There is something wrong with advertising:

• Consumers are trained to tune out advertising because it is annoying. Why should I pay attention to an ad when I am watching a video on Hulu? I am trying to be entertained, not watch a promotional pitch. Tools that allow consumers to skip advertising are very popular. Have you ever started flipping channels as soon as there was a commercial break on TV? There are others that are gaining popularity. I use the Firefox extension Adblock to block internet ads. DVRs allow people to skip forward.
• Even the ads that consumers pay attention to are not very effective because consumers don’t trust information that they receive from the advertisers. I have had poor experience with airlines – flight delays, cancellations, lost baggage… - the list goes on. Why would I trust an airline ad that promises a great experience? In general, we expect advertisers to make exaggerated claims (that are not true) about their products.
• Most advertising that consumers see is not relevant to their needs so they miss the advertisements that they may have otherwise been interested in. If I am looking to buy a new computer, computer ads are all that I want to see. If the webpage or the television show makes me watch nine other ads along with a computer ad, I am almost certain to miss the computer ad.

Advertisers cannot track effectiveness in most mediums – print, television, outdoor advertising or product placement. They can track effectiveness somewhat with web advertising. Within web advertising only search advertising is effective. Banner ads or content ads are much less effective. A click through rate of 0.2% on a banner ad is considered very good. Yet we see plenty of banner ads. Google’s Adsense is extremely popular. In other words, most advertising dollars are wasted and advertisers can do little about it. Yet, advertising as a percentage of GDP has stayed pretty much constant over the last 60 years at around 2.2%. Wasting most of your advertising dollars does not seem smart.

Customers have purchasing criteria for a particular good or service. Teenagers want to drink the coolest drink. People look for certain features in a cell-phone before they get it. Some people are just looking for deals. The economic purpose of advertising is to distribute information regarding the purchasing criteria to consumers. Consumers also get their information from other sources. Before purchasing a product on Amazon, I read the reviews. If the item I am purchasing is a big ticket item, I might do an even more extensive research on the Internet or ask friends. In making a purchasing decision, a consumer is looking for unbiased information. While advertising helps disseminate some information, the information is mostly discounted.

It is clear that advertising is broken. Still, companies are going to continue to advertise till someone figures out a better way to communicate unbiased information to consumers.

The New York Times has a really good article on this topic:

Let’s be honest. No one actually knows when and where the housing market will bottom. Experts have been proclaiming the bottom is now — this very moment — since Alan Greenspan notoriously predicted the worst was over way back in 2006.

Different economists and firms have different takes on whether the market is overpriced or underpriced. There are conflicting views about the Bay Area housing market as well. Personally I continue to believe that the market is still overpriced.