• by Anne Zieger , April 1, 2008

Sure, lead gen is great, but then what?

The click is it - the thing that's everything. Or it has been. For almost a decade, performance marketers have placed so much importance on initial click-through rates that they've forgotten nearly everything else. That's not such a big surprise: After all, while marketers have countless other metrics at their disposal, the click is the most basic unit of reaction one can measure. But the click is really just the beginning.

Even if the click never results in a sale, it does give marketers the reassuring feeling that their message resonates with the audience they're trying to reach. After all, it never hurts to tell your boss, "Look at all of the click-throughs that ad is generating; we must be doing something right."

The problem is, far too often, few of those clickers translate into actual business. According to research by global-marketing effectiveness tracking firm The Fournaise Marketing Group, upward of 60 percent of all u.s. marketing dollars generate no results whatsoever, and online marketing is no exception.

It's not that marketers aren't aware of the problem. Performance marketers have been moving large chunks of their budget into highly trackable paid-search advertising, which should consume a remarkable 40 percent of all U.S. online budgets this year, according to eMarketer.

On the other hand, analysts project that for the next few years marketers will commit roughly 20 percent of U.S. online-advertising spending to display ads, though click-through rates for conventional banner ads have dropped like a stone in recent years to well under 1 percent.

Sometimes advertisers spend hundreds of thousands of dollars on banner-advertising campaigns that deliver millions of impressions but get only 20 or 30 clicks throughout the entire campaign, Fournaise has found. It's not that these advertisers are running branding campaigns - they do hope to attract lots of clicks and actions- it's just that they aren't getting any results.

The reality, it seems, is that many marketers aren't sure which of their online media are performing well - and which are a complete waste. In fact, according to a recent survey by Fournaise, only 5 percent of marketers track how much revenue their online campaigns generated, and only 3 percent tracked return on their online investment. "Marketers will tell you that they have to generate demand for the P&L," says Fournaise CEO and chief tracker Jerome Fontaine. "But with online, they're stopping half-way through."

Change is in the works, though. As pressure to make performance marketing more effective increases, e-marketers are beginning to embrace performance measures that take revenue and ROI into account. They're also rethinking basic assumptions about generating response - such as the commonly held belief that consumers won't click more than a time or two - and redesigning response vehicles to take advantage of consumer impulses.

"Conventional wisdom says that people don't want to click," says Justin Talerico, CEO of post-click specialists ion interactive. He says, "The truth is, you can get them to click many times. What you can't get them to do is slow down."

Sliding Scale

As the click has become passé in today's online marketing circles, marketers have begun to rethink their basic assumptions about what aspects of consumers' online activity they should measure. It's not so much that they're inventing new measures, but they're definitely changing their focus to look at measures that take costs and profit into account.

That's definitely the case at New York-based Morpheus Media, says Adam Broitman, director of emerging and creative strategy, whose clients include upscale retailers like Bergdorf Goodman and Neiman Marcus, L'Oréal and the paper of record, The New York Times.

For one cable network client, Morpheus developed a new performance metric focused on the user's level of engagement and consumption of site resources. For the launch of a new program, Morpheus measured how many times the related video was viewed and how many videos the user viewed, rather than tracking a click-stream through the network's site. "The way we look at performance marketing, click-through rates really mean nothing," Broitman says. "Click-through rates don't tell you much about who is clicking and what their subsequent actions are."

The agency also looked at expenses for results generated, tracking the cost for user time spent on the site, cost per page view and the cost per video view. Such measures go beyond telling marketers whether the latest courtroom drama has engaged fans; they also help cable marketers determine whether the cost of that engagement compares well with promotions in other media.

At ion interactive, the company still looks at click-throughs, but only when they can drive users to click on pages that give marketers a great deal of information on what the user wants and who they are. "We want to see consumers take explicit actions in their own self-interest," Talerico says. "Consumers are going to pick the path that is most relevant to them. You can make very reliable conclusions based on this form of segmentation."

For example, for a hotel chain client, ion built a landing page which directed visitors to click on who they were ("Are you a business traveler or leisure traveler?"), then click-through, one step at a time, to offers that fit their travel plans, lifestyle and preferences. Not only has this self-segmentation process pushed the hotel's response rates into the double digits, it's also given the chain a lot of information on what key customer groups want and greatly aids in retargeting. "If you can move thinking away from the click, and toward who's clicking, you get very valuable learnings from that - which you can apply across wider marketing campaigns," Talerico says.

Well aware that performance marketers are demanding more useful measures, vendors are changing their approach, too. Performance-based ad network Epic Advertising (previously AzoogleAds) has gone so far as to develop an entirely new performance metric, the "performance CPM," which takes CPC, CPM and CPA models into account. Performance CPM also includes "induced visits" to Web sites - those that happen well after a user responds to an ad.

"There's always been this debate whether CPC, CPM or CPA models were best," says Michael Sprouse, Epic's chief marketing officer. "We say there is no best ... it should all be taken into consideration."

Cash Machine

As marketers shift from existing media to new platforms, performance marketing measurement and strategy is likely to change even further. Some of the biggest changes are being affected by the growth of rich media-based options and the emergence of social media. As these trends gather steam, performance marketing campaigns are likely to change further.

Of course, the ad business has been playing with rich media-based ads since at least the mid-'90s. But now, with the YouTube generation, video is blossoming as an ad medium, representing $1.35 billion in spending in 2008 alone, eMarketer says. In December 2007, almost 141 million u.s. Internet users watched more than 10 billion videos, according to research firm comScore. That's spawning a new generation of performance-oriented video-ad options.

Take the platform offered by Salt Lake City-based vendor HookSell as a case in point. HookSell has built its core solution, HookTour, on the notion that video is the best way to reach jaded consumers, particularly attention-deficit types from Gen Y. HookTour allows marketers to not only run direct-response video ads and measure who responds, but also to tempt viewers to stay longer with additional related messages. Prior to launching a HookTour on its page at costco.com, SimpliPhones was selling only one unit of their small-business system every eight days through the big boxer. After the introduction of the HookTour, that number jumped to one every day.

Google, no slouch when it comes to capitalizing on trends, is also powering its way into video advertising. Working in partnership with video sites Revver and blip.tv, plus video technology firms YuMe and Brightcove, Google launched an AdSense program for video ads in February to offer full motion video on Google ads. The newest element of the program, which was in beta when OMMA went to press, lets advertisers place text ads as an overlay at the bottom of a video player.

Meanwhile, marketers are getting a new level of personal information to play with in the form of social networks, which have the potential to provide more targeting information than some strategists can even use. And eMarketer expects advertisers to spend $1.56 billion on social-media advertising during 2008 alone - a 70 percent jump from last year - and for such spending to climb to $2.7 billion by 2011.

True, the market is still shaking out - particularly in terms of what's acceptable in social media ad practices. When Facebook released its Beacon advertising system, for example, its executives got slapped harshly by consumer advocates who felt the system violated user privacy.

But the reality is that there's a new generation of consumers who have little or no privacy expectations, and they're going to prove a rich source of performance data, suggests Scott McAndrew, director of strategy for Tempe, Ariz.-based interactive marketing agency and Facebook APP developer Terralever.

Not only that, as marketers get used to the rich demographic and preference information social networking sites can provide, their expectations will rise ever higher, McAndrew notes. "When they look at Facebook and all of that data, they'll be looking for it in other mediums," he says.

Still, performance marketers are going to have to justify their investment in these media the same way they did in "old" Internet media - by demonstrating that they're getting results. "If you can't prove that every time a dollar is put in, two or three dollars pop out, it doesn't matter what you measure," says HookSell CEO Benoy Tamang. "Turning dollars invested into dollars yielded is the key." It still all starts with that first click, but turning impressions into sales is true performance.