Last updated on October 25, 2022
We had a great discussion with Mr. Lauri Pitkänen about unfair advantage in business – e.g., a gift card company’s business model relying on people not redeeming gift cards, investment banker’s relying on monopoly to take 7% of each new IPO, doctor’s controlling how many new doctor’s are educated, taxi driver’s keeping the supply low through licenses, governments inventing new taxes…
It seems, everywhere you look you’ll find examples of someone messing with the so-called “free market”.
So, what’s the unfair advantage of online ad platforms? It’s something I call ‘leeching logic’. It’s about miscrediting conversions – channel x receives credit for a conversion while channel y has been the primary driver to it.
Let me give you two examples.
EXAMPLE 1:
You advertise in the radio for brand X. A person likes the ad and searches your brand in google. He clicks your search ad and buys.
Who gets credited for the sale?
radio ad – 0 conversions
google – 1 conversion
The conclusion: Google is leeching. In this way, all offline branding essentially creates a lift for search-engine advertising which is located at a later stage of the purchase funnel, often closing the conversion.
EXAMPLE 2:
You search for product Y in Google. You see a cool search ad by company A and click it. You also like the product. However, you need time to think and don’t buy it yet. Like half the planet, you go to Facebook later during that day. There, you’re shown a remarketing ad from company A but don’t really notice it, let alone click it. After thinking about the product for a week, you return to company A‘s website and make the purchase.
Who gets credited for the sale?
Google – 1 conversion (30-day click tracking)
Facebook – 1 conversion (28-days view tracking)
In reality, Facebook just rides on the fact someone visited a website and in between making the purchase also visited Facebook, while they learned about the product somewhere else. They didn’t click the retargeting ad or necessarily even cognitively processed it, yet the platform reports a conversion because of that ad.
For a long time, Facebook had trouble in finding its leeching logic, but now it finally has discovered it. And now, like for other businesses that have a leeching logic, the future looks bright. (Good time to invest, if the stock’s P/E wasn’t somewhere at 95.)
So, how should marketers deal with the leeches to get a more truthful picture of our actions? Here are a few ideas:
- exclude brand terms in search when evaluating overall channel performance
- narrow down lookback window for views in Facebook — can’t remove it, though (because of leeching logic)
- use attribution modeling (not possible for online-offline but works for digital cross-channel comparisons)
- dedupe conversions between channels (essentially, the only way to do this is by attribution modeling in 3rd party analytics software, such as GA — platforms’ own reporting doesn’t address this issue)