Marketers who want to Improve ROI Need to Better Align Ad Budgets with Consumer Media Habits

There’s no doubt that traditional advertising tactics will continue to be a critical part of the mix for many marketers for years to come. That said, whether this practice is based on the efficacy of these tactics (and by that I mean old standbys such as TV, radio, direct mail, etc, but also some of the more aggressive forms of banner ads such as pop-ups and page takeovers), or the fact that the interruptive based advertising model has become so habitual among marketers that it is self perpetuating, is subject to debate.

But what I find ironic is that despite the incredible growth of the Social Web and the dramatic increases in the amount of time consumers spend with digital media, a significant share of ad dollars are still being devoted to traditional formats. Of course, there is plenty proof that these traditional formats are effective at getting messages out. What we don’t know is how effective they are (if at all) at influencing people - but that’s a topic for another post.

The problem is that people do not appreciate the intrusive nature of these traditional tactics and will do anything they can to avoid them. Whether it be putting their name on a do not call registry, adding ad filtering technology to their browser or using a DVR to record TV programming as a way to avoid ads during playback.

People, instead, want control over the content and information they consume. And they want it from sources they can trust; hence the growth of the Social Web.

The good news is that marketers finally appear to be catching on. Earlier this month Forrester published their 2009 – 2014 US Interactive Marketing Forecast. The report predicts that interactive marketing will represent 21% of all marketing spend in 2014 (up from 12% in 2009), which nets out to a CAGR of 17%.

Why? Because they have learned that interactive marketing tactics are incredibly efficient and effective. For example, when Forrester asked over 200 marketers to rank the effectiveness of various marketing tactics over the next three years interactive tactics such as social media and online video topped the list.

What is shocking, though, is that despite this gradual shift of budgets to the digital channel there will still be a significant disparity between the percentage of ad budgets directed to digital (7% in 2009), and the percentage of media time people spend with digital media (34% in 2009). Apparently old habits, even those with significant financial implications, die hard. With that said, I’m going to go watch last night’s Daily Show on my DVR - sans commercials.

Pandora’s Geo-targeted Ads Latest Example of Online Advertising Beyond the Banner

There’s been quite a lot of talk lately on how some Web publishers are moving beyond standard banner ad formats in favor of customized units as a way to increase viewer engagement and clicks. And no wonder with click-through rates for standard IAB banner formats on the decline across many properties.

One big shift, especially among social media sites, is to integrate ads squarely into page content as opposed to on the periphery of a page like most banner units. For example, social news site Digg just recently began flowing ads into the stream of its page content as a way to increase subscriber interaction.


Another good example of this is music service Pandora.com’s placement of ad units squarely into its music player. But Pandora is taking it a step further by adding geo-targeting to the matter.

For example, this morning while logged into Pandora an ad was served up by the Paper Mill Playhouse, which is several blocks from my house, for the musical play “The Full Monty.” Obviously I was targeted for this ad based on IP information from my browser.

I could only wonder if they are also using information about my music preferences (which as a subscriber is stored in their databases) as a way to serve up ads that would be of interest to me. For instance, knowing I like indy rock an ad for “The Full Monty” makes sense – but for "South Pacific," probably not. Some might think this is a little creepy – I don’t, just a way to deliver more relevant and useful information.

Are Fees for Online News Content in the Offing?

A couple of weeks back I posted about the challenges facing the newspaper industry as they deal with declining ad revenues and the migration of readers to free online sources.

http://marketingmemes.blogspot.com/2009/03/time-is-running-out-for-newspapers.html

Now, the New York Times is reporting that the industry is reconsidering its free content for all business model.

http://www.nytimes.com/2009/04/08/business/media/08pay.html?_r=1&ref=business

At an industry conference last week, newspaper execs explored various options to monetize their content on the Web. Some of the payment models under consideration include:

• Subscription model (e.g., WSJ.com)
  
• Micro-payments (e.g., iTunes)
  
• Content licensing to third-party sites

Of course, in order for this to work, newspapers will to address a major, maybe even insurmountable, challenge: how to get readers to start paying for something that has been free for so long?

Joint WPP/Google Research Program – Trying to Solve the Media Mix Riddle

One of the aspects of online advertising that marketers value most is its measurability. Whether you’re running a direct response or branding initiative, the ability to measure campaign performance on the Web is generally easier, and more accurate, than most other media. That said, one frustration for many marketers has been the inability to determine the effect of their online ads in relation to ads they run on traditional media, and vice versa.

With that blind spot in mind, WPP and Google announced today that they will be kicking off a research initiative that will attempt to answer that very question. The research will study the combined effect of digital and traditional ads, and how they influence consumer perceptions and purchase decisions. Ultimately, the research should help establish criteria to help marketers make more informed decisions when making media mix and budgeting decisions.

According to a WPP press release, 11 research grants were issued out of a field of more than 120 submissions - press release can be found at:

http://www.wpp.com/NR/rdonlyres/E0AF399A-8450-408C-8BA8-C35D31DAE88C/31197/wpp_pressrelease_google_mar09_guid1f7dc1deb1b4408b.pdf?pageContent_PressRelease

The research topics are quite varied and address a range of factors that come into play when determining the impact of advertising on consumer attitudes and behavior. Here’s a sampling of the selected research topics:

• Effect of Online Exposure on Offline Buying: How Online Exposure Aids or Hurts Offline Buying by Increasing the Impact of Offline Attributes
• Does Internet Advertising Help Established Brands or Niche ("Long Tail") Brands More?
• Targeting Ads to Match Individual Cognitive Styles: A Market Test
• How do Consumers Determine What is Relevant? A Psychometric and Neuro-Scientific Study of Online Search and Advertising Effectiveness
• A Comprehensive Model of the Effects of Brand-Generated and Consumer-Generated Communications on Brand Perceptions, Sales and Share

Personally, I can’t wait to see the output.

Google’s New Behavioral Targeting Service - a Step in the Right Direction on Privacy Issue

A few weeks ago I posted about the pressures being put on online advertisers, and the Web sites that run their ads, to address the growing privacy concerns around behavioral targeting.

http://marketingmemes.blogspot.com/2009/02/online-advertisers-need-to-get-serious.html

Now, to liven up the debate, Google announced last week that it will be launching a beta-test of its own behavioral targeting service on AdSense partner sites and YouTube.

http://googleblog.blogspot.com/2009/03/making-ads-more-interesting.html

Google is not referring to the service as “behavioral,” but instead is calling it “interest-based” advertising. From what I can tell, the beta service will offer two of the more common ad targeting techniques:

• Behavioral – where an inference is made regarding a Web user’s interests based on the Web sites they visit
• Retargeting – the re-marketing to an online consumer who has shown previous interest in a product or service, but for some reason never followed through on that interest

These techniques are no different from targeting approaches used by other ad networks. That said, what is different about Google’s service is the proactive approach they are taking to address some of the concerns about targeted ads raised by privacy advocates. For example:

1. They will be expanding the number of formats and publishers that allow users to click on targeted ads served up by Google for detail on the information that was used to deliver the ads and how that information was collected
2. Users will be give the means to view, delete or add information about the types of ads they would like to see through a tool called the “Ads Preferences Manager”
3. They will be providing users with an easily accessible way to opt-out of future targeted advertising

In Google’s own words, their approach gives users “transparency,” “control” and “choice.” Hopefully, these steps will quell some of the rumblings from privacy advocates who have been calling for greater regulation of the online ad industry which is the last thing we need in the middle of a recession.

For One Site Fewer Ads Equals Better Performance

Interesting article today on Adage.com about how one site (SmartMoney.com) is increasing online ad performance by reducing the number of placements on their pages.

http://adage.com/digital/article?article_id=134941

According to the article, Smart Money stopped selling one of three ad units (a skyscraper) and saw a 21% increase in click-through rates.

Not bad for a financial site in this environment and a good idea considering the growth of online ad inventory.

Measuring the ROI of your digital marketing efforts

Few doubt that the Web is the most measurable media available to marketers - at least in theory. In reality, many struggle with putting that theory into practice. This is true for both brand building and direct response campaigns. And the measurement challenge becomes even more difficult when digital marketing tactics are used in concert with traditional media.

This situation has several negative results. For client marketers it means bad decision making and media investments that fail to deliver their full potential. For digital agencies it makes it harder to show the ROI of their efforts and justify future investments in online marketing programs.

In addition, consumers rarely make purchase decisions using one channel. The inability to understand the impact of online and offline brand interactions on consumer behavior (both alone and as a complement to each other) makes it nearly impossible for marketers to align experiences with consumer expectations.

Several approaches can be used to close the gap between measurement theory and reality. This is especially so regarding direct response campaigns where I believe the measurement challenge is most difficult. For example, one framework that I have seen used with success is illustrated below.

The theory behind the approach is quite simple: identify the source of visitors coming from online tactics to a campaign Web site using cookies. For offline tactics visitor source is identified using unique URLs. This source data is then carried forward and matched with leads and sales records in a campaign database. This approach can be taken a step further to provide deeper insights by collecting and matching data beyond source such as banner creative, offer, keywords searched, etc.

While this type of approach is simple in theory, the devil is in the details when it comes to implementation. This is especially so as more attribution variables are added. But the payoff more than justifies the effort: better attribution of sales to tactics and critical insights that enable more effective allocation of ad budgets for future campaigns.

Now appearing at a browser near you - online advertising 3.0

Despite all the advances in digital marketing, the process by which online ads are produced is still manual for the most part. And, once these ads are placed they are largely static; if updates are needed (e.g., if the ads are not performing well) some level of human involvement is required.

This situation is changing thanks to process and technical innovations that now allow advertisers to serve and update their online ads dynamically (i.e., automatically) by leveraging a combination of predefined business rules, real-time data, algorithms and pre-developed creative assets. The financial and strategic benefits from these innovations, while not yet fully realized, will be huge for the $28+ billion U.S. online ad market.

The next wave – more efficient production = reduced costs for marketers
The amount of time and money that will be saved by these innovations cannot be underestimated: web designers and developers no longer have to build by hand every online ad unit to every size; and agency media managers no longer need to send scores or even hundreds of ad units to web site publishers.

In terms of marketing effectiveness the impact of these innovations will change the game for online advertising. Advertisers can now do complex, multivariate testing and deliver custom, just-in-time creative that is more relevant and targeted to specific marketing situations.

Automating multivariate testing
Advertisers can now test a conceivably unlimited number (easily into the hundreds) of banner creative configurations to identify the combinations of elements (messaging, imagery, call-to-action, etc) that deliver the best results. Previously, this level of testing was highly impractical since the effort needed to create the number of banner versions to generate statistically relevant test results made it cost prohibitive; in most instances costs simply out-weighed benefits.

More relevant, effective and efficient online ads
This is where things get interesting. Marketers can now deliver much more relevant and targeted ads to consumers by combining customized, just-in-time banner creative with a variety of data about their target consumers, including:

• Geography
• Prior online behavior
• Their stage in a multi-step shopping/purchase decision process
• The editorial focus of the web site where the ads will be placed

Here are some examples of how these innovations are being used to deliver more relevant online advertising:

Sequential messaging – banner ad messages change based on where a consumer is in a multi-step shopping/purchase decision process (this is especially useful for highly considered purchases like automobiles, health insurance, etc)

Contextual messaging – banner imagery and messaging change based on the editorial theme of the site where an ad is running (e.g., personal finance, sports, travel, etc) to increase contextual relevance

Geographic targeting – here ads are customized with messaging or imagery that is relevant to a specific state or region of the country

Real-time targeting – ads can also be updated with real-time information (e.g., sports scores, time of day, weather) using live data feeds to create timeliness or a sense of urgency

While many of these online targeting approaches were previously available the ability do it dynamically wasn’t. So the next time you see an online add that is uncannily relevant to your unique situation it probably isn’t a coincidence. Some people may think this level of targeting is spooky. Personally, I prefer this over the alternative – like seeing ads for Brilliant Blonde Shine Shock hair treatment on my Yahoo! Mail sign in page.