Advertising effectiveness vs. efficiency: what is important?

Direct Line Group, the insurance services group, resisted the temptation to focus on the short term. It stuck with long-term brand-building by increasing …

The advertising industry is suffering from an efficiency bubble. Data-driven digital advertising, in particular, has been highly efficient at driving short-term metrics such as sales, click-through rates and mobile app installations. However, industry experts warn that a focus on efficiency and an immediate return on investment means advertisers are putting long-term advertising effectiveness and creative bravery at risk.

Key measures such as awareness, consideration and brand love are being neglected because they take months, even years, to measure, rather than a sale that can happen in an instant.

Short-termist thinking putting advertising effectiveness at risk

Les Binet, head of effectiveness at adam&eve/DDB, the advertising agency behind John Lewis’ Christmas ads, says: “The efficiency bubble is a real problem.”

Mr Binet is co-author, with Peter Field, of an acclaimed study, The Long and the Short of It: Short and Long-Term Marketing Strategies, which has shown that advertisers should split their spend roughly 60:40 between brand-building and short-term direct response.

When you look at understanding your customer and focusing on your company’s core proposition, you can increase your effectiveness tenfold

The pendulum has been swinging dangerously away from brand-building and advertising effectiveness in favour of short-termism and efficiency, according to Mr Binet.

“Businesses that put efficiency first are businesses that are heading for disaster,” he warns. “It’s advertising effectiveness that matters most. Only once you’ve got effectiveness should you worry about efficiency.”

Advertising has had to change as consumer behaviour shifts

Part of the reason that advertisers have shifted money into online direct-response channels is because of the dramatic change in consumer behaviour in the last decade thanks to the rise of the smartphone and super-fast broadband.

Google and Facebook are the world’s two biggest online advertising platforms and much of their success has been built on the fact they make buying digital ads easy through an efficient, self-serve model.

Advertisers use search and social media ads to target key audiences, increasingly with personalised messages, and drive an immediate, measurable short-term response.

Such advertising has been dubbed “performance marketing” because it drives business performance.

What’s more, digital agencies are experts in optimising performance, such as bidding for cheaper search keywords or increasing the number of app installs, which can increase the efficiency of their clients’ marketing spend.

Efficiency yields faster results than effectiveness

Chief financial officers and procurement chiefs in big companies are fans of performance marketing because the return on investment is accountable.

As Rory Sutherland, vice-chairman of advertising agency Ogilvy, puts it: “Had we put procurement people in charge of the D-Day landing, they would have insisted that the landings took place at Calais to minimise fuel costs.”

Long-term brand-building and emotional storytelling are harder to justify in the boardroom when most companies are worrying about their next quarterly results, not their brand’s health in three years’ time.

Zaid Al-Qassab, chief brand and marketing officer at telecom giant BT, says it is vital to prioritise advertising effectiveness, even though efficiency remains important.

“When you look at the efficiency of your marketing spend, you will be able to do a lot of efficiency tweaks; maybe you can switch the media channels and save 10 per cent, maybe you can improve online click-through rates by 5 per cent,” says Mr Al-Qassab.

“But when you look at understanding your customer and getting the consumer insight right, and focusing on your company’s core proposition, you can increase your advertising effectiveness tenfold.”

Moving the focus towards long-term success

The debate about advertising effectiveness versus efficiency has been maturing as companies ask themselves whether they have got the balance right between short-term performance and long-term brand-building.

Enders Analysis has published a landmark report, Mounting Risks to Marketing Effectiveness, which examined why advertisers have become obsessed with efficiency.

“A focus on quick returns and cheap media at all costs is hurting marketing effectiveness, measured in long-term return on investment, brand equity and consumer satisfaction,” according to Enders.

The report blamed a number of factors including the short tenure of chief marketing officers, who last only about three years on average, and the rise of procurement and so-called zero-based budgeting. The latter is when a company starts the financial year with a marketing budget of zero, rather than using last year’s expenditure as a guide, so it only spends money it thinks is essential.

Enders charted UK ad spend over the last decade and a half and found the rise of Google and Facebook has encouraged brands to shift the mix of their ad spend from a 60:40 ratio between brand-building and direct response, as recommended by Mr Binet and Mr Field, to 50:50.

Big wins for those who can burst the efficiency bubble

However, there are signs that some advertisers are waking up to the potential risks and are willing to burst the efficiency bubble.

The Automobile Association, the car breakdown recovery company, invested heavily in direct mail, only to have a change of heart and it moved money back into brand-building with mass reach.

Direct Line Group, the insurance services group, resisted the temptation to focus on the short term. It stuck with long-term brand-building by increasing its investment in TV and boosted profits.

Both companies have become advertising industry case studies and won gold awards at the Institute of Practitioners in Advertising’s Effectiveness Awards last year.

Mr Al-Qassab believes there is a growing recognition that “as an industry, we’ve spent a lot of time and effort optimising digital, but actually it’s playing with the last mile of the marathon”.

Savvy companies turning back to traditional media

In another sign that brand-building is making a comeback, fast-growth digital companies have been investing in traditional mass media such as TV and out of home.

ITV reported that its advertising revenues from digital disruptor brands such as Deliveroo, Facebook, GoCompare, Google, Just Eat and Uber rose 10 per cent last year, more than offsetting the decline of legacy advertisers.

The recent financial troubles at consumer goods manufacturer Kraft Heinz, which cut costs and then had to write down the value of its brands, have also served as a warning that focusing too much on efficiency can have harmful consequences.

Enders recommends companies should give marketing chiefs “more space for long-term judgement” and “refocus agency remuneration” on creativity and media planning, rather than on efficiency at all costs.

To succeed, companies must be able to balance efficiency with effectiveness

It would be wrong to think that online advertising only drives efficiency and not effectiveness.

Advertising on most media channels, including TV, radio, out of home and newspapers, is going to be bought digitally in future as the analogue and online worlds merge.

There is also a growing trend for advertisers to use technology to create dynamic content that can be personalised and optimised at scale, with thousands, even millions, of messages, which can be tweaked by location, gender, weather, time of day and so on.

Ultimately, the difference between advertising effectiveness and efficiency is recognising that building a brand requires making a lasting emotional connection to justify a premium in the mind of the consumer.

Efficiency and keeping costs low will never go out of fashion, but the most effective way to drive growth is to invest in creativity.

The Automobile Association’s shift from performance marketing back to brand-building is widely regarded as one of the best examples of bursting the advertising efficiency bubble.

Five years ago, the AA was focused on what it admitted with hindsight was the “efficient delivery of short-term results via direct, targeted comms”.

The AA’s marketing strategy seemed to be working as profit was growing. But when the AA looked beyond short-term results, it “discovered a worrying picture of market share and membership decline, driven by increased price sensitivity and falling salience”, as the company conceded in its winning entry at the Institute in Practitioners in Advertising (IPA) effectiveness awards last year.

The car breakdown recovery group changed its approach and invested heavily in “emotional mass reach executions”, including TV, outdoor and radio, and went on to increase market share to its highest level since 2012. The marketing switch delivered a return of more than £2 for every £1 the AA invested.

Insurance services firm Direct Line Group has also won effectiveness accolades from the IPA for investing in TV and radio as part of a long-term, brand-building strategy that helped to increase brand preference and consideration and drove profit by an extra £46 million.

Significantly, Direct Line found that investing in some automated online advertising, known as programmatic, produced little benefit, even on a short-term basis.

However, some leading companies are challenging received wisdom.

Fashion retailer Next, which is expanding its ecommerce operations and reducing dependence on high street stores, said it will double its online marketing spend “to better target new and existing customers” while halving its investment in direct mail, print advertising and TV.

Industry experts say it usually takes at least three years to assess the effectiveness of a marketing strategy.

There is one caveat: some early-stage companies may choose efficiency over effectiveness in the short term if they need to drive rapid growth through online optimisation. Brand-building can follow later.

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How Blockchain Can Help Solve Ad Fraud

The solution will require radical transparency, enabled by blockchain technology, writes Hunter Gebron, Director of Strategic Initiatives, MetaX.

As long as intermediaries have little incentive to distinguish between human and bot impressions in their reporting, ad fraud will be a problem. The solution will require radical transparency, enabled by blockchain technology, writes Hunter Gebron, Director of Strategic Initiatives, MetaX.

With the permeation of “fake news” and “click-bait” seeping into the once sacrosanct world of high-quality journalism, it seems we are already in the late stages of an information war that is being waged all around us.

Professional journalists that write in-depth and unbiased news stories chocked full of intellectual integrity are pitted against antithetical and unscrupulous click-bait hucksters. Both are using different means to achieve the same goal, readership, which in turn leads to ad revenue. But the consequences of who wins in this fight may ripple across our society for generations to come.

If we were scoring this bout, there is no question the journalists are losing. Journalism jobs are steadily in decline and have been for some time. “In the decade from 2008 to 2017, newsroom employment nationwide declined by nearly one-fourth (from 114,000 workers to 88,000).”

While most of the press around fake news centers around the Russian hacking of the 2016 political election and Facebook. There is another more insidious reason why fake news articles are written – to collect advertising revenue.

Here is a synopsis of how our ‘Free Internet’ stays free. Digital publishers (the ones that don’t want to live behind a paywall) must monetize via ad revenue. Advertisers pay publishers based on the number of eyeballs and clicks their ads receive. Consumers who want free content must contend with the endless barrage of ads that have become a ubiquitous part of our online experience. It’s not quite a Faustian bargain, yet, but it’s getting closer to resembling one everyday.

Also Read: What Is Native Advertising and How to Craft Your 2019 Strategy for Maximum Success

The important thing to know about digital advertising is that it’s a numbers game.

The more traffic digital publishers can draw into their site, and the more ads they can display, the more money they are able to collect from advertisers.

One of my favorite quotes is “show me the incentive I’ll show you the outcome” by Charlie Munger.

So let’s take a look at some incentives and their outcomes.

Digital advertising in 2018 topped out at around $111.14 billion and by 2019 it will account for 55% of all media ad spend.

The goal, if you are a publisher or website hosting ads, is to get yourself as big a slice of that $111 billion pie as you can. The incentive is to get as many eyeballs and clicks to see the ads you host as humanly (or as we’ll come to find out ‘in-humanly’) possible.

Now for the outcome.

Of the $111.14 billion spent roughly, $15 billion went straight to fraud.

Yes, you read that right, 13% of all money spent on digital ads was vacuumed up by fraudulent websites and bots in 2018. By 2020, that estimate balloons to $44 billion.

The incentive to get clicks and eyeballs leads to an outcome in which fraudsters have figured out how to game the system. Fake news is just one tentacle in a multi-armed beast that represents all the various forms of ad fraud.

A common practice, known as domain spoofing, where bad actors trick advertisers into buying on a site that isn’t really that site, is exacerbated by the complex patchwork through which digital ads travel, and that makes following the flow of money incredibly difficult.

“Why would fraudsters spoof a domain?” Imagine for a second you are a fraudster. You know that many advertisers want to buy ad placements on CNN.com. So you create a fake website that for all intents and purposes looks like CNN.com, but it’s really just a blank page with a video player on it. You then sell that fake page to advertisers as CNN.com. If it’s done well neither CNN.com or the advertisers ever knows what happened. If it’s not then it gets exposed.

Whether it takes place on a street corner in NYC or in a complex patchwork of web connections that funnels ads from point A to point Z, fraudulent inventory is fraudulent inventory. The vendor ends up not being paid and the customer gets tricked into paying for something they did not want.

‘It is difficult to get a man to understand something, when his salary depends upon his not understanding it!’” – Upton Sinclaire

The relationship between advertisers and news publications goes back a long time, at least 300 years in the United States. However, programmatic advertising has only been around for a decade. Yet billions of dollars are stolen every year. How can we stop this?

An answer may lie in distributed ledger technology. The major selling point for blockchain technology is its native property of radical transparency. All financial activity on the blockchain is recorded and visible. This is the exact opposite of digital advertising which is often likened to a ‘black box’. Money goes in and what comes out is a ‘report’ from a centralized, for-profit company telling you all the wonderful places your money was spent. Want the raw data so you can check for yourself? Good luck with that! And it’s these kinds of conditions where an activity like domain spoofing is able to thrive.

Also Read: What Is Bladtech?

Meanwhile, legitimate digital publishers are getting screwed. Money that should be going to them is being siphoned away to fraudsters.

Here is a novel concept. One that is partly inspired by the ads.txt initiative brought forth by the IAB Tech Lab. Ads.txt allows publishers to publicly declare who the authorized sellers of their inventory are.

We can apply the same principles using blockchain technology to allow digital publishers to publicly declare the authorized wallet addresses they control on the blockchain. The caveat is they will need to be comfortable accepting cryptocurrency as a form of payment from advertisers but the upside is it would completely eliminate the incentive for domain spoofing.

Remember, the main reason why domain spoofing is able to thrive is that fraudsters can collect the money to their bank accounts.

If everyone can publicly see the wallet addresses of everybody else (which is how public blockchains function) then money should never get sent to the wrong place. It would be pretty foolish to spoof a domain if you knew the money was going to be sent to the entity you were pretending to be regardless!

Getting an entire industry to get comfortable with the idea of accepting cryptocurrency is a tall order. But with $15 billion in fraud hanging over the digital advertising industry’s head, it may be time to start exploring alternative options.

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Is it impossible to run a company without buying advertising from Google?

Lyft Inc., the ride-hailing company, spent $92.4 million on Google advertising last year, more than double the amount of two years earlier. That was …

Google controls many of the ways businesses access customers online in the U.S., making it almost impossible to run a company without buying advertising from the internet giant.

As politicians increase scrutiny of large technology companies, Google’s lock on these digital relationships is becoming a potential liability, not just a lucrative advantage praised each quarter by Wall Street analysts.

Presidential candidate and Senator Elizabeth Warren outlined a proposal Friday for breaking up Alphabet Inc.’s Google — and Facebook Inc. and Amazon.com Inc. — because they have “too much power” and have “bulldozed competition.”

While consumers pay nothing for most Google services, some businesses say they often can’t avoid giving more money to the company because the internet giant is the main source of answers when Americans go online to get information. Google has more than 81 percent of the mobile search market, according to research firm NetMarketShare.

While Facebook matches advertisers with people interested in certain topics, Google can tell what a person really wants, right as that person types their query into the search bar. Showing up at the top of search results is imperative for most companies and in recent years Google has changed its software, especially on smartphones, to make buying ads the best way to achieve that goal.

It’s not possible to run a business without advertising on Google, according to Joey Levin, chief executive officer of IAC/InterActive Corp., which owns internet services like Tinder, HomeAdvisor and Vimeo. He spends about $350 million on advertising every quarter, much of that on Google.

Lyft Inc., the ride-hailing company, spent $92.4 million on Google advertising last year, more than double the amount of two years earlier. That was about 10 percent of its $991 million loss in 2018.

“Google has dominance in search, it’s utterly, completely, dominant,” said Brian Wieser, president of business intelligence for GroupM, the media investment management arm of advertising giant WPP Plc.

The Federal Trade Commission closed an antitrust investigation into Google in 2013 but there’s been a rising chorus of voices on the political left and right demanding Google be cut down to size, somehow.

Nowhere is Google’s power more pervasive — and potentially damaging to businesses — than in the esoteric market for “branded keywords.” This is where businesses buy ads based on their brand names. So Lyft bids on the word “Lyft” and when people search for that, Google runs an ad at the top of results usually linking to the ride-sharing company’s website.

Some businesses say that they have to buy these ads — whatever the cost — because rivals can bid on the keywords too. If Lyft doesn’t pay up, Uber Technologies Inc. is ready to pay Google instead and grab customers. A search for “Lyft” on Friday on a Google Pixel smartphone showed an ad at the top from the company. Right underneath, there was an ad from Uber saying “Your Ride is A Tap Away.”

“You have you buy the ads every day,” said Mike Lindell, CEO of MyPillow Inc., which sells bedroom items online. “Google gets a piece of every single MyPillow sold and it’s wrong. Why should someone be able to bid on your own brand words and why do you have to buy your own just so people can see you online? That’s wrong.”

In recent years, this pressure has increased because on mobile devices Google search ads show up at the top of the results, rather than on the side of the page with desktop results. This means people are more likely to click on the ads, rather than the free, “organic” links to companies’ websites.

MyPillow’s marketing team has tested not buying Google search ads for “MyPillow,” and the slot is immediately purchased by other businesses, sometimes selling knock-offs on e-commerce marketplaces like Amazon, Lindell said. “We’ve had to bid more to get back on there after we stopped,” he added.

“Limiting the ability to advertise around brand names would restrict competition and make it harder for people searching for one brand of product to make informed decisions by comparing features and prices,” a Google spokesman wrote in an email.

The company has said in the past that it doesn’t break antitrust laws and that competition online is just a click away. Google also regularly stresses that it never accepts payments to be included in or to be ranked higher in organic search results, and doesn’t manipulate search rankings to benefit advertisers.

American Airlines Group Inc. and Rosetta Stone Inc. sued Google years ago over selling their brand names in search ads, arguing the internet giant shouldn’t be allowed to use protected trademarks in this way. Rosetta, a language learning technology provider, lost its case in state court, but it was revived on appeal and Google settled in 2010 for an undisclosed sum, according to Ars Technica.

More recently, companies have tried to work with — or around — Google’s system. Online travel agent TravelPass Group sued a group of leading hotel chains late last year alleging they conspired not to bid on each others’ branded keywords, according to the complaint. The hotels are fighting the suit and the case is ongoing.

Beyond just branded keywords, the cost of all types of Google search ads has been rising at about 5 percent a year, according to Mark Ballard, vice president of research at Merkle, an agency that helps retailers and other companies buy Google ads. That’s well ahead of U.S. inflation, which is running at 1.6 percent currently, according to data compiled by Bloomberg.

Google search ad prices often surge when the company restricts the growth of supply, and they fall when Google dramatically increases inventory — a sign of strong pricing power. The cost for Google U.S. search ads jumped 13 percent in the first quarter of 2018 and 12 percent in the second quarter as the growth in the number of clicks declined, according to Merkle data.

Many Google advertisers are happy to pay more because the company has so much data that it can target the marketing messages and generate big returns on that spending, said Ballard.

“To the extent that Google has close to a monopoly on this area, they can’t force advertisers to pay more than makes sense,” he added. “Prices have risen, but returns are higher.”

Where that breaks down is in the branded keyword market, Ballard said.

“When it comes to brand keywords, some advertisers will spend beyond what makes sense. These decisions are not as rational,” he added. “That’s a question that comes up when advertisers see costs go up. People are thinking about that and testing it by stopping buying those branded keywords to see what happens.”

Those tests usually result in a decline in traffic, both from search ads and from free, or organic, results, according to Ballard. How big depends on the advertiser. “If you’re a well-known company with a unique name, you will capture organic traffic without buying your own brand keyword on Google,” he said.

For everyone else, they must continue to pay Google.


If you have an interesting article / experience / case study to share, please get in touch with us at editors@expresscomputeronline.com

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Xaxis’ short-form video format now in APAC

Xaxis has partnered with advertising technology company Sizmek to launch a mobile-first short-form video format in the Asia Pacific (APAC) market …

Xaxis has partnered with advertising technology company Sizmek to launch a mobile-first short-form video format in the Asia Pacific (APAC) market that the media firm says will deliver effective engagement and 100 percent viewable video ads.

The new format will allow clients to run campaigns across a selection of premium publishers including Unruly’s premium publisher marketplace, Spotify, Rakuten Viber and Dailymotion to drive increased advertising reach and engagement.

Six-second videos

Sizmek added interactive elements into the six-second short-form video format to drive engagement and dwell time. A new social sharing function increases advertising mileage, while custom emoticon reaction buttons are said to unlock a new dimension in campaign measurement.

Clients are already beginning to implement Xaxis’ Short Form Video format with outstanding results, claims the media company. It cited how a campaign for an entertainment client in the Philippines as an early example of its success, achieving 68% viewability within a one-month period, with over two-thirds of viewers watching the ad in full.

By comparison, Facebook’s video ads in the Philippines typically have a 7.88% viewability rate with less than one-fifth of viewers watching to the end, says Xaxis.

“Long gone are the days when advertisers could simply rely on good creative and a big budget. Today, brands look to maximize reach by scaling on digital platforms, but genuine engagement remains elusive,” said Deepika Nikhilender, the APAC SVP at Xaxis.

“Our new ad format has already proven incredibly effective in terms of high-impact brand recall, giving our clients a huge competitive advantage in this market. By adding social sharing and emotional engagement functions for the first time, we have pioneered a distinct way for outcome-driven brands to optimize and measure their campaign results.”

Over two-thirds of the APAC population are mobile users hungry for bite-sized content, says Phil Townend, the chief commercial officer of Unruly at APAC. Xaxis short-form video format is hence set to make a big impact in the region and drive tangible outcomes for brands, he said.

Further reading:

Consumers now watching almost 7 hours of video per week

How B2B brands can succeed with video

The human-centered strategies that accelerated Xaxis’ AI-based business in APAC

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DoubleVerify acquires Zentrick, a video tech company from Belgium

DoubleVerify last month announced that it has acquired Zentrick, a digital video technology company that provides middleware solutions to drive …

DoubleVerify last month announced that it has acquired Zentrick, a digital video technology company that provides middleware solutions to drive execution and performance of online video advertising.

DoubleVerify says Zentrick engineering teams will continue to operate from offices in Ghent, Belgium. The transaction was completed as an all cash, all stock offer on February 15, 2019.

Zentrick middleware reduces video breakage by more than 50%, by shortening load times and eliminating multiple forms of latency that can prevent a video ad from delivering. Greater ad delivery maximizes performance for advertisers and revenue yield for publishers. Zentrick software further enables publishers to detect and resolve issues behind breakage as they occur.

Zentrick Middleware Benefits the Entire Video Advertising Ecosystem

For media platforms and publishers, Zentrick middleware eliminates the technical overhead and latency associated with supporting multiple third-party data integrations (e.g., measurement, attribution and audience providers). Third-party service providers benefit from seamless platform activation and equal access to the video playback data necessary to power their services. According to DoubleVerify, today over 30% of video ads that are sold are unable to be delivered by publishers due to various forms of technical ‘breakage’ in the ad delivery chain

“The entire Zentrick team is thrilled to join forces with DoubleVerify – a rapidly expanding, global organization with a best-in-class verification offering,” said Pieter Mees, Zentrick Co-Founder. “Integrating Zentrick’s digital video technology and expertise with DV’s industry-wide platform will accelerate our efforts to simplify and streamline ad performance.”

“In 2018, Zentrick accelerated the delivery of more than 150 billion video ads,” said Frederik Neus, Zentrick Co-Founder. “Through integration with DoubleVerify, we anticipate scaling our solution to better service both advertisers and publishers, while driving even greater positive impact throughout the ecosystem.”

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