Performance Marketing is a Ponzi Scheme

Deceptive, dangerous, and ultimately, doomed.

In a Ponzi scheme, the “profits” you receive aren’t actually new wealth being generated; it’s simply your own principal—or the principal of new investors—being handed back to you as an illusion of growth.

Performance marketing has run a similar illusion for twenty years. The platforms aren’t generating new demand. They are harvesting the brand equity you already paid to build, capturing customers at the very end of their journey, and selling them back to you as “new acquisitions.” You think your ad spend is generating returns, but you are just being fed your own money, until the reservoir runs dry.

First, A Fish Tale

To understand how this happens without anyone noticing until it’s too late, let’s look at the collapse of the Northern cod fishery in the 1990s.

In 1968, the fishery hauled in a record 810,000 tons of cod. By 1992, the biomass had collapsed to less than 7% of its historical average, leading to a moratorium and the loss of 39,000 jobs.¹ Right up until the collapse, the fishermen thought they were doing great.

They were using advanced sonar and massive trawlers. Because their technology was so good at finding the remaining schools of fish, their “Catch Per Unit Effort” stayed incredibly high, masking the fact that the underlying population was entirely decimated.

In performance marketing, the attribution algorithm is the sonar, and ROAS (Return on Ad Spend) is your Catch Per Unit Effort. Just as those boats became hyper-efficient at scooping up the last remaining fish, today’s algorithms have become hyper-efficient at finding the last remaining high-intent buyers. And, the dashboard metrics look incredibly healthy until your brand equity runs out.

So Much Hype

The proposition behind performance marketing was always built on a single claim: unlike brand investment, we can measure it. Brand was soft. Performance was accountable. The CFO could see it in the dashboard, and what the CFO could see was fundable.

I spent the better part of my career (very reluctantly) living in this story — first on the brand side, reorganising marketing strategies, departments, budgets around what turned out to be highly inaccurate dashboards, then inside one of the largest platforms perpetuating the mythology. The attribution system that credited our campaigns looked convincing. It was designed to. What we were actually measuring was channel activity, not business outcomes.

There are two mechanisms worth separating out, because they compound. The first is equity depletion: cut brand investment and you draw down the reservoir of memory structures, associations, and instincts that make someone reach for your product without thinking. That reservoir empties slowly. Typically brands have twelve to eighteen months before efficiency collapses. The second is attribution error: performance platforms were claiming credit for purchases that were going to happen anyway — buyers with existing brand intent, who happened to see a paid ad while completing a purchase they’d already decided on. These two mechanisms reinforce each other. As equity depletes, there is less demand to misattribute. As the misattribution runs, the depletion goes undetected.

Les Binet and Peter Field spent twenty years analysing the IPA Databank — the largest database of marketing effectiveness cases ever assembled — and produced the most cited and least acted-upon finding in the industry: the optimal marketing mix is roughly 60% brand building, 40% sales activation.² Brand building fills the reservoir. Activation converts it. The CFO could see the activation, the reservoir wasn’t measured.

Orlando Wood’s research for the IPA added a further layer: as performance channels came to dominate budgets, the creative running through them was optimised for click-through rather than memory — shorter, more rational, more feature-led. Better at triggering action in the moment; progressively worse at building the emotional associations that make a brand retrievable when the buying moment arrives. The ads were optimised for conversion at the cost of the very thing that made conversion possible.³

Byron Sharp’s work at the Ehrenberg-Bass Institute established the underlying logic: brands grow primarily through mental availability — being thought of in more buying situations — not through conversion efficiency or loyalty metrics. Performance channels can trigger that mental availability. They cannot build it.⁴

Cut brand building and you can still run activation for a while. The reservoir exists, it drains, and for a period your performance metrics can actually look better — because fewer uncredited touchpoints means the paid channel claims more of the attribution.

Airbnb’s Famous Findings

In 2020, Airbnb cut all performance marketing. Not as a deliberate experiment — the world had stopped travelling and the spend had nowhere useful to go. But the results were striking enough that they chose not to reverse them.

Airbnb retained 95% of its online traffic with marketing spend reduced to near zero. CEO Brian Chesky: “What the pandemic showed is we can take marketing down to zero and still have 95% of the same traffic as the year before.”

They used it as cover to permanently restructure. They cut $541 million in performance spend, reoriented toward brand investment and editorial coverage, and described the shift as moving from “buying customers” to building something people sought out. By 2022, 90% of Airbnb’s traffic was arriving direct and not from paid channels. CFO Dave Stephenson called the shift “incredibly effective.” Q4 2022: EBITDA up 52%.⁵

What the pandemic accidentally revealed was this: the performance campaigns hadn’t been generating demand. They had been converting demand that already existed — brand-built intent that attribution models were crediting to the last ad served. When the campaigns stopped, the intent didn’t go away, because the campaigns hadn’t created it. The measurement had been wrong for years.

The Airbnb has a caveat: they could make this pivot because a global crisis gave them cover to absorb the short-term pain of withdrawal. Most brands don’t get that option. Performance spend suppresses competitors as much as it generates returns — the moment you stop, someone else takes your position. It functions less like investment and more like a subscription you can’t cancel (ironic). This is the liquidity trap at the centre of the scheme: it perpetuates not because it works, but because stopping is too costly to contemplate. What the Airbnb case actually shows is not that the exit is easy, but it is possible.

The End of Social

Apple’s iOS 14 update removed the device identifier Facebook had been using to match ad clicks to purchases. Here is how that had been working: you see a Facebook ad on your phone, click it, and later buy on a website. Facebook’s tracking pixel on that website sends a signal back — “this device converted” — and matches it to the earlier click. The conversion gets attributed to the campaign.

When Apple removed the identifier and 96% of US users opted out of tracking, Facebook could no longer make that match. Reported conversions collapsed. But in documented cases, actual sales — measured independently through order management systems — hadn’t moved.⁶

The campaigns weren’t suddenly failing. Facebook had been taking credit for purchases that were going to happen anyway. Buyers with existing brand intent, who happened to see a Facebook ad in the process of completing a purchase they’d already decided on, had been logged as performance marketing successes.

The measurement that was supposed to make performance marketing superior to brand investment was running the same margin of error marketing always had, it just provided the appearce of health and the illusion of speed.

There is a separate question — one that compounds everything else — about what the channel became while we were busy measuring it (poorly).

In November 2025, Reuters published internal Meta documents showing the platform serving approximately 15 billion higher-risk scam ads per day. Internal analysis projected that around 10% of Meta’s 2024 revenue — roughly $16 billion — came from ads for scams, banned goods, illegal gambling, and fraudulent investment schemes. The company’s internal policy required 95% confidence before banning a fraudulent advertiser. High-spending accounts could accumulate 500 violations without losing access to the platform.⁷

Your performance budget has been competing for space in a system deliberately structured to protect its most fraudulent customers. The context your ads run in is not a minor footnote.

Daily time spent on social media is down nearly 10% since 2022. Facebook’s share of organic content from people users actually know has dropped from 22% to 17% in two years; Instagram’s from 11% to 7%. The feeds have filled with AI-generated content, synthetic engagement, and automated slop. People are present but emotionally absent. Performance marketing running in that context is not the same as performance marketing running in the social media context that people loved. The ROAS figures have not reflected the difference, but they will.⁸

New Interface, Similar Issues

In February 2026, OpenAI launched advertising in ChatGPT at $60 per thousand impressions, with a $200,000 minimum spend. The ads appear below AI responses — outside the answer, OpenAI noted. “Ads do not influence the answers ChatGPT gives you.”9⁹

That is exactly what Google said about AdWords.

Actually, that comparison undersells the problem. When Google introduced advertising alongside search results, there was still an impression. A user saw the ad. They might click or not — but there was a moment of human attention in which a brand could exist.

In an agent-mediated environment, there is no impression. The customer was never in the room. The agent evaluated, decided, and executed without any moment in which a brand could be encountered. Performance advertising on social could occasionally behave like brand advertising: interrupt, introduce, create a flicker of curiosity. The agent environment removes that possibility entirely. There is no discovery moment to sponsor. There is only the output and the brown box on the doorstep.

The Discovery Debt — the compounding cost of ceding how customers find you and decide you’re worth choosing — accumulates faster here than before. The reservoir isn’t just being drawn down by performance spend. The channels through which it was being partially replenished is being removed from the customer’s experience entirely.¹⁰

Channels Were Never Meant to Be Strategy

Performance marketing is not the problem. It is a set of channels — paid search, social advertising, display, programmatic — and channels do what channels do. They distribute. They report on distribution. They optimize for their own metrics. None of that is wrong.

The error was in ever treating a set of channels as a strategy. When channels become the plan, organizations manage for channel metrics, because those are the metrics available. CFOs who could see the dashboard defunded the efforts that filled the reservoir they couldn’t see. The 60/40 ratio inverted (or worse). For years the performance metrics continued to look acceptable, because they were drawing on equity built before the inversion happened.

The brands that came through this period in better shape are the ones that refused to make that trade. On Running and Hoka weren’t built on performance spend. They were built on product conviction and community — run clubs, niche trail athlete sponsorships, silhouettes distinctive enough to start real-world conversations before a digital ad ever served. The performance channels, when used, amplified something that already existed. That is what they are for.

What the platforms extracted, over twenty years, was the relationship between brands and the people who might choose them. The belonging, the identity, the sense that a brand was something you found and chose rather than something that found you. They intermediated that relationship so much that many brands now have no direct path to the people who buy them. And now those same platforms are selling access back — first as performance advertising, then as AI placement, then as whatever the next channel is. The platforms became the managers of relationships they didn’t build. The brands are paying rent on something they used to own.

The cod fishery wasn’t destroyed by fishing. It was destroyed by fishing without good measurement and without a plan for renewal. The trawlers were technically excellent. The sonar was accurate. The catch was real. What was missing was any investment in the stock the catch depended on because the measurement metrics were just plain bad.

The moratorium was declared in the year I graduated from high school (Go Saxons!) and I can tell you, that was a very long time ago. The Northern cod stocks still haven’t recovered. The fishers who kept hauling right up until the last day still talk about how healthy the water looked.

Ponzi schemes are deceptive, dangerous, and, ultimately, doomed.

1. Department of Fisheries and Oceans Canada; DFO stock assessments 1990–1992; Harris Review (1990). Job losses: Standing Committee on Fisheries and Oceans, 1994.

2. Binet, L. & Field, P., The Long and the Short of It (IPA, 2013); Effectiveness in Context (IPA, 2018).

3. Wood, O., Look Out: Advertising’s Effectiveness Problem Is Staring Us in the Face (IPA, 2021).

4. Sharp, B., How Brands Grow (Oxford University Press, 2010); Ehrenberg-Bass Institute for Marketing Science, University of South Australia.

5. Airbnb Q3 and Q4 2022 earnings transcripts; Marketing Week, November 2022; Campaign, January 2023; The Drum, 2023.

6. Apple ATT framework, April 2021. Opt-out data: Flurry Analytics, May 2021. Attribution gap case studies: Cometly, 2021; Elumynt, 2022.

7. Reuters, November 6, 2025. Fortune, December 15, 2025. Congressional letters, Senators Hawley and Blumenthal, December 2025.

8. DataReportal/We Are Social Global Digital Report 2025. Meta organic content share: Mark Zuckerberg earnings disclosures, 2023–2025. DoubleVerify Global Insights Report 2025.

9. OpenAI advertising announcement, February 9, 2026.

10. Discovery Debt introduced in Essay 2 of this series, “Meanwhile, As You Were Optimising.”