Cost Per Whatever: Has Ad Tech Crippled Advertising?

(By Francine Hardaway)

In the race to prove themselves up to the task of working with the CIO, CMOs have forgotten what Steve Jobs knew well: We are human and therefore emotional. We make decisions mostly on emotions. Where are our customers and what makes them buy? How do we query data to arrive at effective media buys? Effective advertising provokes decisions, but efficient advertising simply reaches people.

In the beginning, there was creative. Then came reach and frequency. Much later, programmatic buying.

I’ve been having fascinating state-of-the-industry lunches over the past few months with Rodney Mayers, the CRO of Palo Alto-based Proximic. We’ve been trying to figure out how to tell the ad industry that although programmatic buying does bring efficiency to the process, it doesn’t necessarily bring effectiveness. Efficiency is a work flow problem that can be solved by programmatic buying. But solving it will not necessarily move product unless it is combined with effectiveness–what makes people act.

Effectiveness, the be-all and end-all of advertising, is a totally different story.

In the race to prove themselves up to the task of working with the CIO, CMOs have forgotten what Steve Jobs knew well: We are human and therefore emotional. We make decisions mostly on emotions. Where are our customers and what makes them buy? How do we query data to arrive at effective media buys? Effective advertising provokes decisions, but efficient advertising simply reaches people.

You have to ask the right questions of the data produced by programmatic platforms in order to combine your increased efficiency with effectiveness. CMOs need to go back to the drawing board and spend time on how people actually make decisions. Because most decisions are made emotionally, the CMO actually may need less data. However, as data storage and cloud computing have drastically reduced the cost of storage, there is a contest to see who has Bigger Data, though most of it might be worthless.

This is especially true in brand marketing, where online advertising should work best. Tweaking the last little metrics to squeeze out some more 0.001 improvement might be okay for direct response marketers, but as online advertising matures, more and more agencies are becoming aware that branding initiatives work very well online, especially in cross-platform campaigns. Brand advertisers just need metrics to be in the right range, and then it’s more important to be able to scale the campaign–to reach the right people with the right messages. The question is “did this ad move the revenue needle?”

We should be measuring effectiveness–not efficiency. If we are efficient in getting the wrong message to the right people, what good does that do? In ad tech, we sometimes forget how important it is for the media buyer in an agency to actually get things done, and to execute easily in a way that can be communicated (and understood) by clients. The media buyer needs to be able to say “I bought this because…” and back up the decision with metrics that can be understood, not metrics that obfuscate.

These quotes from Ad Age‘s latest CMO study tell it well:

“A lot of them use metrics that don’t measure finance at all. Some said, ‘That’s a good question.’ Others said, ‘If my boss is happy, that works for me.’ Another: As one respondent colorfully put it, his company’s marketing ROI measurement is like ‘pissing in the wind.'”

That’s why to measure and reinforce effectiveness.

Historically, digital measured what it could and declared it a standard–first hits, then pageviews, then it was visitors, then unique visitors, then CTR, then CPA for early direct response deals in display, then CPC when search exploded, then viewability. It’s now CPW (Cost Per Whatever). We’ve measured what we are able to measure, not what should be measured.

Effectiveness and efficiency are the two sides of advertising; they always have been and always will be. We’ve measured efficiency up the wazoo lately, but we are less skilled at measuring effectiveness, because it means different things to different brands. We’re right back to the “half of my ad dollars are wasted” problem of John Wanamaker’s day.

A measure of how efficient a buy is can be tracked with big data. Effectiveness is far more complex.

(Source: The Fastcompany)

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