Opinions

PhD Targeting & 1st Grade Metrics: the Online Media Paradox

Posted by Steve Latham on November 15th, 2011 at 8:56 am

A big gap exists between how data is being used to find audiences and measure performance.  Here are 3 reasons for the gap, a roadmap for addressing them, and a glimpse at what better metrics will do for the industry.

Online advertising has become increasingly about data.  While strategy, creative and media planning are still core to the advertising process, data (science and management) has emerged as the 4th leg of the digital media platform.  While the ad-tech industry revels in the concept of evolving from Mad Men to Math Men, we still lag significantly in one critical data-related area: measuring performance.

In its most basic form, data can be used in two ways: 1) targeting audiences and 2) measuring results.  While we've made impressive gains in using data to target audiences at scale, the sad truth is that most advertisers continue to use outdated metrics for measuring performance.  Many of the advertisers who invest heavily to reach niche audiences fail miserably in measuring the impact of all that upfront work.  It's like they're hiring PhDs to develop new algorithms while having 1st graders evaluate their work.

Reasons for the Gap

For 4 years, we've been aware of the need for better metrics for measuring performance of display media.  While clicks, click-through rates and direct conversions make sense for search and other low-funnel media, they offer very little insight when measuring display ads (video, rich media and flash).  Instead we should be measuring the impact ads have on increasing awareness, consideration and preference among target audiences.  These methods may include multi-touch attribution, in-ad engagement, brand-lift studies, A/B testing and cross-channel modeling, among others.

While most advertisers recognize the need to look beyond "last-click" and "last-view", a scarce few have actually done it.  Even today, most agencies and brands still rely on antiquated metrics to measure and optimize campaigns – much to the dismay of media vendors.  Consequently, the true contribution of display advertising is understated, and those media vendors who deliver quality placement and upper-funnel engagement are unfairly penalized. Ultimately, this inhibits the growth of display advertising.

While we all agree change is needed, Inertia is a powerful force; especially when it has friends.  I believe the reasons for the slow adoption of new metrics is a result of the following:

  • Lack of Knowledge: while most advertisers realize they need new tools and methodologies for measuring media, few know exactly what they need.  Few have defined specs that can be defined as requirements for choosing a vendor.  Compounding the problem, each vendor claims to have a unique (and superior) approach to solving the attribution problem.  Consequently, many Attribution initiatives get stuck
  • Lack of resources: most brands have tasked their agencies with selecting a new measurement platform (often without a budget to pay for the research).  But as you may have noticed, agencies are already stretched thin.  Agencies are stuck on the wrong side of an equation where the fragmentation, breadth and complexity of digital media is growing rapidly while fees continue to shrink relative to media budgets.  If there's no budget to do the work, it will have to be done when they have spare time (which is never).
  • Too many priorities – Accurate measurement of media is a priority but it's not the only one.  Our industry innovates so rapidly that it's hard to keep up. Real-time bidding, ad verification, brand protection, OBA compliance, audience measurement, data management and tag management must also be addressed in this increasingly complex ecosystem.  And guess who is normally tasked with these responsibilities as well…?  Yep, it's the overworked and understaffed agencies.

While we are starting to see a handful of advertisers take a more holistic view of measurement (often by partnering with their agency to find the right solution), the vast majority are still using what is easy and available, even if it's inefficient, ineffective and counter-productive.

The Opportunity?

In early days of search, we intuitively knew it was important to show up in paid and natural listings.  I believe it was the introduction of keyword tracking and the metrics we could assign to each ad (CPC, CPA) that validated our hunch and ignited the growth in paid search and SEO services.  I believe the same opportunity exists in display media today.

While display advertising is growing at a nice clip, it still accounts for less than half of what is invested in paid search, SEO, affiliate, email and other low-funnel media.  I believe it's growth is still limited by the fact most marketers aren't able to accurately measure the value of display media.

Just think how much demand would be unlocked if advertisers knew the real impact of video, rich media and banner ads!  It's not inconceivable to think we could double the 2015 forecast of $21bn (U.S. display), which would be a boon for the entire industry.  One thing is certain: the path towards Google's utopian vision of a $200bn global display market starts with closing the gap in how we measure and attribute credit to digital media.

4 Steps to fill the gap
Here are 4 steps marketers can take to close the gap and remove the barriers to growth in online advertising:

  1. Make measurement a priority.  While it's not bright or shiny, proper measurement is a key requirement for success.  Whether you're an advertiser, agency or media vendor, make time to talk about measurement as a 2012 priority and allocate budget to catch up on your own measurement capabilities.
  2. Give agencies the resources they need.  If you're a Brand advertiser, recognize your agency has more to do with fewer resources than ever before.  If you feel your agency should "own" measurement, give them the resources and support they need to do the work.  Define objectives, timeline and budget.
  3. Align your organization.  If you're a large company, you may need to do some internal selling and silo-busting to get your departments on board.  If your branding, direct response, CRM, Communications and IT groups are not aligned and supportive of a cross-discipline approach to measuring performance, your chances for success are slim.
  4. Walk before you run.  There is a myth that everything in digital is infinitely measureable and explainable.  Unfortunately this is not true; there is no perfect solution.  That said, there are many good solutions available, and the absence of a perfect solution is not an excuse for doing nothing.  You didn't go straight from 1st grade to college.  Start with the basics and build from there.  Even marginal improvements in how you measure and optimize media can have dramatic impact on your success.

Thanks for the lending me the soapbox.  Comments and critiques are welcome!  To read more on this topic, check out our Attribution blog.

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