Impact of Online Display Advertising Absent the Click
Part I: Its Impact on Site Visitation

Last month, the IAB invited me to present a summary of comScore's Q2 2008 e-commerce trends as part of an IAB webinar where the IAB released their Q2 online ad spending data.

The IAB data were assembled and presented by Price Waterhouse Coopers (PWC) and were most interesting. Overall, the data were reassuring, with a growth in online ad spending of 13% versus year ago. Search continued to grow strongly (+24% vs. YA) while display ads (i.e. banners) grew by 8%. Consistent with the PWC data, CMR also reported an 8% increase for display ads. Let’s hope we see more of the same in Q3 and Q4!

At about the same time, Nielsen released its own estimate of display ad spending for the first half of 2008 and reported a 6% decline. I was intrigued as to why the Nielsen number differed so widely from the PWC and CMR estimates and spent a little time digging into the numbers. It turns out that Nielsen reports online ad spending for CPM-based display ads, while the PWC and CMR numbers include both CPM and “pay-for-performance” display ads (i.e. CPM, CPC and CPA deals).

So, in interpreting the data, it would appear that advertisers are shifting large amounts of their display ad spending from CPM to CPC / CPA deals. With today’s tough economy, I don’t think this is surprising – since it’s natural for advertisers to demand more performance. But, I think there’s more to the story. In a study comScore completed earlier this year with Starcom and Tacoda, we measured click rates across all online display campaigns in a month and found them to average less than 0.1%. Does this mean that display ads aren’t having any impact? I don’t think so. I think the issue is that a click no longer reflects the effectiveness of a display ad. Just as we wouldn’t expect that print ads, TV ads and radio ads should generate immediate consumer response, why would we expect it to be so with online display ads?

We've conducted extensive research at comScore that confirms the impact of display ads. Using our behavioral panel, our analysis compared the behavior of consumers who were exposed to display ad campaigns with a control group who were not exposed. The control group was carefully selected to be demographically and behaviorally balanced with respect to the exposed group. Below, I’ve shown the average impact of 139 display ad campaigns in terms of their ability to drive visitation to the advertisers’ sites:

The impact of the display ad campaigns is clear, with substantial lift in site visitation occurring in the first week of exposure to the campaign (+65%) and continuing through the fourth week following initial exposure (cume +46%).

So, with these types of positive results, are we to conclude that advertisers who pay on the basis of CPC arrangements are making a mistake? I think the answer is “yes and no.” “Yes,” because it’s clear that a singular focus on display clicks is misleading and does not reflect the actual impact of the ad campaign. "No," because smart advertisers understand the benefit of running display campaigns and that paying based on the number of clicks realized is economically very attractive. They get the “view through” impact of the ads but only pay for the small number of clicks that are generated. That’s a great deal for the advertiser -- but a poor one for the publisher. I think it behooves publishers to consistently measure “view through” impacts and to use the results to charge a fair price for the holistic performance of display campaigns that are run on their properties.

In my next blog posting I’ll reveal further evidence of the effectiveness of display advertising by focusing on its impact on consumers’ search queries.

Even into the final days of the U.S. Presidential campaign, the Internet played a significant role, as it has throughout most of the season. Both presidential candidates made use of the channel to advance their respective messages, whether by outlining their positions on their websites, distributing campaign messages via video, or using online ads. Perhaps most important was the way the Internet changed the candidates' ability to fundraise in smaller increments from a much larger donor base.

In the waning days of the campaign, both candidates inundated their email lists with last minute pleas to contribute money for advertising to be used in the remaining days. It should not be much of a surprise, then, to find that the number of visitors to the candidate websites spiked in the last week. In particular, BarackObama.com peaked at 730,000 visitors in a single day on Tuesday, October 28 -- 125% higher than an average day over the preceding two months.

This was truly an historic election for reasons that are too many to count. One of the stories that is certain to go down in the annals of history was how this was the first national election where the Internet was truly front and center in determining the landscape and eventual outcome of the election. The Internet has forever changed the game of politics and I can only wonder what 2012 will have in store for us...

With the credit squeeze, looming recession and high gas prices affecting U.S. consumer behavior, we are increasingly being greeted with ugly headlines foretelling the failures of several core American industries, with the U.S. auto industry at the top of this list of struggling sectors. Recent reports suggest that yearly sales declines have reached double digits¹.

Even though the declining auto sales were widely expected by industry analysts, the speed at which the consumer demand collapsed still caught some -- including the big-3 auto makers -- by surprise. The short-term forecasts of auto sales tend to be based on the prior months’ sales trends and anticipated near-term state of economy. While this established method yields adequately accurate forecasts at normal times, it often misses the mark at times of drastic demand changes.

For mall-based retailers, foot traffic has often been a good indicator for sales. Similarly, for auto dealers, showroom traffic and incoming phone or email inquiries can be used as indicators for sales in coming months. However, these numbers are often difficult to compile and imprecise.

A more measurable and potentially more reliable leading indicator for vehicle sales may be the online visits to auto-related sites. According to a study by Capgemini published last month², 88% of the car buyers used the Internet as a primary source of information during the purchasing process. J.D. Power reported that 75% of new vehicle buyers in 2008 are using the Internet during their shopping process, and the shoppers spent on average of 6.5 hours online researching automotive information³. A study by CNW Market Research found that the Internet information is most heavily relied upon by shoppers starting 4 months prior to a new vehicle acquisition⁴.

Based on these research results, I thought it would be interesting see if there is any correlation between online visits and the actual auto sales. The figure below shows the unique visitors to large auto-related sites. The visitors included are the ones that have made more than one visit to a site and viewed more than 10 pages on the site (as one would expect a serious car shopper to do).

The data shows a clear declining trend beginning with July 2007, which corresponds with the beginning of the downturn in actual auto sales. So, at least at the first glance, there seems to be a correlation between the two.

In order to ascertain if there is a real correlation between the two data series, I plotted the actual auto sales (in log) versus the 3-month trailing unique visitor totals (also in log) for the two months prior to sales. For example, May-July visitor data are plotted versus September auto sales. As it turns out, the correlation between the two data sets is very strong, with a correlation coefficient of 0.98 for the time period being analyzed.

The next step of the process was to determine whether or not these visitor data could actually provide an accurate forecast for U.S. auto sales. As shown in the figure, the fit of this simple model is quite good and it seems that a fairly accurate industry sales forecast can be obtained from the visitor data.

So it seems that the Internet traffic data may serve as a good leading indicator for actual auto sales, as long as the majority of the shoppers actually carry the purchase process to the end. One important caveat is that the correlation may fray in the event that the purchase process gets disrupted. A significant demand shock, such as consumers being spooked by the meltdown in the financial markets and holding off on major purchases or not being able to obtaining financing for a car loan, might cause this existing model to break down. That said, car manufacturers and others following the industry closely may want to take a look at what consumers Internet behavior indicates for auto sales forecasts.

¹ Department Commerce Advance Monthly Sales for Retail and Food Services data.
² Capgemini, Cars Online 08/09.
³ J.D.Power, 2008 New Autoshopper.com Study.
⁴ CNW Marketing Research, Inc., Purchase process Wave IX.

Last Saturday morning (at 8:30 am!), I delivered a keynote presentation at the annual meeting of the Collegiate Entrepreneurs’ Association (CEO) in Chicago’s McCormick Place.

CEO was founded in 1997 by Dr. Gerry Hills, an entrepreneurial professor at the University of Illinois at Chicago, who had worked tirelessly since 1983 to establish the organization. CEO’s vision is to be the premier global entrepreneurship network which will serve 30,000 students, through 400 chapters and affiliated student organizations at colleges and universities. Today, 150 universities and colleges from across the country are members of CEO. Congratulations, Gerry, on a remarkable accomplishment!

There were about 1,400 students attending this year’s conference, representing universities and colleges nationwide. The energy level was stimulating, and it was terrific to see so many young people excited about the idea of starting their own businesses. Many had done so already.

I shared some of my own entrepreneurial experiences, and liberally referenced quotes I like regarding the life and actions of an entrepreneur. I thought you’d enjoy seeing some of them.

“Pioneers get arrows in their backs. They also blaze trails that have a way of turning into highways for countless travelers to follow.”
Jason Fry, Wall Street Journal

"The innovator has for his enemies those who did well under the old conditions.”
Albert Einstein

“Don’t be afraid to innovate; be different: Following the herd is a sure way to mediocrity.”
David Ogilvy, Co-Founder, Ogilvy & Mather Ad Agency

When asked which customer had given him the idea for the Model T automobile, Henry Ford answered:
“If I had listened to my customers, I would have built a very, very fast horse.”

“Whatever is not nailed down is mine. Whatever I can pry loose is not nailed down.”
Colis P. Huntington, Builder of the Transcontinental Railroad

“When there’s a ton of water, a lot of things float and look like boats. When there’s a ton of money, a lot of things float and look like companies.”
David Roux, Silver Lake Partners

“The meek may inherit the earth, but they’ll never increase market share.”
William McGowan, Chairman, MCI

“Good managers challenge their people. Poor ones comfort them.”

“Time lost in not making a decision can never be recovered. Sooner is better. Right now is best.”
Howard Tullman, Chicago Entrepreneur

“Never give in, Never, Never, Never.”
Winston Churchill

Okay, so I’m bragging.

As the wife of the CEO, I don’t often do this, but this past weekend was not only fun, but inspiring. I’ve just had the pleasure of attending the annual Ernst and Young Entrepreneur of the Year Conference with comScore’s leaders, Magid and Gian, and Gian’s wife Sarinda. Having won the regional Entrepreneur of the Year title for the Mid-Atlantic Region back in June, Magid and Gian were invited to attend the national competition, which culminated in a gala on Saturday night, hosted by Jay Leno.

Hosted in Palm Springs in all its glory, the conference was quite an event. E&Y put on a first class event, all around. Speakers included people like Jack Welch, and Robert Nardelli, CEO of Chrysler (who, IMO, deserves a lot of credit just for showing up.) My favorite quote of the week came from Jack Welch, who, when espousing on the topic of how companies could survive the current economic environment, said: “Your competitors: buy them or bury them. And by that I mean dismember them — pick off all their best people.” (Hmmm…good advice, Jack)

Offering all the glamour and glitz of the Oscars, the gala on Saturday night was the highlight (although Gian, who grew up in the UK during the sixties couldn’t quite get over the Joe Cocker concert on Friday). Complete with champagne, a red carpet, and yes -- even Joan Rivers, the gala was attended by a black-tie crowd of over 3,000 that was just as handsome (if somewhat more geeky) than the Hollywood version. Jay was about the best I’ve ever seen him — hilarious in his prepared bit, and just as good with his spontaneous comments, making fun of politicians and entrepreneurs alike. Our own Dustin Hoffman, as Gian was referred to in a recent Fortune article, was right at home. Even Magid, coined ‘the grim-looking CEO’ in the same article, was all smiles.

It was quite an honor to have made it that far. To get there, Magid and Gian were among 250 regional winners who had been selected from over 3,500 applications from across the country, representing every possible type of company under the sun. Unlike the Oscars, no one knew who the four finalists were in each of the ten categories until they were dramatically announced that evening, via a very fancy video profiling each of the finalists. Low and behold, Magid and Dustin were named one of the four finalists in the Services category, placing them in the top 1% of all applicants. Very exciting.

But when the big moment came, and the envelope was opened with the requisite drama and drum roll, alas, they did not win the big enchilada in their category. That honor went to —and here’s the rather funny part — James Barnes of Oakleaf, which is a waste management company. Sparing you Jay’s comments about how happy he was that “finally, there were some ‘non-Italians’ in the waste management business,” and the jokes at our table about how we ended up in that category (which were very funny), Oakleaf, with its many green initiatives, is actually a very impressive company. Instead of physically hauling trash, the company contracts with retailers, restaurants, property management companies, hospitality companies and corporate clients and hires haulers in the immediate area to do the actual removal. Oakleaf was started with a $45,000 loan in 1995 and has grown at a 30% per year clip to become a company with 750 employees and annual revenues of more than $700 million. Walmart, CVS and Home Depot are three of its flagship accounts. Not too shabby. This was a well deserved honor for them, and all the other winners of the evening.

But the bigger takeaway was this: what a club to be a part of. Having overcome a very colorful and storied collection of overwhelming personal and professional odds, this group of entrepreneurs has made a huge impact on the economy. They have collectively created tens of thousands of jobs, supported hundreds of thousands of people, generated untold millions in taxes, and even at today’s valuations, created billions of dollars of market cap. Pretty impressive.

Another great point Jack Welch made is that as the G20 were gathered in Washington this past weekend trying to figure out a plan for the current economic crisis, that “they should be looking at this crowd -- 3,000 miles west.” I couldn’t agree more. Many, if not most, of these entrepreneurs were not from elite backgrounds or Ivy League schools; most were not 4.0 types. Rather, they were often from humble beginnings, but had the ideas, determination, creativity and pure guts to drive to success. To me, that’s America -- at its best. At this point in our country’s history, I believe it is more important than ever that we encourage and harness this energy. I’m not suggesting that this group will provide a silver bullet to all our economic woes, but they will surely provide an important pillar. They look at an economy like the current one and find opportunities. And they will ultimately profit from them. It’s quite a club.

So as I write this from the airport the next day, in my back-to-reality jeans, getting ready to board my flight and take my middle seat back to DC, there is a lot to reflect on. But my net takeaway is this: despite all the uncertainty about our country’s near-term economic future, I am sure of one thing: I’m going home with winners.

On Thursday November 14, I delivered a keynote presentation at the Jordan Edmiston Group’s 2008 Growth Conference in New York.

Pictured from left to right: Gian Fulgoni, Chairman, comScore; Wilma Jordan, Founder & CEO, JEGI; Michael Chen, President & CEO, GE Commercial Finance, MCE; Scott Peters, Managing Director, JEGI

This by-invitation event is one of the few conferences bringing together senior-level private equity and venture capital investors with CEOs of top global and emerging media, information, marketing services and technology companies.

JEGI is an independent investment banking company for media, information, marketing and related technology. We worked with JEGI in comScore’s recent acquisition of M:Metrics.

Speakers from the media world included Gordon Crovitz, former Publisher, Wall Street Journal; Martin Nisenholtz, SVP, Digital Operations, New York Times; Mike Galgon, Chief Advertising Strategist, Microsoft; Jonathan Hsu, CEO, 24/7 Real Media; George Kliavkoff, Chief Digital Officer, NBC Universal; Dave Morgan, former Chairman & CEO, Tacoda and current Chairman, Tennis Company; Rob Norman, Global CEO, GroupM Interaction (WPP).

There were some fascinating discussions regarding the global economic crisis and its impact on the media industry.

In my presentation, I discussed how the Internet is faring in these tough economic times and focused on three issues that are of vital concern to online marketers:

1. E-commerce Trends
2. The State of the Online Ad Market
3. The Rise of the Long Tail

You can request a copy of my presentation by visiting our Presentation Gallery.

Also, click here http://link.brightcove.com/services/player/bcpid2651885001 to see some interesting interviews with some of the speakers at the conference.