March 30, 2017
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.
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.
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.
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.
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.
March 30, 2017
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.
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.
March 30, 2017
Planning makes happy people.
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).
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.
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%).
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.
March 30, 2017
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 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!
March 30, 2017
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.
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.
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.
March 30, 2017
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:
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.
March 30, 2017
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.
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).
Figure 1 Digital marketing ROIs
So, here are different ROI sub-types in digital marketing:
And they can be divided like this:
dmROI = digital marketing ROI
oROI = organic digital marketing ROI
osmROI = organic social media ROI
seoROI = search-engine optimization ROI
cmROI = content marketing ROI
pROI = paid digital marketing ROI
psmROI = paid social media ROI
seaROI = search-engine advertising ROI
dROI = display ROI
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:
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.
In turn, how should we define the 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.
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.
March 30, 2017
This is a very short post explaining, from a media house’s perspective, how to manage the two-sided online ad market.
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.
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.
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.
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.
March 30, 2017
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.