How Much Is Our Behavior Worth?

by , Aug 14, 2009, 10:30 AM
  • Comment (6)
  • Recommend (30)
Subscribe to Metrics Insider

Tags

Looking to add to your summertime reading list? I recommend the new report from Harvard Business School professors John Deighton and John Quelch and Hamilton Consultants, "Economic Value of the Advertising-Supported Internet Ecosystem" (full disclosure: John Deighton was my marketing professor). The report was created for the IAB to explain the online advertising sector to public policy makers, and literally calculates how much the Internet is worth to the U.S. economy.

In an attempt to solve this seemingly Sisyphean task, the report asserts that the Internet is simply worth what we pay for it, which is roughly equivalent to 2.1% of the U.S. gross domestic product. Due to the commercial diversity of the Internet and its far-reaching socioeconomic impact on American consumers, the authors rely on three different approaches to triangulate their answer:

1.     From an Employment perspective (jobs created), the Internet is worth $300 billion;

2.     From a Sector GDP perspective (money paid to the Internet sector), it's worth $444 billion;

3.     From an Attention perspective (consumer time online), it's worth $680 billion.

As well-structured and comprehensive as this report is, I can't help but conclude that it overlooks another valuable contribution the Internet has made to the economy: behavioral data as a source of consumer insight that can radically improve how companies go to market. Yes, I am probably biased because I am a market researcher (and an online market researcher to boot), but the lack of attribution to these Information/Insight benefits in the report's value calculation certainly shortchanges the Internet. And, while I haven't crunched the numbers, I'd assert that the information that the Web creates about consumers exceeds the commercial value of Internet advertising (nearly $25 billion in 2008). In other words, what we can learn about consumers' digital behaviors is worth more than what companies pay to reach them online.

This may be a provocative view for publishers and their ad sales teams, but it should ring true for the rest of marketers.  Part of the challenge is that digital data has been pigeon-holed as only useful for online advertising decisions: simple Internet audience measurement on one end, and highly addressable, behavioral targeting on the other. So as Internet marketing grew up, we became obsessed about the near-term impact of banner ads at the expense of more holistic Internet research. Many marketers, influenced by this CPA-mania, still view the Web as just a direct response medium and a cheaper channel for surveys.  We now need to broaden the applications for digital research by measuring people and their behaviors, not just the ads. We have an opportunity to re-define what behavioral research is, so that marketers can more easily access and act on it.

In order to unlock the new value that behavioral research offers, it's first useful to point out what makes online consumer behavior data unique. Panel-based online behavior data is: 1) observational (passive collection mitigates bias); 2) dynamic (updates in real time as behaviors occur); 3) longitudinal (measures how behavior changes over the course of time); and 4) extremely comprehensive (measures behavior across all sites a person visits). And when combined with other data -- in particular, attitudinal information collected via surveys from the very same online panel -- it creates the most holistic view of consumers in history.

So what can we do with this new, combined data asset that we couldn't do before? Here are three ideas that can create new insights -- and value -- for marketers immediately:

1.       Holistic Brand Trackers. Large consumer brands often rely on survey-based tracking studies to assess their brand equity. These tools are an effective means for measuring brand health over long-time horizons, but they don't serve as an effective early-warning system. Combining traditional brand measures with new behavior-based metrics, such as "share of search activity" or "online churn indicators," will add a new dimension and actionability to brand trackers.

2.       Integrated Purchase Funnels. Understanding how advertising creates demand, and how this converts into sales, is at the core of marketing effectiveness. But marketers frequently face a methodological gap between upper, middle and lower funnel measurement. An integrated view of the funnel that measures self-reported purchase intent, plus the ensuing online consideration and purchase behaviors across the same consumers, will pinpoint the exact opportunities and threats marketers need to act on.

3.       Digital Segment Profiles. Segmentation studies help marketers profile discrete customer groups and track their share of wallet among these segments over time. Conducting these studies on an online consumer behavior panel can complement the standard information collected in a segmentation study. By incorporating a comprehensive view of the entertainment, commercial and social media sites that garner segment attention and influence their attitudes, marketers can quickly become more responsive and differentiate from rivals.

The three ideas above are good examples of how marketers can augment their existing market research with new online consumer behavior data, making the combined information more actionable and therefore more valuable. As marketers, we've just started to scratch the surface on how to use this new digital research in how we run our businesses. We're poised to move beyond the basics of audience measurement and advertising research. And when we succeed in unlocking this new value for our brands (and our consumers), let's hope we can count on Professors Deighton and Quelch to help us measure it.

0 comments on "How Much Is Our Behavior Worth?".

  1. David Cooperstein from Forrester Research
    commented on: August 14, 2009 at 3:50 p.m.

    Very interesting Stephen, and I agree with your points. I get how you might be able to extend analysis of purchase funnels and profiles with online panels, and that would clearly extend the "Value" of the Internet as a part of the overall economic engine.

    The one thing I struggle with here is that a lot of these sales (and the media to drive them) are spent off line. Would you propose that all research on an off-line be synchronized to accommodate this reality? Quantifying the intersection of the two broad media types would certainly increase the impact on line media has on the economy.

  2. Srishti Gupta from MediaCom
    commented on: August 14, 2009 at 4:19 p.m.

    Very insightful post! I agree with the points mentioned. The only word of caution is that online consumer behaviors do not always mirror offline activity...they are quick signs but not the whole story. Intersecting the information with offline measurement is critical

  3. Michael Becker from MobiPraxis
    commented on: August 15, 2009 at 2:45 p.m.

    Nice piece, I enjoyed the insight.

  4. Dimarco Stephen from Compete
    commented on: August 17, 2009 at 5:01 p.m.

    David,
    Absolutely need to synchronize online behaviors with offline media exposure and sales outcomes. On the sales front, this can be done via third-party, anonymous data matches with companies like JD Power (automotive) or Cannondale (retail). On the media exposure front, surveys are the most common approach, but return path data from set-top boxes is the next big thing. Thanks for your comment!

  5. Joshua Chasin from comScore
    commented on: August 19, 2009 at 11:29 a.m.

    Well lah di dah! Steve went to harvard!

    ;-)

  6. Barking Unicorn from The Barking Unicorn
    commented on: September 9, 2009 at 11:34 a.m.

    "while I haven't crunched the numbers, I'd assert..."

    Ignorance is skillful as a question, unskillful as an opinion.

    Next applicant, please!

Leave a Comment

Sign in to leave a comment. Don't have an account? Join Now

Recent Metrics Insider Articles

» Metrics Insider Archives