Download Marketers Know They Aren`t Calculating Digital Advertising

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white paper
Marketers Know
They Aren’t Calculating
Digital Advertising
ROI Correctly
But until now, their hands have been tied.
M
arketers don’t need to
change the way they
think. They just need
new digital marketing
technology and mea­
sures that conform to the way they think.
Thankfully, while the old model for measur­
ing the return on investment (ROI) from
digital advertising falls short, a new model
is gaining momentum.
Digital marketing continues to incur an
enormous amount of growth. The prolif­
eration of new digital channels, compel­
ling websites and countless new oppor­
tunities makes it difficult for marketers to
keep pace – and even more challenging
for marketers to reach and engage their
audience.
Large brands and direct response
marketers are therefore constantly seek­
ing the right mix of channels, sites and
interesting creative to engage their audi­
ence as effectively as possible. Yet when
a digital advertising campaign is success­
FigurE 1
The “last ad” model miscalculates ROI by attributing credit to only the last click before a
conversion. The model assumes the consumer doesn’t see or click any other ads along the way.
ful, they can only credit one of the many
touch points their audience experienced.
Typically, between 93 percent and 95
percent of audience engagements with
online advertising receive no credit at all
when advertisers review the ROI on their
campaigns. Although the universe has
been getting bigger, marketers have been
forced to view it through a very limited
by Robert Haskitt, Microsoft
ROBERT HASKITT, director of marketing at Microsoft Advertising, has been introducing marketers to
Internet-based advertising solutions for 10 years. As a marketer who both uses and promotes advertis­
ing ROI solutions, he is an advocate for the emerging Engagement Mapping model because it brings
a much higher degree of transparency, accuracy and flexibility to digital advertising. Prior to joining
Microsoft, he was a marketing strategist at aQuantive.
lens. And this limited view has constrained
their vision, creativity and success.
The reason for this misalignment is that
the industry has been using a method
of ROI measurement that only attributes
credit for advertising effectiveness to the
last ad clicked or viewed prior to a cus­
tomer conversion (Figure 1). The “last ad”
standard forces marketers to pay attention
to a small set of data and ignore key infor­
mation required to properly calculate the
ROI for each site and channel. In addition,
it goes against conventional marketing
wisdom, and therefore stands in the way
of adoption, creativity and the innovative
evolution of digital advertising by market­
ers who are seeking better results.
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www.perform.mThink.com/30154
Site A
FigurE 2
Site B
Site C
Site D
• Marketers need to attribute credit to
multiple sites and engagements, not just
the last one.
• Marketers need to have true transpar­
ency and the flexibility to weigh the
importance of influential factors such as
ad size, frequency and rich media interac­
tions in their ROI calculations.
• Marketers need to be able to easily
adopt and transition to the new model
from the old.
Site E
This is the way it really looks for an advertiser as people spend more time online. People interact
with many channels: they see video online, interact with rich media, and view and click on display
and search ads.
THE ‘LAST AD’ MODEL VS.
CONVENTiONAL WiSDOM
To date, the industry’s online ROI measure­
ment models, including click-through
rates and the “last ad” standard, have been
significantly out of alignment with basic
marketing fundamentals. For example, a
critical marketing concept, the sales funnel,
is completely disregarded by the “last ad”
model. The idea is simple: different market­
ing messages play different roles for con­
sumers. Some marketing messages drive
awareness; others close the deal. In the
off-line world, broadcast media have typi­
cally been at the top of the funnel, while
other channels, such as direct mail, have
been used to induce a purchase. In the last
10 years, online media have moved from
being strictly a direct response medium to
becoming a multifaceted channel with the
potential to reach consumers across every
point in their journeys. The “last ad” model
is exceptional at measuring ROI if your only
goal is to measure the bottommost touch
point in the sales funnel. In this regard, our
current conversion attribution standard is
sadly out of touch with the reality of online
marketing today.
Based on only a single engagement,
the “last ad” model forces marketers to
place greater importance on the aspects
of their advertising that support the model
than on those that truly support advertis­
ing success. Given all of these factors, it’s
fair to wonder why the industry persists in
using the “last ad” model. The reason is that
until now, digital marketing technologies
enabled only a limited set of capabilities
and measures of digital media.
Marketers, however, need to be able to
calculate the ROI on all of the exposures
and interactions the audience experi­
ences on each media owner’s site – not
just the last one (Figure 2). The result of
this more comprehensive calculation is a
measurement known as engagement ROI.
Advanced digital advertising technologies
are now making it possible to calculate
engagement ROI (see “Factors That Impact
Engagement ROI,” on the following page).
ENgAgEMENT MAPPiNg: YOu
CAN gET THErE FrOM HErE
The new model enabling the calculation
of engagement ROI is called Engagement
Mapping. It’s based on the following three
simple premises:
Passive Events
Last Ad
Engagement mapping is made possible
by back-end technology that analyzes
many factors behind the scenes. In the new
model, key influential factors can roll up
into a straightforward site-by-site analysis
to succinctly summarize engagement ROI.
Factors that can be taken into account
include frequency, ad size, recency, media
type, interaction and order of engagement.
By considering these experiential fac­
tors, advertisers will be able to learn from
previous campaigns and fine-tune their
media strategies while their campaigns
are still in progress. Marketers can then
manage their digital media investments by
channel, placement, site and media type
(among other factors).
WEigHTiNg FACTOrS
The Engagement Mapping model allows
you to easily customize your application
of the model to the factors you deem
important for measuring your specific cam­
paign (Figure 3). The various factors can be
weighted differently in your engagement
ROI calculation. For example, passive events
Advanced
Model
Text Link
Display
Flash and Java
Rich Media
Video
Active Events
Clicks
RM Interactions
FigurE 3
Engagement Mapping is a flexible attribution model that provides greater transprency and
enables advertisers to include many factors in their engagement ROI calculations.
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white paper
white
paper
11%
2,000
factors That Impact
Engagement ROI
6%
100%
0%
4%
1,600
conversions
1,500
FigurE 4
E-Map
Order
Recency
Reach
Creative
Interactions
0
Ad Size
500
Engagement Mapping is a transparent model that enables advertisers to determine and view how
each factor impacts their ROI calculation. Here’s an illustration of how those factors enable credit
for conversions to be attributed more relevantly and comprehensively under the new model.
(like viewing a text link or a display ad) can
be weighted one way, while active events
(like clicks and rich media interactions that
convey a higher level of interest) can be
assigned different values. If you aren’t sure
how much weight you should assign to a
factor, you can simply choose a setting that
closely reflects your marketing objectives
from a collection of default settings.
PrACTiCAL APPLiCATiON
OF ENgAgEMENT MAPPiNg:
SiNgLE SiTE ExAMPLE
Engagement Mapping isn’t just conceptual.
It’s a model that you can begin to apply
practically today. When the model is applied,
each exposure and interaction can be attrib­
uted a portion of the credit for a conversion.
Here’s a hypothetical example of how
Engagement Mapping attributes credit
differently (see Figure 4). Let’s say you have a
site right now that gets 1,000 conversions
under the “last ad” model. When frequency
is figured into the model, it actually boosts
the attribution number up to more than
twice as many conversions. So your number
of conversions credited to the specific site
has jumped up to 2,000.
But it turns out a lot of these frequent
impressions are not very large. When you
factor in ad size, it turns out that a high
number of exposures were actually small
text links. By factoring in ad size, the num­
ber of conversions attributed to the specific
site is revised downward to 1,400.
Here are some important things to take
into consideration when calculating
engagement return on investment.
Frequency. How many times did
your customers see an ad across
multiple sites and channels?
-30%
Frequency
1,000
-14%
1,000
conversions
Last Ad
delivering the customer experience
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Continuing down this path, the Engage­
ment Mapping model also accounts for
creative type, recency and order. The model
ends up attributing 1,600 of your conver­
sions to this one site. Thus, when you evalu­
ate the sites that produced the greatest
return on your media investment, this one
site looks very different than it did when
you used the “last ad” model.
By being able to weigh the importance
of various factors, you can put a greater
focus on those that matter more. Thus,
if you’re a direct-response marketer, you
might want to place more emphasis on
factors like clicks and recency, but if you’re
a brand marketer, you might want to give
more credit to more passive engagements –
such as video views and ad size – even if
there’s no interaction. Or your objective
might lie somewhere in between. Flexibility
and transparency in the way you measure
each factor are important components of
the new model.
As you get more familiar with the new
model and how each factor affects your
results, you can begin to test your well­
exercised intuition. For example, most
marketers that employ rich media do so
because intuitively they know that it’s a
strong way for the audience to experience
their product or brand. The new model
gives advertisers the ability to make specific
adjustments, and set the dials to reflect the
impact of the factors they believe have the
greatest impact on their engagement ROI.
Ad size. Which ads have a greater
impact when you factor in their size?
Should a bigger ad get more credit
than a small text link?
Recency. How much should impact
diminish as engagements move fur­
ther away in time from the action?
Was it the first exposure that caught
the audience’s attention?
Media type. Is a rich media ad more
effective than a skyscraper banner
ad? How should video be weighted
versus display?
Interaction. How much time is a
user spending interacting with a rich
media ad, or visiting your website
before seeing a banner ad and click­
ing on it?
Order of engagement. What if you
determined that order matters, such
that the first ad gets most of the credit
or the last ad gets less, or vice-versa?
STAY ON COurSE;
gO A LOT FArTHEr
Great marketing comes from a healthy
combination of right- and left-brain think­
ing. Once marketers move beyond the
“last ad” measurement model, they’ll bene­
fit from greater flexibility and transparency.
And they’ll be free to combine attention­
getting creative with smarter buying
practices that achieve awareness goals
and take full advantage of the infinite
opportunities presented by digital media.
Your campaigns will likely garner more
attention once you can measure and
justify the use of a greater variety of for­
mats, sites and channels. n
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