Old habits die hard

There was another installment yesterday in the seemingly endless series of articles on the counter-productivity of CTR optimization.  This “billion-dollar mistake” has been covered on this page in depth and repeatedly.  With the ever-growing abundance of research on the topic you’d think that more buyers would stop focusing on CTR “optimization”.

It’s surprising how hard old habits die.

I thought this particular article was worth calling out because it suggests that the ultimate answer to the evil of optimizing for CTR is optimizing for conversions instead.  That’s right of course, if it’s possible (and assuming your attribution models are correct – not a trivial assumption).

But what about the vast majority of valuable commercial activity that can’t be cleanly tracked with a pixel?  Like, for example, the 95% of retail sales that occur offline?  As I discussed in a recent post on the trillion-dollar O2O opportunity, this is a huge gap in the thinking behind and the capabilities of most online advertising solutions today.

Brand.net’s ground-breaking Media Futures Platform was designed specifically to attack this opportunity, driving profitable offline sales measurably and scalably.

These are the results that really click for our customers.

The Trillion-Dollar O2O Opportunity

Some interesting dialog on ad exchanger today about bringing brand dollars online.  Obviously a topic near and dear to our hearts here at Brand.net, even though I think this particular framing of the issue is less and less relevant as the distinction between online and offline blurs.

Zach’s a smart guy and I agree with some of his points.  Manually cobbling together a buy won’t allow the scale advertisers need.  Check.  We as media providers need to enable the creatives to deliver the message in a compelling way.  Check.  Where I lose the thread is his jump to how DSPs, RTB and exchanges magically solve everything for brands.

It is possible to use a DSP (as he describes) to bid only on specific top sites that have offered, transparently for RTB through an exchange, the same inventory their direct sales forces sell.  But there’s simply no scale available that way today.  And unless publishers are prepared to gut out and cannibalize their primary direct sales channel, there won’t be tomorrow either. 

So that’s a big hurdle.  But for the sake of argument, let’s assume that changes.  How much will this premium inventory via RTB cost relative to a direct buy?  Can you plan at scale and count on that cost, or even on basic delivery?  I.e., ultimately, if you use a DSP/exchange in this manner are you really better off?  Or to recognize significant efficiency in terms of cost and effort do you need to buy into the long tail and/or buy blindly by audience or contextual category rather than by site?

Also, the tech world seems to have convinced itself – with a few intelligent exceptions – that large global advertisers would unanimously and emphatically agree that transparency to a media provider’s margin structure is much more important than level of or predictability of costs.  Is a $5 CPM that includes a known margin better than a $3.50 CPM for the same thing that includes an unknown margin?  Is a CPM that could vary between $2 and $4 for delivery that could vary between 20% and 100% of target better than a fixed CPM of $3 on a guaranteed buy?  Large advertisers may well be unanimous on these questions, but not in the direction the tech community majority seems to think. 

Let’s not forget that low cost is not necessarily the same as high-value – there is an “R” in ROI.

Which brings me to my biggest issue with Zach’s post, well articulated by Jeff Rosen in the comments.   Most large brand advertisers – CPG companies are great examples – generate 95% of their sales offline.  For them to spend at scale, they need to know their investments in media are profitably driving incremental offline sales. 

Offline sales impact data comes in with several months lag (at best) and isn’t tied to individual cookies, which are the lingua franca of RTB.  Probably just as well, because when this data does come back it’s not particularly kind to some of the targeting techniques most often used for RTB.  “It doesn’t work that well”  is obviously a big (huge) disconnect, and of course that is before we even get  to the troubling privacy and data ownership issues created by the questionable provenance of much of today’s online targeting data.

Not surprisingly, growing recognition of the importance of this tie between online media and offline activity has spawned a shiny new TLA:  “O2O” (for “Online To Offline”).  O2O is still just a foal of an acronym, but this foal has legs – like the legs on which most people still walk into brick and mortar stores to do 95% of their retail spending. 

O2O is truly a trillion dollar opportunity.

Companies like Groupon have done a great job demonstrating the potential of O2O for promotional spending.  The typical Groupon offer is time-sensitive and designed to drive foot traffic and sales more or less immediately – a savvy twist on the successful online DR advertising model.  Based on the results this model has shown to date, we’re going to see a lot more in the future.

But I also think we need to think more broadly about the potential of O2O than simply the ability to motivate customers at the bottom of the funnel.  Online media is also a powerful, efficient and increasingly proven way to create the awareness, consideration and intent that translate into higher offline sales.  Offline sales increases created in this way have longer cycles than promotional lifts simply because they originate at the top of the funnel, but we, Nielsen, comScore and others prove every day that they are also measurable with accuracy and statistical rigor.

I am always up for a healthy debate, but we’re not going to unlock the huge potential of O2O by debating each other.  We need to spend less time navel gazing and more time with real customers delivering enterprise-class technology that accommodates their business processes and ultimate (not just proximate) marketing objectives.

Stay tuned for more on this shortly.

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