There is an “I” in ROI

An interesting report came out last week looking at the relative cost and effectiveness of behavioral targeting vs. other approaches.

The headline finding was that BT cost on average 2.7 times what non-BT did and converted viewers into customers 2.4 times as well.  As the mathematically dexterous may notice immediately, this combination of numbers means that BT spend had a slightly lower ROI than non-BT spend.   I.e. BT was more effective, but not quite enough more to make up for its higher cost.  For the rest of us, here’s the calculation spelled out:

In short, according to this study, each conversion cost about 10% more with BT than without it.

This finding is doubly interesting given that it was obtained from direct response ad networks who typically focus on driving online activity.  In the pure online environment ad impact can be measured quickly and with very high resolution, enabling a tight feedback loop for improving targeting performance.  For the other 95% of sales that occur offline, however, it’s a different story.  While the online advertising environment enables powerful, accurate offline sales measurement capabilities, the same type of high-resolution, fast feedback optimization simply isn’t possible.

So if BT isn’t “earning its keep” in the pure online environment with all the data advantages that this environment provides, it’s certainly reasonable to have a healthy skepticism of how well it might perform in driving offline sales.  Indeed, the data we have seen suggest that other media approaches can be just as effective as BT, if not moreso in driving offline sales – very similar relative performance to this study.

The bottom line is simply to measure and hold your media vendors accountable to the metrics that are most important for a particular campaign’s objective.  It’s not enough that a particular targeting select has a catchy name or offers “zero waste”.  It’s not enough that campaign didn’t run next to objectionable content.  It’s not enough that X many consumers engaged with your ad.  Advertising is about changing attitudes and driving sales.  Those impacts can and should be measured and benchmarked for efficiency across all media approaches.

For most advertisers the most important goal metric is offline sales.  As approaches are compared for effectiveness in the context of cost and operational efficiency (collectively, the “I” in ROI), some buyers might be surprised to find that quality media, with well-managed frequency, high composition against the target and reasonable rates, delivers fantastic results.

About Andy Atherton
I am currently an SVP at AppNexus. I previously spent four years as COO and cofounder of Brand.net, a pioneer in programmatic reserve technology and leading digital media buying solution for top brands. Prior to Brand.net, I was Vice President of Pricing and Yield Management for Yahoo!, responsible for maximizing monetization of a global portfolio of display inventory worth $2B annually. Beginning in 2002, I created, developed and globalized Yahoo’s PYM function over a period of five years. Prior to Yahoo!, I was president and cofounder of Optivo, a venture-backed start-up that developed price optimization software for e-commerce retailers. More on LinkedIn...

2 Responses to There is an “I” in ROI

  1. Pingback: InterCLICK And Publishers On Mediaweek; The Audience Layer; The Apple iAd Platform Opportunity

  2. Pingback: Behavioral Advertising / Publicité Comportementale » There is an “I” in ROI

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