proven to be a farce. Facebook, the poster child for precision targeting, has click rate results so low that they refuse to publish them. If "precision targeting" can't deliver better results, what the hell is the point?

• Ironically, despite its promise of pinpoint targeting, display is looking more and more like it's attracting the scattershot advertiser -- the tonnage direct marketer.

• Even if pinpoint targeting was real, what difference does it make if nobody notices the ads? In most cases, the physical properties of display ads render them essentially invisible. Have you ever heard anyone discuss that awesome display ad they saw?

• The amount of known click fraud is alarming. The amount of unknown click fraud is...unknown.

• The amount of known website visitor fraud is also alarming. The amount of unknown website visitor fraud is...you get the picture.

• After 15 years, can you name a single significant consumer brand that has been built by display advertising? I didn't think so.

There are plenty of smart people in the advertising industry who know display has been a mess, but are keeping their mouths shut because there is too much at stake. Remember, prudent, intelligent people in the ad industry who were skeptical of the magical powers of "interactive" advertising were excoriated for years for being Luddite dinosaurs (who moi?)

There are a few things that could destabilize display's house of cards.

• A high profile fraud scandal

• Widespread recognition of Facebook's display ad dysfunction

• Mobile not living up to expectations

• A major agency or research company throwing open the emperor's closet

I'm not predicting that display's house of cards is going to collapse. It is too well entrenched for that. But if it started to follow the downward track of print advertising, I wouldn't be shocked.

Be sure to see my piece today at Digiday on banner advertising.