The Click Is Wagging the Dog

According to the most recent Interactive Advertising Bureau Internet Advertising Revenues Report, Internet advertising for the first 6 months of 2009 was down 5.3% year over year, to $10.9 billion.  According to TNS Media Intelligence, total U,S, ad spend for the same period was down 14.3%, which means that online advertising is doing a pretty good job of weathering this recession, and is in fact increasing share of spend.  That will stand us in good stead as the economy recovers.

 

Digging a little deeper into the IAB report, two trends jump out at me. 

One is that, of that almost $11 billion in online advertising in the first half of 2009, 47% of it was spent on search, up from 44% a year prior and from about 40% in 2006.  Display, on the other hand, accounted for only 34% of online ad spend.

The other is that the share of Internet advertising sold via performance-based pricing continues to increase, and was at 58% for the first half of 2009.  CPM pricing accounted for 38% of the dollars, with the remaining 4% based on hybrid pricing.

From these stats, I draw two conclusions: one, that there is still a lot of potential upside in attracting brand advertising, which generally comes under display.  Indeed, as Brand.net has noted, the Internet only commands about 5% of total brand advertising spend in the U.S, but 30% of direct response advertising.  And two, that the prevalence of performance-based pricing is impeding our ability to attract that branding money.

Now, I know that the digiterati hate CPM pricing.  CPM is old-school, and you don't want to look at this modern dynamic medium -- or rather, the collection of media that exist online --through the same lens that your great-aunt Sophie used when she bought radio at Ted Bates in the early '50s.  Too, CPM pricing takes you directly down the path of commoditization, where inventory aggregators undercut the pricing of branded, differentiated media outlets, basically squeezing money out of the business. (That's a rant we've done already.)

But the problem with performance-based pricing -- search aside -- is that there's no way to price for the majority of display advertising's performance.  Some Internet marketers are enamored of the click, even as click-throughs are declining, and more and more research comes out quantifying the value -- the effectiveness -- of display advertising with respect to impact on consumer attitude, awareness, predisposition, purchase intent, and actual purchase (on or offline.) 

Pay for performance might be better conceptualized as pay for instant gratification.  But brands are built over time, not click to click.

If I see an ad for your advertiser's product, and in the next five minutes I put my coat on, go outside, and buy it, did that ad perform?  No, it isn't a trick question; it's a rhetorical one.  But I didn't click on anything, so if you sold that impression on a performance basis, you didn't get paid.  And that's not good.

At comScore, we've done research into the phenomenon of the click-through.  In "Natural Born Clickers 2," a study we just released with Starcom USA, we found that only 16% of Internet users clicked on any display ad in a month; this was down from 32% in 2007.  Half these clickers --  a scant 8% of the total US online universe -- accounted for 86% of all clicks.

So evaluating online advertising by the click is great -- if you're targeting that 8%.

Conversely, while clicks are down, and fewer users are accounting for more and more of the clicks, the body of knowledge quantifying the effectiveness and ROI of online advertising keeps expanding.  We know that consumers exposed to a campaign online, but who do not click on it, spend disproportionately more time on that advertiser's site in the next month. 

The IAB Revenue Report notes that retail is the leading category in online ad spend, so let's focus for a moment on retail.  In the retail/consumer electronics category, for example, we saw that 66% of the online universe was exposed to a campaign within a month but did not click; another 0.1% (that's a tenth of a percent) was exposed and clicked.  But that 66% of exposed non-clickers accounted for 89% of the page views at advertised Web sites over the course of the month. These data strongly support a conclusion that the ad exposures are pulling those consumers a little further through the funnel.

While click-through rates at fractions of a percent are judged by some to be successful, in the comScore/OPA study "The Silent Click" earlier this year, we found that about 18% of consumers exposed to an average major advertiser campaign eventually searched for the brand, and that 29% visited the advertiser's site.  Compare a typical click-through rate of two tenths of a percent, to 18% of exposed consumers searching for the brand.  Exposure to a campaign is a contributing variable to driving search 90 times as often as it is a source of click-through.  Even if we just limited the impact of brand advertising to driving search, click-through fails to account for the vast majority of the value of the typical display ad campaign.

So what are we to do? 

I think ultimately the secret to effective display advertising is that there aren't any secrets, no shortcuts, no magic algorithms.  Ultimately there are the same three things that have marked good advertising since the days of Claude Hopkins (look him up): creativity, testing, and measurement.  But you have to be sure to measure the right things.  Because the Internet is so immediately interactive, we tend to underestimate the communication value of messaging that doesn't immediately produce an interaction.  The obvious and classical stimulus-response nature of the click is so eminently measurable, so "on the nose," that we fall into the trap of measuring it, and then stopping measurement.

But compelling selling messages, delivered in creative new ways and formats, carried in differentiated content environments and presented thusly to the right consumers, and evaluated based on holistic measures against communications objectives (from awareness through sales, depending on the particular brand's goals) are never going to get old in this business. What has already gotten old is deploying advertising in the service of the click.  Doing so misrepresents the true value of online advertising, and forces advertisers to see only a small sliver of the value we provide.  Let's show them the whole pie.  They're going to come back for seconds.

 

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If you want to learn more about the state of online display advertising, visit your local library.  Or, better, here's an "Easter egg" for you for reading this far: check out Kathryn Koegel's paper "The State of Digital Display." Definitely worth a read.

Tags: metrics
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10 comments about "The Click Is Wagging the Dog".
  1. Mark Kolier from moddern marketing , November 3, 2009 at 11:30 a.m.

    Josh you have captured it very well. Thanks.

  2. Howie Goldfarb from Blue Star Strategic Marketing , November 3, 2009 at 11:58 a.m.

    What is a click worth? Considering there are Clickbots infiltrating the system trying to take advantage of the Click Performance Pricing. And the studies showing most clicks are done by such few people. And the whole ecosystem is kind of messed up. I myself click on banner ads served to news/content sites that I have access to free content...just so the site I am on can earn money for my presence with no intention of doing anything more than that click.

    While the utility of Banner Ads and Search Results technically is off the charts in terms of potential. Reality is different. I think banner ads should be counted on to be a print ad serving an impression and be happy with it as such.

    One area not covered is content of the Ads. Not just the activity. Of the exposed group who did click did the banner Ad just say 'Toyota' or did it say 'click to enter Toyota Sweepstakes'? And I still have not figured out if Ad Serving Networks can tell if a served Ad was blocked by Ad Blocking Software and viewed. Seems to be a dirty secret of the Ad Serving Networks don't want any clients to find out about.

  3. Mike Einstein from the Brothers Einstein , November 3, 2009 at 12:17 p.m.

    Let's quit backpeddling and cut to the chase:

    The bed the Internet made and must now sleep in is accountability. And the only purely accountable marketing environment that exists online is an advertiser's own branded website or landing page, period. There is one media model that understands this, The Vidsense Video Snack Network.

    Advertisers, ask yourselves: Do you really want to target behavior hit and miss in the rearview mirror, or do you simply want to tap behavior that you know for certain already exists? The one, growing behavior we all share is video snacking, defined as the viewing of randomly encountered bite-sized video clips. Vidsense uses proven content across a vast publisher network to attract hungry video snackers and deliver them in scale directly to you, where they can then eat their fill in the only risk-free, completely controllable "environment to buy" there is - your website.

    Why push more clutter on an increasingly unreceptive public when you can play the gracious host to a willing audience instead? Stop thinking like an intermediary and start thinking like a destination. Vidsense can show you how.

  4. Tilly Pick from Development Practice 360, LLC. , November 3, 2009 at 2:35 p.m.

    To me the issue seems to be that pay-for-performance in the online space is mostly being defined in a limiting and convenient manner -- the click. Feels very similar to the somewhat linear CPM approach in advertising.

    Why not consider other dimensions for pay-for-performance models? Josh pointed to traffic to advertiser's websites. He mentioned the impact on search. I, myself, saw great value in understanding the lag effect (or post-impression traffic) for one of my clients. I suspect that many marketers would much rather pay for that kind of performance than the click.

  5. Mike Blacker from Feeva Technology , November 3, 2009 at 3:18 p.m.

    great article! With click rates so poor and dropping why are we restricting success only to online? Why not include a phone number in online ads so we can, at a minimum, add another component of success to online campaigns. Sure, it only works for certain advertisers (travel, health, finance, retail, etc), but everyone understand the phone, older demos are comfortable using the phone, calls yield 30-50% conversion rates (vs. 1-2% online), and average revenue per phone sale is more than twice what it is online.

    99%+ of the users don't click....and the ones that do are generally not the right customer. Including a phone number as an alternative to the click just makes sense. Including a phone number also drive the ability to track online ad placement to offline sales....something we just have not been able to do well in the online world to date.

    RingRevenue is a great example of a company that has built a unique platform to allow the tracking of phone calls in online campaigns.

  6. Joshua Chasin from comScore , November 3, 2009 at 4:30 p.m.

    THanks for the good words... Tilly, totally agree that the question behind pay for performance is how to define performance.

    Mike... I don't know, that almost looked like a commercial.

    ;-)

  7. John Grono from GAP Research , November 3, 2009 at 5:04 p.m.

    Hi Josh, great post.

    That 8% doing 86% is sure some heavy lifting by the very few! In classic communication planning that reeks of both opportunity AND danger. While I can leverage such concentrations it also means that it is a small pool or my brand (and every other brand) to fish in.

    Of course we all know that 'last-click' is not the be-all-and-end-all ... it's just that it has taken a decade to admit it

    But there is also an extension to your fantastic explanation of what is really going on in the online world. And that is, that a LOT of traffic in the online world is often driven there by offline world advertising. For example, you see a billboard, TV ad, or print/press ad which catches your eye and has the URL prominent. You log in and check it out, like what you see and buy the product.

    If you restrict your analysis then Google or another search engine will get the credit.

    As a communications planner that is obviously guff!!

    So, how does a marketer or a communications planner work all this out and make the correct attribution (or more correctly the correct contribution as all media act in conjunction) of the sale? The only thing I have found so far is multi-variate non-linear time-series micro-econometric modelling. And they are darned hard work - maybe three months for a robust model. However, when you build such models you must have a 'common language'. There are two common languages across all the media - time and people. Including on-line metrics in such models can be done, but they are not a 'natural fit'.

    The more that online moves towards people-based time-oriented metrics then the more they will be on the radar for communications, instead of a fulfillment 'silo' tacked on to the main game of communicating the brand via advertising to targeted users.

  8. Ron Stitt from Fox Television Stations , November 4, 2009 at 11:31 a.m.

    Back in the pre-internet dark ages, the dichotomy was between promotion (performance) based marketing strategies, and advertising (branding) based emphasis. The challenge was striking the right balance, but it was fairly well understood that over-emphasis on performance (promotion) undermined brands, and brand equity. I'm not sure things have really changed as much as we like to think, on a fundamental level. Many though have forgotten the whole brand equity thing though.

  9. Anshuman Misra from ICICI Bank Ltd , November 5, 2009 at 3:15 a.m.

    A very good article and very well spelt out. We have seen the movement of Online advertising from Display to Search. It would be interesting to see the journey back specially, keeping the growing pie in mind.

  10. Kathryn Koegel from Primary Impact , November 9, 2009 at 8:55 a.m.

    Big thanks to Josh for making my whitepaper the "Easter Egg." There is an update to the paper he cited (that one was written in May): State of Digital Display II, which was just published 10/27: go to www.primaryimpact.com/dpac4