- February 28, 2008

Measurement of Online Advertising ROI: The 100% Solution

I think it was H. L. Mencken or Albert Einstein (a quick search showed me that they are both cited as authors) who said: “For every complex problem, there is one simple – but wrong – solution.”

I was reminded of this quote when I read a blog posting on the Adify site where the discussion focused on how to measure the effectiveness of online display advertising.

For me, the quote sums up the challenge. While it’s alluring to believe that there is one simple, easily-obtainable metric that will accurately and reliably predict advertising success, I believe this is a siren’s song. And, I suspect that most experienced researchers who have spent decades searching unsuccessfully for advertising’s Simple Holy Grail have also come to the conclusion that, while there certainly are simple metrics that can give you some insight, they’re far, far from foolproof as a measure of advertising’s impact on sales. And sales, I would argue, is the one undeniably relevant metric for evaluating ad effectiveness. Unfortunately, however, measuring advertising’s sales impact is something that’s often difficult to do – especially since it’s often vital to measure advertising’s cumulative impact on sales across time and channels and to cleanly separate this from the impact of everything else that’s going on in a brand’s marketing mix.

This brings me to the validity of the click as a measure of advertising effectiveness. For many years, the click was used as a supposedly accurate measure of the effectiveness of display advertising. Now, I would be the first to agree that – for some direct response ad campaigns – the click remains a relevant metric. However, when it comes to measuring the impact of brand building advertising, the idea that consumers’ immediate response via a click is hard proof of the effectiveness of display advertising is just plain wrong. Perhaps, in the early days of online advertising when click through rates were running at levels of 5% or so, it was easy to believe otherwise. But, as click rates have dropped to a fraction of one percent it has become clear that some other metric is urgently needed. To believe otherwise today would be to acknowledge that display advertising has no impact at all. Perish that thought!

Comscore’s objective in conducting the click study with Tacoda and Starcom was to prove – once and for all – the limitations of the click as a relevant metric to use to measure display advertising effectiveness. I believe this is a critical step in the evolution of online advertising because if our industry is to continue its torrid growth, we have to look beyond direct response advertising dollars. We have to convince the brand-building advertisers that they should move more of their ad dollars from traditional media to the Internet. Rest assured, we’re not going to be able to do that using clicks as the metric of choice. Instead, we have to be able to show that display advertising increases brand sales over time and across both online and offline sales channels. I think that Einstein would agree.

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