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“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”

As much as those words still resonate in the automotive dealer community today, they were famously first spoken more than 130 years ago by John Wanamaker, considered the fathers of modern advertising.  In 1874, Wanamaker printed the first-ever, copyrighted store advertisement for his eponymously named Philadelphia department store. Customers came to trust him for delivering on the honest, straightforward claims in his newspaper advertising, and business boomed.

But as much as Wanamaker leveraged newspaper advertising to fuel his success, he also recognized inherent challenges long before the Internet made them obvious.

Newspapers, of course, were only able to sell advertising to Wanamaker based on their readership size, regardless of whether those readers actually looked at his ad or came to his store. In other words, he was paying simply for ad “placement” instead of paying for ad “performance.”

For the newspapers of Wanamaker’s era, as well as the magazines, radio, television and other offline media that followed, “paying for placement” has been a great business model. They’re paid the same amount regardless of how the advertisement performs for the brand.

But how well is this model really working for advertisers, especially dealers?

When I put that question to dealers, I often hear a refrain very similar to Wanamaker’s famously worded frustration: “we can’t really tell what’s working and what isn’t.” In many cases, dealers are left to wonder how many shoppers actually came from their TV, newspaper or radio ads and the same is often true for their Internet advertising.

Consider this: in 2012 alone, U.S. advertisers spent a whopping $128 billion in offline media, according to eMarketer.  One can only wonder how much of it was ultimately wasted.

Helping dealers tackle this problem is so much a part of our core mission that the original product codename for MAX was “Project Wanamaker.”

The good news, of course, is that the Internet has changed all of this. Because it’s inherently an interactive, data-driven medium, advertisers can hold their Internet advertising partners accountable and pay only when their ads “perform.”

While most industries have already embraced  the shift from “Pay for Placement” to “Pay for Performance”, the auto industry still needs to embrace a new mindset in order to catch up.

Our industry has a Wanamaker problem. In our next post, we’ll discuss the solution.

Pat Ryan Jr. is the founder of FirstLook and MAX Systems. This blog entry and others can be found at www.getrelevantordie.com.