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Tracked Performance: a Double-Edged Sword

The ability of advertisers to measure the performance of paid search has made Google the massive, profitable and growing enterprise that it is. As internet access and speed improves significant natural growth will continue for years to come.

However tracking also makes it tougher for Google to sell more advertising and more types of advertising to the same customer base.

IN THE BEGINNING…

10 Years ago, advertisers spent lots of money with web portals. AOL, Yahoo, and MSN commanded huge fees for prominent placements within their shopping malls, and advertisers were willing to pay those fees because the high-level tracking suggested that they drove a great many sales.

Direct marketers at the time also learned that “Banners suck.” Given that, the portals were about the only game in town.

Time-Warner became AOL/Time-Warner

However, as the tracking became more granular, and advertisers had the ability to learn which placements within those portals ‘drove’ all the sales, they learned much to their dismay that it wasn’t the “Anchor Tenant”/ Gold Merchant placements that drove business, rather the lion’s share of the sales came from user’s searching for the advertiser’s by name. AOL “drove” sales through “AOL Keyword [Your Trademark].”

Advertisers recoiled and the swaggering sales reps from the portals found it difficult to get companies to re-up.

At the same time, Goto, Comparison Shopping Engines, and upstart Google provided an advertising environment through which performance could be tracked to the most granular levels. That tracking revealed that the money previously wasted on portals and banners could be invested in these search engines for much much greater returns on investment.

AOL/Time-Warner became…Time-Warner, money poured into the search engines, and Google became the darling of Wall Street.

…THE PRESENT

As SERPs become saturated with ads, and CPCs become naturally limited by the tracked value of the traffic, revenue growth through paid search becomes more challenging for the engines and more limited to the sheer number of searches conducted.

Advertising dollars drawn to the engines by the strong ROI are now limited by those same ROI constraints.

Content advertising has failed to provide the growth opportunity desired because the tracked performance suggests that traffic isn’t worth very much.

Display advertising (don’t call them “banners”), in-stream video ads, and mobile ads are hoped to be the new opportunities for getting back to the huge growth rates in online advertising enjoyed in the first decade of the 21st Century.

But that tracking thing poses problems when the ROI isn’t apparent. To date, few advertisers have found the measured ROI of those channels to be able to withstand the kind of ad spend that goes into paid search.

At RKG we’re wading into the Display Advertising arena hoping that our facility with data driven marketing, coupled with the new tools available for controlling ad service, coupled with the new, more efficient marketplaces for buying display advertising will yield measurable ROI at meaningful volumes. We shall see.

In the meantime, those with an interest in pushing advertisers to spend more harp on two different themes:

  1. Ads drive more business than tracking reveals; and
  2. It shouldn’t be all about ROI anyway, advertisers should think about the branding value.

There is certainly some truth in #1, but only some. The myth of conversion funnels has been debunked by everyone who has studied the data and reported their findings with integrity. Certainly cookie breakage happens, and JavaScript tracking drops a fair amount of credit that should go to ads. And, there is some spillover from online advertising to physical stores, but as our data has shown that spillover happens in both directions and likely more credit is stolen by online ads than is stolen from them. Marketers who believe and act upon the absurd ratios one hears bandied about of 7 to 1 (do I hear 10 to 1?) offline dollar sales to online observed sales driven by online ads will find themselves and others on the street when the Corporate P & L statements don’t reflect that effect.

There is also great truth in #2, but there is trouble lurking here as well. Clearly exposure to an advertiser’s brand has value, whether a visit to the website, a compelling display ad impression, or even a glace at a text ad. How much value there is in each of those very different levels of brand involvement is hard to say. But the problem is larger than the more esoteric value calculations alone.

The problem is competition. Advertisers have no shortage of opportunities to spend branding dollars. There have always been opportunities to place advertising for brand building. Whether through billboards, store signage, print, radio, direct mail, television, the opportunities for and competition for branding dollars is huge and long-standing.

Paid search sold itself, but as the engines wade into the pool of brand building ad sales they will find many old, large, ferocious sharks in the water. Momentum and time are certainly on the side of the engines and ad exchange networks as the web continues to draw more and more eyeball-hours. However, selling brand advertising is a different beast, requiring far more effort and expense. Growth in these media will happen, no question about it, but it will be hard won growth.

Detailed tracking will change brand advertising, too. Smart brand advertisers and their agencies will think deeply about the value of different types of brand interactions and how a user’s past experiences with the brand might influence those values. Driving by the right metrics will produce better ROI no matter how distant the connection between the R and the I.

It has been said that “offline dollars turn into online dimes” as a result of tracking, and perhaps that is as it should be.

The road ahead is exciting, but very different from the road we leave behind.

Comments
13 Responses to “Tracked Performance: a Double-Edged Sword”
  1. Jim Novo says:

    Well said.

    I have a suggestion – don’t you think it would be valuable if we stopped associating Display with Brand and spoke of what it really is most useful for online – Awareness?

    Here is what I mean. In the old days, it was not possible to directly interact with most companies / products unless you got yourself physically in contact. “Brand” or mass advertising, then, had two components: Awareness, so people knew about you, and then “expectations / positioning” that drew people in – and hopefully the actual experience matched the expectations.

    Online, I’m not sure the second function above of Brand is really relevant or even happening.

    Online a Brand is no longer a set of expectations, it’s an experience one can have almost immediately, it’s what you do, not what you say. If true, this leaves Awareness as the primary function of online Display media – it’s the answer to the serendipity problem presented by Search – how do I know to Search for something if I don’t know it exists?

    Seems to me it would be better to simply acknowledge that online, the web site is the Brand, and Display simply drives the top end of the AIDAS funnel – Awareness / Attention, maybe some Interest. Then Search takes over for Desire and Action.

    I’d guess this is exactly the mechanics of what we see when we overlay a Display Campaign on Search; certainly sounds like it when I read the research. So, why drag the concept of Brand into this?

    Online, Brand happens at the other end – starting with the site, through the Action, and post the Action (Satisfaction).

    Make sense? It sure would make things a whole lot clearer if we could acknowledge that Advertising itself on the web really doesn’t do much for Brand – it’s the web site and surrounding ecosystem that is Brand.

    When people say they are buying PPC for “Brand”, is that in fact what the execution is? Or is it really for Awareness?

  2. Billy Wolt says:

    Jim,

    aren’t branding and awareness the same?

    If you are saying the site is the brand, then shouldn’t the same be said of brick and mortars?

    Best Buy’s individual stores are the brand, but the commercials are raising awareness?

    It seems to me that there is no difference.

    George, best of luck with the banner ads.

  3. Jim, you make a fine point. I think you’re right that there is a distinction between awareness and brand, and your definitions make sense to me.

    It seems also, that spending big dollars to create awareness is a dicey proposition. For manufacturers of products, perhaps you have to take that level of risk. Certainly in our industry (online advertising service providers) many of our competitors have felt the pressure to get big quickly before the VC clock strikes midnight.

    I do wonder how much a commodity retailer can afford to spend creating awareness.

    I know why LG TVs spends money on TV advertising…I’m not sure why B & H Photos would do that.

    Billy?

    Maybe I’m a cautious critter, it just seems to me the greater the separation between R and I and the less certainty of the connection, the lower the fraction of budget aught to be devoted to those awareness creating programs.

    Am I too cheap?

  4. Jim Novo says:

    Billy, I think there is a huge difference between Awareness and Brand. There must be tons of Brands I’m not aware of, and there are products / companies I am aware of but have no idea what to expect from them – the “Brand”.

    Best Buy is an interesting case (for me, anyway) because I’m aware of them both offline and online. I like their online Brand, I dislike their offline Brand (going into the stores).

  5. Guy says:

    I once heard:

    “Brand CREATES demand, search captures demand.”

    I don’t 100% agree w/ that, but that’s a nice one-liner.

    As for brand vs search… I am “branded” (made aware by) search ads all the time. Text can brand. I know creative folks will balk at that suggestion, but not everyone buys because of the color of the logo!

    Cheers… great article.

  6. Thanks Guy,

    I agree that there are all kinds of influences that help shape a brand. I tend to agree with Jim, that “brand” carries with it “expectations.” I expect to find great service at Crutchfield and B & H; I expect low prices from WalMart; I expect high quality apparel from LL Bean.

    But, what expectations does one develop for a brand from seeing a text ad (or a logo, to your point)? Certainly a visit to the website might create some impression of a brand, but if that person didn’t buy from you, short term or long term, doesn’t that raise questions about the value of that branding? Whatever expectations were developed apparently weren’t ones the customer wanted fulfilled!

  7. derek.newman says:

    Good luck with display George and RKG!

    Are you aware of Jon Mendez’s work? http://www.optimizeandprophesize.com/

    For years now he has been pretty much (in my book) at the forefront of new thinking about display.

    His work with dynamic display ads is fascinating – taking the keywords that people used to find a publisher’s page and then apply rules to determine the content of the display ad.

    He has made some might impressive claims about the ROI.
    “effectively reverse engineering the search experience into display’s near limitless inventory and producing higher ROI through lower display CPM than search CPC.”
    http://www.optimizeandprophesize.com/jonathan_mendezs_blog/2009/03/search-becomes-the-display-operating-system.html

    Of course I am not affiliated with him :) but I do find his approach to display highly notable.

    Cheers

  8. Jeff says:

    This is a reasonable and balanced approach to branding and display advertising. Too many people fall exclusively into one camp or the other – that branding efforts are the be-all-end-all, or that they simply aren’t worthwhile because their effects are difficult to track. There is a sweet spot in the middle that a lot of people miss out on.

    Display is going to be huge as the engines make a big push to be more involved. Tracking and attribution will naturally improve over time, but it will still be necessary to operate on a little bit of faith to get the most mileage out of display. It’s scary at first, but I think the benefits become more clear over time!

  9. Jeff, thanks for your comment. The branding vs direct marketing battle has raged since the beginning of the catalog industry, and isn’t likely to let up now. I “grew up” in the direct marketing world with the mindset to measure and track as much as possible. That said, there are an awful lot of storied businesses that have grown on the back of brand advertising. It is an art; a different art, but an art. Branding skillfully is different than pouring money into an ad buying frenzy.

    Derek, thanks for the heads up on Jon. I don’t know him or his work, but will research. As a rule, I don’t pay much attention to marketing claims; too much “hooey” out there. I don’t doubt that Display can be cost effective, my fear is that when done cost effectively it is tiny compared to paid search. That’s what seems to be the case with content advertising through text, and I fear the same is true with display.

  10. Thanks for the shout out Derek.

    I’ll post a comment Jim Novo left on my blog a couple of years ago that I liked so much I’ve included in a number of my presentations since:

    “Branding is why media buyers don’t care about context. But Branding only works when people can’t talk to each other, and compare notes on the “images” they are being sold. The web made sure that era is over. Branding, and so “impressions”, don’t matter any more.

    Marketing is about identifying markets and fulfilling needs. Marketing thrives when people can compare notes, and Marketing craves context, because needs in a market are specific.”

    George – I knew Alan and great work continuing on with this blog and the work at RKG. As you get to know me you’ll find out I don’t make claims. I share results. :)

    The majority of display spend is performance based meaning even though it’s purchase at CPM buyers are backing in their CPx. The rise of the Exchanges and data platforms will continue to fuel this growth for the foreseeable future. It’s not about Awareness or Demand Gen. It’s about driving actions directly attributable to the media.

    Great post & comment thread.

  11. Jonathan, thanks for chiming in. Encouraging to hear that “there’s gold in them thar hills!” We’re sharpening our picks and axes as we speak!

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