- August 19, 2008

In Praise of Online Advertising

In my last Metrics Insider column, I wrote about the question of how advertising works. The column generated some great comments, and I got some very thoughtful responses via email; some of you even sent me papers on different components of ad effectiveness measurement. This week, I want to revisit the topic, and perhaps amplify a few points.

1. Advertising works. There are reams of anecdotal, observational, and empirical data that demonstrates that advertising does indeed work. In the late ’80s and ’90s, I remember Comscore’s CEO, Magid Abraham, then President / COO of Information Resources (IRI), publishing landmark work, based on hundreds of TV ad campaigns, correlating advertising and sales in a series called “How Advertising Works.” Magid found that incremental TV weight was able to generate sales increases for CPG brands 50% of the time. In our space, my company, Comscore, does a lot of work quantifying the effectiveness of online advertising.

Advertising works in many different, sometimes mysterious, ways, with many variables affecting its performance (e.g. creative, media schedule, purchase cycle, share of voice, etc.) Well-designed research can measure that performance, and the best way to do so is against the advertiser’s objective. Suppose a campaign generates robust click-through, but no measurable branding impact. Did that campaign work? Certainly that depends on whether the goal was driving click-through or building brand awareness.

2. Online display advertising works. At my company, we have done hundreds of studies demonstrating the ROI of different kinds of online advertising. In one case study recently presented, we found that, among consumers exposed to a campaign, click-through accounted for only 10% of subsequent site visits and 14% of incremental dollar sales volume; view-through — consumers exposed to the campaign but who did not click on the ads — accounted for 90% of eventual site visits and 86% of incremental dollar sales. In other words, gauging the effectiveness of this campaign based solely on clicks would have missed 90% of the sales impact.

3. Online advertising drives offline sales. Sometimes people forget that the Internet is not a self-contained ecosystem. We can’t ignore the extent to which online advertising can drive offline sales, something else that can’t be counted with clicks. Using our panel and our ability to link it to offline databases, we have been able, time and again, to quantify the impact of online advertising on offline sales. Even for search advertising, wherein one might be tempted to believe the majority of effectiveness accrues in-session and via click, we have observed that 83% of the advertising impact on sales is either latent (sales on subsequent user sessions; 20%) or offline (63%.)

4. Search and display work better together. Another thing we’ve found is that when an advertiser runs a search and a display campaign simultaneously, the impact (as measured by lift versus a control group) of exposure to both search and display is greater than the impact of search alone or of display alone; in fact, impact of search and display together exceeds the sum of the effects of search and display impact individually. In other words, there is a synergistic effect; add two and two and you get five. And not surprisingly, much of the incremental sales generated by the combined exposure group occurs offline.

5. Display ads online are at least as valuable as display ads offline. Television still commands a significantly greater share of ad dollars than the Internet, at higher CPMs. In my last column, I noted that online ads that can be empirically tied to conversion tend to have greater perceived value than ads whose primary impact is measured by awareness, recall and other brand-building metrics. So let me make this point: the impression generated by one consumer watching a given spot presented within long form online video, in full screen mode, is at least as valuable as an impression delivering the same spot to the same consumer on traditional TV. (I would argue that the online impression is probably more valuable because it is likely to also reach the kind of younger, more tech-savvy and harder-to-reach consumer that is increasingly difficult for traditional TV to deliver.)

As we develop new ways to dedicate on-screen real estate to delivering captivating, engaging ads, whether via banner, rich media or emerging formats, I fully expect online display advertising to become an increasingly important component of the media mix. We don’t require a click-through from a magazine ad or a TV ad or a newspaper ad or a radio ad, and all these impressions are valued by advertisers. Impressions online should have at least the same value, wholly independent of the direct linkage to a click. The opportunity to generate that action online is a profound value-add, but let’s make sure that we properly value the ad before we overlay the value-add. Advertising can have immediate effect, but it can also have quantifiable mid-term effect, and profoundly valuable long-term branding effect. And that is as true for online advertising as for any other medium.

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