Archive for the digital marketing tag

Joni

Why social advertising beats display advertising

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Introduction

I’ve long been skeptical of display advertising. At least my students know this, since ever year I start the digital marketing course by giving a lecture on why display sucks (and why inbound / search-engine marketing performs much better).

But this post is not about the many pitfalls of display. Rather, it’s outlining three arguments as to why I nowadays prefer social advertising, epitomized by Facebook Ads, over display advertising. Without further ado, here are the reasons why social rocks at the moment.

1. Quality of contacts

It’s commonly known Facebook advertising is cheap in comparison to many advertising channels, when measured by CPM or cost per individual reached. Display can be even cheaper, so isn’t that better? No, absolutely not. Reach or impressions are completely fallacious metrics — their business value approaches zero. Orders of magnitude more important is the quality of contacts.

The quality of Facebook traffic, when looking at post-click behavior, tends to be better than the quality of display traffic. Even when media companies speak of “premium inventory”, the results are weak. People just don’t like banner ads. The people who click them, if they are people and not bots to begin with, often exit the site instantly without clicking further.

2. Social interaction

People actually interact with social ads. They pose questions, like them and even share them to their friends. Share advertisements? OMG, but they really do. That represents an overkill opportunity for a brand to interact with its customer base, and systematically gather feedback and customer insight. This is simply not possible with any other form of advertising, display including.

Display ads, albeit using rich media executions, are completely static and dead when it comes to social interaction. Whereas social advertising creates an opportunity to gather social proof and actual word-of-mouth, even viral diffusion, in the one and same advertising platform, display advertising is completely lacking the social dimension.

3. Better ad formats

Social advertising, specifically Facebook gives a great flexibility in combining text, images and video. Typically, a banner ad can only fit a brief slogan (“Just do it.”), whereas a social advertisement can include many sentences of text, a compelling picture and even link description that together give the advertisers the ability to communicate the whole story of the company or its offering in one advertisement.

But isn’t that boring? No, you can craft it in a compelling way – the huge advantage is that people don’t even need to click to learn the most essential. If the goal of advertising is to inform about offerings, social advertising is among the most efficient ways to actually do it.

Conclusion

That’s it. I don’t see a way for display advertising to overcome these advantages of social advertising. Notice that I didn’t mention the superior targeting criteria — this is because display is quickly catching up to Facebook in that respect. It just won’t be enough.

Joni

Programmatic advertising: Red herring effect

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Introduction

Currently, there is very strong hype involved with programmatic buying. Corporations are increasing their investments on programmatic advertising and publishers are developing their own technologies to provide better targeting information for demand-side platforms.

But all is not well in the kingdom. Display advertising still faces fundamental problems which are, in my opinion, more critical to advertising performance than more granular targeting.

Problems of display advertising

In particular, there are four major problems:

  • banner blindness
  • ad blocking
  • ad clutter
  • post-click behavior

Banner blindness is a classical problem, stating that banner ads are not cognitively processed but left either consciously or unconsciously unprocessed by people exposed to them (Benway & Lane, 1998). This is a form of automatic behavior ignoring ads and focusing on primary task, i.e. processing website content. Various solutions have been proposed in the industry, including native advertising which “blends in” with the content, and moving to calculating only viewable impressions which would guarantee people actually see the banner ads they are exposed to. The problem with the former is confounding sponsored and organic content, while the problem with the latter is that seeing is not equivalent to processing (hence banner blindness).

Ad blocking has been in tremendous rise lately (Priori Data, 2016). Consumers across the world are rejecting ads, both in desktop and mobile. Partly, this is related to ad clutter referring to high ads-to-content ratio in the websites. The proliferation of ad blocking should be interpreted as an alarming signal by the media houses. Instead, many of them seem to take no notice, keeping their website layout and ads-to-content ratio high. If there are no major improvements in user satisfaction, visible in reducing ads-to-content ratio, demanding higher quality ads from advertisers and making changes to website layouts, ad blocking is likely to continue despite pleas of publishers. Less advertising, of better quality, is needed to trigger a positive sentiment towards online advertising.

Finally, post-click behavior of traffic originating from display ads tends to be unsatisfactory. Bounce rates are exceptionally high (80-90% in some cases), direct ROI is orders of magnitude lower than search, and alarmingly enough display often seems weak also when examining the entire conversion path. Consequently, using direct ROI as a measure for success in display advertising yields sub-par results. Unfortunately, direct ROI is used more and more by performance-oriented advertisers.

Brand advertisers, who seek no direct returns in their online ad spend (think Coca-Cola), may continue using reach metrics. Thus, focusing on these advertisers, which still make a large share of the advertising market, would seem like a good strategy for publishers. Moreover, combating click-fraud and other invalid click forms is essential. If shortsightedly optimizing for revenue at all means – including allowing bots to participate in RTB auctions – media houses and DSPs are shooting themselves in the foot.

Root causes

But let’s talk about why these problems have not been addressed, at least not fundamentally by the majority of media companies. There are a few reasons for that.

First, the organizational incentives are geared towards sales. The companies follow a media business model which principally means: the more ads you sell, the better. This equation does not consider user satisfaction or quality of ads you’re showing, only their number and the revenue originating from them.

At a more abstract level, the media houses face an optimization conundrum:

  • MAX number of ads
  • MAX price of ads
  • MAX ad revenue
  • (MAX ad performance)
  • (MAX user satisfaction)

Maximizing number of ads (shown on the website) and price of ads also maximizes ad revenue. However, it is not maximizing user satisfaction. User satisfaction and performance are in parentheses because they are not considered in the media company’s optimization function, although they should be because there is a feedback mechanism from user satisfaction to ad performance and from ad performance to price of ads.

Seemingly, many media companies are maximizing revenue in the short-term through power-selling strategy. However, they should be maximizing revenue in the long-term and that cannot take place without considering user satisfaction from consumer perspective and ad performance from advertiser’s perspective. Power selling actually hurts their interests in the long-term through the feedback mechanism.

Finding solutions

How to dismantle this conundrum? First, the media companies should obviously consider both user satisfaction and ad performance. The former is done by actively studying the satisfaction of their users in terms of ad exposure. The latter is done by actively asking or otherwise acquiring data from advertisers on campaign performance. I, as a marketing manager, rarely found media sales people interested in my campaign performance – they just wanted a quick sell. Even better than asking would be to find a way to directly dip into campaign performance, e.g. by gaining access to advertiser’s analytics.

Second, media companies should consider the dynamics between the variables they are working with. For example,

  • ad performance (as a dependent variable) and number of ads (as an independent variable)
  • ad performance and user satisfaction
  • user satisfaction and number of ads
  • price of ads and ad performance

It can be hypothesized, for example, that a higher ad performance leads to a higher price of ads as ads become more valuable to advertisers. If in addition ad performance increases as the number of ads decreases, there is a clear signal to decrease the number of ads on the website. Some of these hypotheses can be tested through controlled experiments.

Third, media companies should re-align incentives from power-selling to value-based selling. They should not want to “fill the slots” at any means, but only fill the slots with good advertising that performs well for the advertiser. Achieving such a goal may require a stronger collaboration with advertisers, including sharing data with them and intervening in their production processes to deliver such advertising which does not annoy end users and based on prior data is likely to perform well.

Conclusion

In conclusion, there is a bottleneck at advertising-customer interface. Red herring effect takes place when we are focusing on a secondary issue – in the context of digital marketing we have to acknowledge that there is no intrinsic value in impressions or programmatic advertising technology, if the baseline results remain low. Ultimately, advertisers face a choice of abundance with channels both online and offline. And although they are momentarily pushing for large programmatic investments, if the results don’t follow they are likely to shift budget allocations into a different sort of equilibrium in the long-run, once again under-weighing display advertising.

Personally, I believe the media industry is too slow to react and display advertising will lose budget share in the coming years especially against social media advertising and search advertising, but also against some traditional channels such as television.

Joni

Online ads: Forget tech, invest in creativity

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Technology is not a long-lasting competitive advantage in SEM or other digital marketing – creativity is.

This brief post is inspired by an article I read about different bid management platforms:

“We combine data science to SEM, so you can target based on device, hour of day and NASDAQ development.”

Yeah… but why would you do that? Spend your time thinking of creative concepts that generally work, not only when NASDAQ is down by 10%. Just because something is technically possible, doesn’t make it useful. Many technocratic and inexperienced marketing executives still get lured by the “silver bullet” effect of ad technology. Even when you consider outside events such as NASDAQ development or what not, newsjacking is a far superior marketing solution instead of automation.

Commoditization of ad technology

In the end, platforms give all contestants a level playing field. For example, the Google’s system considers CTR in determining cost and reach. Many advertisers obsess about their settings, bid and other technical parameters, and ignore the most important part: the message. Perhaps it is because the message is the hardest part: increasing or decreasing one’s bid is a simple decision given the data, but how to create a stellar creative? That is a more complex, yet more important, problem.

Seeing people as numbers, not as people

The root cause might be that the world view of some digital marketers is twisted. Consumers are seen as some kind of cattle — aggregate numbers that only need to be fed ad impressions, and positive results magically emerge. This world view is false. People are not stupid – they will not click whatever ads (or even look at them), especially in this day and age of ad clutter. The notion that you could be successful just by adopting a “bidding management platform” is foolish. Nowadays, every impressions that counts needs to be earned. And while a bid management platform may help you get a 1% boost to your ROI, focusing on the message is likely to bring a much higher increase. Because ad performance is about people, not about technology.

Conclusion

The more solid the industry becomes and the more basic technological know-how becomes mastered by advertisers, the less of a role technology plays. At that point of saturation, marketing technology investments begin to decline and companies shift back to basics: competing with creativity.

Joni

Basic formulas for digital media planning

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Planning makes happy people.

Introduction

Media planning, or campaign planning in general, requires you to set goal metrics, so that you are able to communicate the expected results to a client. In digital marketing, these are metrics like clicks, impressions, costs, etc. The actual planning process usually involves using estimates — that is, sophisticated guesses of some sorts. These estimates may be based on your previous experience, planned goal targets (when for example given a specific business goal, like sales increase), or industry averages (if those are known).

Calculating online media plan metrics

By knowing or estimating some goal metrics, you are able to calculate others. But sometimes it’s hard to remember the formulas. This is a handy list to remind you of the key formulas.

  • ctr = clicks / imp
  • clicks = imp * ctr
  • imp = clicks / ctr
  • cpm = cost / (imp / 1000)
  • cost = cpm * (imp / 1000)
  • cpa = cpc / cvr
  • cpa = cost / conversions
  • cost = cpa * conversions
  • conversions = cost / cpa

In general, metrics relating to impressions are used as proxies for awareness and brand related goals. Metrics relating to clicks reflect engagement, while conversions indicate behavior. Oftentimes, I estimate CTR, CVR and CPC because 1) it’s good to set a starting goal for these metrics, and 2) they exhibit some regularity (e.g., ecommerce conversion rate tends to fall between 1-2%).

Conclusion

You don’t have to know everything to devise a sound digital media plan. A few goal metrics are enough to calculate all the necessary metrics. The more realistic your estimates are, the better. Worry not, accuracy will get better in time. In the beginning, it is best to start with moderate estimates you feel comfortable in achieving, or even outperforming. It’s always better to under-promise than under-perform. Finally, the achieved metric values differ by channel — sometimes a lot — so take that into consideration when crafting your media plan.

Joni

Keyword optimization routine for search-engine advertising (AdWords)

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In this post, I’m sharing a simple optimization process for search-engine advertising. I’ll also try to explain its rationale, i.e. explanation of why it should work. The process is particularly applicable to Google AdWords due to availability of metrics, but for the most parts it applies to Bing Ads as well.

First, take a list of your keywords along with the metrics defined in the following.

Then, sort by cost (high to low). Why? Because you may have thousands of keywords, out of which a handful matter for generating results — the Pareto principle is strong in search advertising. It makes sense to focus your time and effort on optimizing the keywords that make up most of your spend.

In metrics, look at

  • relevance (subjective evaluation)
  • match type –> if broad, switch to exact
  • impression share –> if low (below 70%), increase bid (all else equal)
  • cost per converted click –> if high (above CPA target), reduce bid
  • avg. position –> if low (below 3), increase bid (all else equal)
  • Quality Score –> if low (below 6), improve ad group structure, ad copy and/or landing pages

Relevance is the first and foremost. Ask yourself: is this a keyword people who are interested in my offering would use? Sometimes you may include terms you’re not unsure of, or because you want to achieve a certain volume of clicks. If you are able to achieve that volume with relative ease, you don’t need expansion but reduction of keywords. Reduction is started from the keywords with the lowest relevance – interpreted firstly by the results of a keyword (data trumps opinions) and secondarily by qualitative evaluation of the keywords according to the aforementioned rationale.

A common strategy is to start with broad match, and gradually move towards exact match. Take a look at the search terms report: are you getting a lot of irrelevant searches? If so, it definitely makes sense not only to include negative keywords but also to change the match type. Generally speaking, as the number of optimization cycles increases the number of broad match keywords decreases. In the end, you only have exact terms. However, this assumes you’re able to achieve click volume goals.

Are you getting enough impressions? Impression share indicates your keywords’ competitiveness in ad auctions. If relevance is high and impression share low, you especially want to take action in improving your competitiveness. The simplest step is to increase keyword bid. Depending on the baseline, performance, and SEA strategy, you may want to increase it by 30% or even 100% to get a real impact.

Regarding the goals, you should know your CPA target. A very basic way to calculate is by multiplying average order value with average profit per order, i.e. calculate your margin. The amount equivalent to margin is the maximum you can spend to remain profitable or at break-even. (Of course, the real pros consider customer lifetime value at this point, but for simplicity I’m leaving it out here.)

Average position matters because an ad with a high rank gains a natural lift. That is, you can run the same ad in position 3 and position 1 and get better results in position 1 just because it is position (not because the ad is better). This in turn influences your click-through rate and indirectly boosts your Quality Score which, in turn, reduces your CPC, all else being equal. Other ways to improve QS are to re-structure ad groups, usually by reducing the number of keywords and focusing on semantic similarity between the terms, writing better ad copy that encourages people to click (remember, no ad is perfect!), and improving landing page experience if that is identified as a weak component in your Quality Score evaluation.

This is what I pay attention to when optimizing keywords in search advertising. Feel free to share your comments!

Joni

5 questions to ask your Facebook marketing agency

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Facebook marketing is not magic, although it might seem like it if you have no clue how to do it. Therefore, before anything else, the first piece of advice is: get to know the basics. Jonloomer.com is a good resource for that, as well as Facebook’s free training modules.

Now, to the actual point. A company may run Facebook marketing in-house or via an agency. For small companies, it often makes sense to do it yourself, but larger budgets require a deeper know-how and more time to get the best results. For these reasons, outsourcing is often chosen by many medium and large companies. When outsourcing, an agency can take care of organic Facebook marketing, paid advertising, or both.

But how to test the quality of your agency?

Well, remember the first advice – learn the basics of Facebook marketing. If you don’t know something, you cannot manage it. Second, you can ask these questions, before engaging an agency or during your relationship with them.

  1. What goals would you set for our Facebook marketing?
  2. How would you measure the achievement of those goals?
  3. Describe your strategy in achieving the goals.
  4. Describe your optimization process for Facebook marketing.
  5. Based on our Facebook posts, tell me something that I don’t know about my business

The first question reveals how well the agency grasps your business, and how they would fit your business goals to the Facebook environment. The goals don’t have to be exactly what you had thought of — it’s more important that they show innovativeness and general understanding of your business.

The second question reveals the metrics they would choose to measure performance – the more they are aligned with your general business goals, the better. In addition, if they are able to argue efficiently for both ROI- and non-ROI-oriented metrics, it’s a good sign as it shows an understanding of the general complexity of multichannel consumer behavior.

The third question tells how they would go about creating a Facebook marketing strategy — here you can pay attention to their proposed split between organic and paid, frequency of posting/optimization, target group definition, ad creation process, etc. You can ask specifying questions, e.g. about the suggested size of budget. That shows how they approach campaign planning on the fly – the better they know the environment, the better answers they can give.

Fourth, it is important to know how they would run the accounts in practice. For example, how much time are they willing to invest? Facebook marketing is a time-consuming activity, which is actually a major reason the optimization workflow has to be efficient to achieve the best results. For an agency it’s easy to spend money precariously because Facebook takes all the money you can throw at it — but optimization is a different ballgame.

The fifth question tells how well they have analyzed your accounts and prior Facebook marketing activities. Not all agencies bother to analyze the status quo in your Facebook marketing this before meeting you — or even when they are doing marketing for you — but obviously doing so communicates a genuine interest in closing/keeping you as a client, as well as attention to detail. If they are able to tell you something about your customers, for instance, that you didn’t know, it’s a very good sign.

There. Asking these questions and going through the associated discussion is, in my opinion, an excellent way to vet a Facebook marketing agency.

In addition, one of the by far most neglected aspect of managing digital marketing agencies is auditing. You should frequently have a 3rd party, such as another agency, audit your campaigns. Never be “forever happy” with an agency but instead always push for more. You want to show commitment so they see value in investing in the relationship, but you also want to keep them a little bit on their toes so they actually bother doing their best for you, as oppose to only chasing new clients.

Joni

Controlling ad quality in programmatic buying

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Highway to ad quality.

Ad quality is an issue in programmatic buying where ad exchange takes place via computer systems. In traditional ad exchange, there’s a human supervising the quality of advertising, but in a programmatic system it’s possible to receive spammy, illegal, or otherwise undesirable advertising without publishers (ad sellers) being aware of it. Likewise, the quality of performance such as clicks, likes or even impressions might be compromised by fraudulent bot behavior.

In the lack of humans, how to control for quality? Well, some ways include:

  • bot detection — this is what Google uses to filter invalid clicks likely caused by bots. It includes i.a. detecting anomalies in click behavior. Facebook, too, has mechanisms for detecting bots. How well these systems function should be from time to time audited by neutral 3rd parties due to the inherent problem of moral hazard by ad platforms.
  • performance-adjusted pricing and visibility — again, used by Google and Facebook in Quality Score and Relevance Score, respectively. What works cannot be wrong, essentially. The ads with the best response get the most views for the less money. However, this does not directly solve the problem of removing undesirable ads from the system.
  • reporting — again, both Facebook and Google enable reporting of ads by end users. This shows to advertisers as negative feedback – once negative feedback reaches a certain threshold, the ad stops showing. It is in a way crowdsourcing the quality control to the end users.
  • algorithmic analysis of ad content — for example, Facebook is able to detect nudity in the pictures and consequently disqualify them. This is among the best methods, albeit technically demanding, because machine can treat many millions of ad content units in batches. With constantly developing machine learning solutions the accuracy of automatic detection of undesirable content approaches human classifiers.
  • finally, we can have human fail-safe as a “plan B”. Again, both Facebook and Google use manual detection of click-fraud but also in treatment of advertisers’ complaints over refused ads. However, the solution is expensive and does not scale over millions of ad units, so it can be seen as a backup at best.

There – I believe these are the most common ways to control ad quality in modern programmatic advertising platforms. If you have anything
to add, please share it in the comments!

EDIT: Came across with another quality control mechanism: private exchanges. They effectively limit the number of participating advertisers making it manageable for a small number of humans to verify the ads. The whole point of the problem is that this works for a handful or so ads, but when there are millions of ad units, humans cannot be used as the primary solution.

Joni

On digital marketing ROI

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On digital marketing ROI

Introduction

There are many sub-types of ROI calculations in digital marketing. This post aims at making an argument that digital marketers should measure digital marketing returns as a sum of sub-returns from different channels/actions. Through that, they are able to capture the ROI impact on a wider scale than just looking at overall sales. Some metrics which inevitably have (some, albeit often hard to quantify) effects on dollar-returns, can only be accessed via a sub-type examination.

Profit, not revenue

Before going into the ROI types, I have to mention one important caveat in ROI  calculation — whenever possible, use profit as the upside, not revenue. This is simply because you want to measure the real profitability of your marketing efforts, which you cannot determine without including production costs into the equation. Don’t only measure marketing cost, measure the cost of being in business (because that’s what your bottom line consists of).

Digital marketing ROI

Figure 1  Digital marketing ROIs

So, here are different ROI sub-types in digital marketing:

  • dmROI = digital marketing ROI
  • oROI = organic digital marketing ROI
  • pROI = paid digital marketing ROI
  • osmROI = organic social media ROI
  • seoROI = search-engine optimization ROI
  • cmROI = content marketing ROI
  • psmROI = paid social media ROI
  • seaROI = search-engine advertising ROI
  • dROI = display ROI

And they can be divided like this:

dmROI = digital marketing ROI

consists of

oROI = organic digital marketing ROI

consists of

osmROI = organic social media ROI
seoROI = search-engine optimization ROI
cmROI = content marketing ROI

and

pROI = paid digital marketing ROI

consists of

psmROI = paid social media ROI
seaROI = search-engine advertising ROI
dROI = display ROI

Different returns

Now, the ROI equation has two sides: the cost and the return. As said, the return side measures the profit. But what happens when the profit is not directly computable? Such can be the case in deferred conversions, multi-channel effects and word-of-mouth, for example.

In this case we need to substitute profit with some other quantifiable measure. If one is not available, we have to calculate it.

The returns can be something like this:

  • Value of sales — this is simply euros
  • Value of customer lifetime — this is average order value times average frequency of repurchases during average customer lifetime (a lot of averages here…)
  • Value of impressions — for example, the increase of brand searches and their association with sales
  • Value of social shares — for example, the increase of organic reach leading to likes and associated returns
  • Value of likes — for example, the amount of sales from a social media channel divided by the number of followers in the channel in a given period
  • Value of email subscribers — the amount of sales from email channel divided by number of subscribers in a given period
  • Value of leads — the closing rate times average deal size gives the value of a lead
  • Value of organic traffic increase — the sales uplift from SEO activities vis-à-vis normal development of organic search traffic

We should aim at isolating the marketing effects to the best of our ability, i.e. determine what the baseline metric would have been without the marketing intervention and what it was; the difference between the two is our return. In a similar vein, we should seek to attribute not only direct but also indirect (assisting) interaction effects in the return side of a given marketing channel/effort. Not everything that should be observed can be observed (cf. Einstein), so we have to use arbitrary mechanisms such as attribution modeling.

Different costs

In turn, how should we define the costs?

  • In paid channels, they include media + labor costs
  • In organic channels, they include labor costs

There is a good rule of thumb: to achieve a certain reach, you need either high labor cost (and low media cost) or a high media cost (and low labor cost). Of course, the practical implementation decides the outcome, but this is the ceteris paribus scenario. The labor cost can be determined by internal accounting, e.g. activity-based costing (ABC). This cost calculation you can also use to determine “make or buy” decision – i.e., whether outsourcing digital marketing is feasible or not.

Conclusion

ROI is a fascinating question of which there is not certainty or absolute truth. Bringing in the sub-type examinations widens the scope of ROI and makes its constituency more accurate, yet leads into some sort of relativism, manifested e.g. in the choice of attribution models.

Joni

Quality in programmatic advertising

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Introduction

This is a very short post explaining, from a media house’s perspective, how to manage the two-sided online ad market.

Why does quality matter, more than you think?

The success or failure of online advertising takes place through QUALITY. My argument rests on the notion of two-sided markets, along with their distinctive element of network effects. In more detail, bad ads impose a negative indirect network effect geared towards the end users of media. As a result, ad block usage is increasing rapidly in the world. See the graph from the fresh Kleiner Perkins report on Internet trends.

The answer to this, and many other problems of online display advertising, is not more ads (in contrast, it needs to be less, to avoid clutter) or better targeting, but rather the focus on quality.

Why do I say better targeting is not the answer?

Well, many media houses seem to have this wishful thinking that technology provides the answer to what essentially is a human problem. People don’t want to see crappy, intrusive advertising. “Crappy” here means uninteresting, poorly conceived creative implementations – something that is not hard to see if one browses any given media site. Intrusive means the ads jump to your face. While the latter ensures “guaranteed delivery” for one market side – namely the advertiser, it destroys the satisfaction of the other. And a two-sided market cannot function without both parties on board. New media formats, another convenient solution sought by media houses, are also not the answer. While they may fix the intrusiveness, they cannot amend for low-quality ads that are a much bigger problem.

How to solve the quality problem, then?

First of all, ad platforms and media companies need to be stricter with their clients – not every advertiser should in fact have the right to show online ads. It makes more sense in the long term for publishing houses to refuse bad advertisers (and possibly educate them) than to take the easy money in the short term. But in the current climate, where Facebook and Google are eating their lunch, media companies are tempted to clinch to every dollar and sell to everyone who wants to buy. In general, it’s not a wise business decision to cater all customer types, and in this particular case where ad quality is not uniformly distributed, it’s a decision of shooting yourself in the leg.

In practice, publishing houses need to create strict rule-based systems to control advertising impressions, instead of guaranteeing delivery, which is currently the case for many of them. Although advertisers may want guaranteed delivery, this is not the best choice for the overall (two-sided) market because of the aforementioned quality problem. If guaranteed delivery is to be given at any circumstances, there needs to be a credible commitment from the advertiser’s part to deliver high-quality ads. And how can this be confirmed? By running limited pilot campaigns and verifying the end user response is satisfactory. By no means the verification is a question of a marketing executive saying “Oh, these banners look nice, so this must be high-quality advertising.” That approach is old-fashioned and detrimental to both the industry and the individual company.

Moreover, media companies also need to practice vertical integration by offering creative services and data on best practices with online advertising. They need to show commitment for improving ad quality, both to end users and to advertisers. In strategic terms, they need to become “channel captains” that drive the positive change. Eventually, this will lead to a triple-win scenario where the end users are shown high-quality advertising, advertisers get satisfactory results and media houses in consequence receive a higher share of their clients’ media spend. In the current situation, none of these outcomes are realized.

Conclusion

Targeting and new media formats can be a part of the solution, but they will never be the core solution to the problem which is essentially a human problem. Only humans, not technology, can fix that. Thus, better creative implementations are needed — and the industry needs to collectively move from quantity to quality, or else the triumph of ad blocking persists. Media companies need to take charge and accept their responsibility of the future of online advertising – like Google and Facebook, they need to start accounting and demanding for quality from their clients. The old “anything goes” mentality needs to change, and it needs to change fast.

The author wrote his Master’s thesis on online advertising exchange (available here) and Doctoral dissertation on two-sided markets (available here). He is currently working as a Post-Doc Research at the Turku School of Economics.

Joni

Here’s Facebook cheating you (and how to avoid it)

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Here’s how Facebook is cheating advertisers with reporting of video views:

How is that cheating? Well, the advertiser implicitly assumes that ‘video views’ means people who have actually watched the video which is not the case here. Say, you have a 10-second video; this metric does not show people who have watched that video till the end, but only those who have watched the first three seconds — possibly just scrolling their newsfeeds and letting the video autoplay accidentally while quickly browsing forward. Essentially, that kind of exposure is worth closer to zero than the 1 cent Facebook usually reports.

Indeed, other view-based metrics such as CPV should be calculated based on somebody watching the video till the end, but in FB it’s 3 SECONDS after which they calculate it as a view. In effect, this will multiply the real CPV by order of several magnitudes, in some cases I’ve seen it’s 10x more than the figure reported by Facebook.

But aren’t they telling this honestly? Sure, they show the correct definition, but a large part of advertisers do not bother looking at it, or are unsuspecting misguiding definitions. After all, you should be able to trust that a big and reputable player like Facebook would not screw over advertisers. However, those of us who have played the game for many years know it’s not the first time (remember their definition of “click” a couple of years ago?).

What’s more, there’s no metric for the real CPV in the reports, so advertisers need to calculate it manually (at which point, based on my experience, it’s revealed that Facebook video views are are typically 5x more expensive than on Youtube).

How to avoid this shenanigans? Simply look at the metric ‘video views to 100%’. This is the real video views metric you should use – calculate your spend with that number, and you will get your true CPV. In other words:

ad cost / views to 100%

Keep your eyes open, my fellow advertisers!

UPDATE: Another good tactic, pointed out by my colleague Tommi Salenius, is to bid for 10-second views in your video campaigns. This is a relatively novel feature in Facebook, and although it doesn’t fix the problem, it’s a decent workaround. He also recommended to optimize “average % viewed” metric – you can do that e.g. by comparing different demographic segments. Finally, Facebook video ads can be seen to have a “social advantage” which refers to people’s ability to comment and like videos – sometimes this does take place 🙂 The advertiser can also include more text than in Youtube video ads which has a positive effect on ad prominence. It is then up to the advertiser to consider whether these advantages are worth the cost premium Facebook tends to have in comparison to Youtube.