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Cost Per Whatever: Has Ad Tech Crippled Advertising?

Effectiveness and efficiency are the two sides of advertising. Always have been, always will be. We’ve measured efficiency up the wazoo of late, but we are less skilled at measuring effectiveness.

In the beginning, there was creative. Then came reach and frequency. Much later, programmatic buying.

I've been having fascinating state-of-the-industry lunches over the past few months with Rodney Mayers, the CRO of Palo Alto-based Proximic. We've been trying to figure out how to tell the ad industry that although programmatic buying does bring efficiency to the process, it doesn't necessarily bring effectiveness. Efficiency is a work flow problem that can be solved by programmatic buying. But solving it will not necessarily move product unless it is combined with effectiveness—what makes people act.

Effectiveness, the be-all and end-all of advertising, is a totally different story.

In the race to prove themselves up to the task of working with the CIO, CMOs have forgotten what Steve Jobs knew well: We are human and therefore emotional. We make decisions mostly on emotions. Where are our customers and what makes them buy? How do we query data to arrive at effective media buys? Effective advertising provokes decisions, but efficient advertising simply reaches people.

You have to ask the right questions of the data produced by programmatic platforms in order to combine your increased efficiency with effectiveness. CMOs need to go back to the drawing board and spend time on how people actually make decisions. Because most decisions are made emotionally, the CMO actually may need less data. However, as data storage and cloud computing have drastically reduced the cost of storage, there is a contest to see who has Bigger Data, though most of it might be worthless.

This is especially true in brand marketing, where online advertising should work best. Tweaking the last little metrics to squeeze out some more 0.001 improvement might be okay for direct response marketers, but as online advertising matures, more and more agencies are becoming aware that branding initiatives work very well online, especially in cross-platform campaigns. Brand advertisers just need metrics to be in the right range, and then it’s more important to be able to scale the campaign—to reach the right people with the right messages. The question is "did this ad move the revenue needle?"

We should be measuring effectiveness—not efficiency. If we are efficient in getting the wrong message to the right people, what good does that do? In ad tech, we sometimes forget how important it is for the media buyer in an agency to actually get things done, and to execute easily in a way that can be communicated (and understood) by clients. The media buyer needs to be able to say "I bought this because..." and back up the decision with metrics that can be understood, not metrics that obfuscate.

These quotes from Ad Age's latest CMO study tell it well:

"A lot of them use metrics that don't measure finance at all. Some said, 'That's a good question.' Others said, 'If my boss is happy, that works for me.' Another: As one respondent colorfully put it, his company's marketing ROI measurement is like 'pissing in the wind.'"

That's why to measure and reinforce effectiveness.

Historically, digital measured what it could and declared it a standard—first hits, then pageviews, then it was visitors, then unique visitors, then CTR, then CPA for early direct response deals in display, then CPC when search exploded, then viewability. It's now CPW (Cost Per Whatever). We've measured what we are able to measure, not what should be measured.

Effectiveness and efficiency are the two sides of advertising; they always have been and always will be. We’ve measured efficiency up the wazoo lately, but we are less skilled at measuring effectiveness, because it means different things to different brands. We’re right back to the "half of my ad dollars are wasted" problem of John Wanamaker’s day.

A measure of how efficient a buy is can be tracked with big data. Effectiveness is far more complex.

[Image: Flickr user Martin Terber]

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  • Jeff Zwelling

    Interesting points, Francine. I think ad tech isn’t so much crippling the advertising industry as it is motivating it. With increasingly accurate measurement and attribution models available, we have greater insight than ever into what is both efficient and effective. As you wisely point out, efficient advertising reaches people but effective advertising provokes decisions. Now that advertisers can reliably track consumer behavior and engagement with advertising across platforms, we can determine which ads consumers saw, as well as which actually drove them on the path to conversion. Furthermore, we can assign credit to the marketing touchpoints where credit is due. This kind of ad tech is allowing marketers to combine efficiency and effectiveness in more innovative ways and helping the industry move forward rather than encouraging or enabling companies to focus on the wrong goals.
    Jeff Zwelling, CEO of Convertro

  • NyazeVincent

    I keep hearing about this ability to track user behavior from impression to purchase, but you have to admit it's not 1-1 yet. Every company has a voodoo method for coming up with a representational value of impressions-to-purchase based on disparate but related data sets, but it's not real-time. In other words, effectiveness is being estimated, rather than determined. Not to mention, I've found, despite the hype, agency creatives always go with their gut in creating content. They aren't pouring over spreadsheets to extract inspiration. They aren't hamstrung by strategic briefs. Though when they are, it's clear in mediocre executions. 

  • Chuck Wall

    Francine, thanks for a great post.  I think you've hit the nail on the head; of course the most efficient way to advertise is to do none at all...and we all know how that would turn out.  But I would simply add one more question to the mix: what it's really worth to a company to acquire a new customer?  I am constantly amazed at the lack of clear answers I get to this relatively simply question by both marketing and C-suite executives of firms that have been around long enough to know. All the big data in the world is meaningless until the people running the enterprise clearly KNOW the answer to the question.  It can vary across time (seasonally) or be in a range, but you must be able to put a real dollar amount on it.  This is the first benchmark to determine if what you are doing is profitable for the company or it isn't.  I'm afraid many people are afraid to learn the ugly truth so they would rather bury their head in the sand and hope it all works out.  Sadly, this is the reason marketing people aren't often viewed in a positive light within the board room.  So figure it out.  Either increase what's working (while it's working) or be willing to change what you're doing if it's not.  

  • designarts66

    Thanks for your insightful article considering Effective Messaging in a time of robotic eyeball tracking & machines counting machines - counting!. [see Genius + SalesForce] 

    My early immersion into retail advertising design in the 80s via the LA Times, our ad results were delivered by store receipts the next morning: The good, bad & the ugly. Primary factors were product, price point and message/design. If it was a sellout, we won the Trifecta! 

    When Facebook rolled out its advertising platform we found their wide exposure yielded high impressions - yet few engagements with our target audience. It's always a balance of responsive messaging and qualified media. 

    A most persuasive message when lacking proper media placement might be unheard, like a Mime performing Rock & Roll...[wait, that might actually work, if executed well!] 

    A retail sales approach is valid in effective advertising campaigns: Enroll prospects [followers]. empower loyal customers [fans with spend history] and engage with compelling offers [loyal groups, interests, local events]. 

    One underrated method to discover what's working and not working with your brand marketing is to sit down and have a one on one with your customer service staffers. Real customer experience is way more interesting than marketing stats and more revealing, too. Also, if you don't have this on hand, acquire a competitive analysis to anticipate trending, keyword hybridization and ad budget histories.

    Finally, merge your assessments in a data mash-up [Marketing Matrix] to clarify brand acceptance and growth insights that may direct tweaks, course corrections and new opportunities for growth.

    Flashback: The Medium is the Message.

    Whatever happened to the APPLAUS-O-METER?

    Kent Looft, DesignArts, Inc.
    Phoenix, AZ