Of course all companies use ads, including unscrupulous ones. But ads work better for companies with a real product, and therefore you expect the % of good products among advertised products to be higher than among non-advertised ones.
> But ads work better for companies with a real product, and therefore you expect the % of good products among advertised products to be higher than among non-advertised ones.
Are you contesting that ads work better for good products, or that such would imply more good products across advertised products?
The mechanism for the first is quite intuitive. An add can make someone buy something once. If that thing is good, there is a chance they will buy again, and so give you more money. If it is not good, they will at most buy it once.
So the EV of an add on a good product is by definition higher than one on a bad product; and so a company with a good product should be willing to spend more on an ad.
> Are you contesting that ads work better for good products, or that such would imply more good products across advertised products?
The latter. Basically, it boils down to the intuition that a company with an inferior product is likely to spend more on advertising to make up for its products deficiencies. The best products often don't need paid advertising at all because they can be successful with only word of mouth advertising from happy customers.
I've recently had some personal experience with this from an expensive home improvement product. One company advertises heavily, has a high-touch sales force, and engages in extensive SEO online. However, once I dug in deeper I came to believe the whole category of products probably doesn't work effectively over the long haul (their advertising and guarantees use some tricky wording), and is certainly not worth the expense. Their advertising was a poor proxy for quality.
