The importance of alignment.

Not many of us would trust a used car salesmen claiming that the vehicles they sell are great deals.

Why? Because there is an obvious misalignment of interests. The used car salesmen's interest is to sell vehicles and make as much money as possible regardless of the quality of the vehicle. A consumers interests are likely to a quality vehicle at an affordable price.

However, in working with marketing vendors and agencies these conflicts can be found all over the place.

Self Reporting

Marketing vendors obviously benefit from advertisers that work with them long term, they make more money. Moreover, advertisers want to run successful campaigns that will lead to more business. As a result, marketing vendors have a financial incentive to provide marketing reports that paint a more positive picture.

Where this becomes really problematic is when marketing vendors make money as a percent of the advertisers spend. (Hint: almost all do) For example, Google AdWords makes more money if you spend $5,000 per month than if you spend $500 per month. Not only does Google have a financial incentive to paint a positive picture, they are further incentivized to paint a picture in which the advertiser will be more successful if they spend even more money.

Pro tip: Ask your marketing vendor if they should significantly decrease their marketing spend. If they only list downsides, they are probably making money as a percent of spend. Note that many will not disclose this fact.

Campaign Optimizations

Marketing vendors often discuss the importance of targeting the right audience. In reality, the exact size of the right audience varies from week to week and month to month. However, regardless of the size of the audience, marketing vendors always seem to be able to spend the full advertising budget.

Why? Because the vast majority of marketing vendors make money as a percent of the advertising budget. In order for the marketing vendor to realize the full amount of revenue, they have to make sure they spend all of the advertising budget.

Campaign optimizations on the other hand is the process of eliminating aspects of the campaign. This can be the time of day, where the advertisements appear, who is exposed to the advertisements, etc. If a marketing vendor is actually optimizing a campaign, it decrease the ability of the campaign to spend money. Which then decreases the amount of money the marketing vendor will generate.

Pro tip: Ask yourself if your marketing vendor would put your success over their ability to make more money.