The CMO Council and Vizu (a Nielsen company) have just released their 2013 Online Advertising Performance Outlook report, which essentially states that brands are flocking to online advertising yet struggling to pin down the value of that advertising. To that end, let’s look at the trends underlying the explosion in online advertising in more detail while outlining ways for you to keep your sanity as you try to calculate ad performance for your business.
Online Advertising Trends
Overall, marketers are spending more on online advertising, and this will continue into the future. Marketers have been using the online channel for direct response for a while now, but the study reveals that advertising spend for online branding has grown dramatically and now rivals that of direct response. Further to this, future growth projections for online branding are higher than for direct response advertising.
The report details these statistics:
- 63% of marketers will increase their budget for online branding, with one in five saying the jump will be 20% or more
- 48% will be shifting dollars from TV to online ads
- 61% will be shifting from online direct response to online branding
- 70% will be increasing spending for social media and mobile
- 60% of ad sellers say more of their revenue this year will come from online branding
- 89% of sellers predict an increase in online branding spending, with almost a third saying the increase will be more than 30%
So life is good when it comes to online advertising, right? Well, not so fast.
Although marketers appear to be committed to this online advertising avalanche, the report also shows that most of them are skeptical about the results. Only 10% of ad buyers and 8% of agencies believe sellers’ claims that they can reach the promised target audience. And even if they can hit the target, buyers still lack proof that customer opinion is changing as a result.
Marketers are clamoring for clear metrics that will help them justify their exploding online advertising budgets. Ad buyers want improved clarity around actual ROI, in particular on how it relates to overall sales and brand lift. Over 98% want a single, primary objective and metric to measure online advertising performance. The vast majority want clearer metrics to evaluate their online advertising performance more accurately.
So is there really a “metrics morass?” Are advertisers shoveling money into a black hole with no indication that their spend is buying them anything?
Obviously, measuring any “sales lift” directly from the online advertising campaign or during the campaign is going to be helpful. According to the CMO Council/Vizu report, seventy-eight percent of marketers feel that sales lift is the most appropriate metric for measuring the value of an online advertising campaign.
As sales lift is not going to be a viable metric in every situation, 55% of marketers feel that “brand lift” is a useful alternative for measuring the value of their online advertising. This makes sense, given that brand lift is often a precursor to sales lift.
Measuring the Value of Your Online Advertising
With direct response advertising, we believe that measurement is super easy. Measure clicks to conversions, conversion volume, view-through conversions, conversion rate, and cost per conversion. You can place a value on a lead (e.g., the value of a whitepaper download to your business, the value of a free trial registration, etc.). You can also examine your conversion rate of leads-to-paying-customers, and factor in the average lifetime value of a new customer. Put it all together and you can measure direct response.
With branding, we recommend that you measure sales lift as well as brand lift. This would include any direct conversions, view-through conversions and overall conversions from other channels, but would also include:
- Overall website traffic
- Overall inbound call volume
- Overall form submissions from the website
- Volume of branded search (both organic and paid search)
In discussing brand lift with one of our clients recently, we showed them that their site traffic had increased by an amazing 225% year-over-year and by approximately 48% over the prior reporting period after the launch of a new display campaign. Their search-driven leads had increased dramatically as well. Without looking at brand lift, we believe it’s extremely difficult to assess the full benefits of an online advertising campaign.
To not account for the interrelated nature of advertising with your other forms of marketing would be myopic and misleading. Our feeling at Digital Marketing NOW on the importance of looking holistically at your marketing performance is backed up by many studies.
A 2013 Harvard Business School study found that display advertising significantly increases search conversions. According to HBS, “Both search and display ads…exhibit significant dynamics that improve their effectiveness and ROI over time.” In addition, “…we find that each $1 invested in display and search leads to a return of $1.24 for display and $1.75 for search ads…”
A study by comScore showed that the combination of search and online ads results in a sales lift of 119%.
An iProspect study revealed that people initially respond to online display ads as follows:
- 31% respond by directly clicking on an ad
- 27% respond by searching for the product, brand, or company by launching a search on a search engine
- 21% respond by typing the company Web address into their browser and directly navigating to the website, and
- 9% respond by investigating the product, brand, or company through social media venues
- Overall, 52% of Internet users actively respond IN SOME WAY to online display advertising
The study also found that one third of users who respond to online display advertising eventually purchase from the company, and that thirty-eight percent of users who respond to online display advertising learn about a brand for the first time as a result of their exposure to such an ad.
In addition, we recommend attribution modeling for more granular online advertising performance measurement. There are a variety of attribution platforms now, including VisualIQ, ClearSaleing, Adometry, Convertro and Google. They help you assess the value of every step in your lead generation or purchase process, including every online ad exposure. This is opposed to the inherently flawed approach of assigning credit merely to the “last click,” which overweights the value of Search. Your ad may be acting as an introducer, an influencer, or a closer, and with attribution software, you’ll have a much firmer grasp on the role each of your ads is playing in your marketing funnel.
So is online advertising measurement perfect? Not quite yet. But eventually the metrics will catch up. In the meantime, you know that your customers are online and so your advertising needs to be there, as well. By utilizing sales lift, brand lift and attribution modeling, you can gain a firmer grasp on the ROI from your online advertising investments, helping you to optimize your media spend and increase your results.