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Searching for answers

September 11th, 2009 by Kevin Francis

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Are NZ advertisers really receiving the best service from their agencies?

New Zealand advertisers are poorly represented in what is, in most cases, the most cost effective channel to market that there is. Overseas, online marketing has rightfully established itself as the fastest growing marketing channel and mandatory in marketing budgets. Within online, search marketing is the fastest growing channel and now accounts for more than 50 per cent of the online spend. How does New Zealand fare in comparison?

This begs two questions—why are online budgets so small and why does search have so little share of online?

It is not as if we are less savvy or connected compared to other nations nor can it really be blamed on broadband penetration as often touted by some.

Taking 2008 figures from the OECD, NZ compares favourably in terms of overall internet connectivity and has now passed over 20 per cent in terms of broadband.

For larger advertisers, agencies certainly seem to decide how the overall budgets are sliced and diced and there seems to still be an over familiarity with old style advertising, such that online is an afterthought, not a mandatory thought. This is reflected in the fact that while online ranks 2nd or 3rd in terms of overall marketing spend in the UK, US and AU, it still ranks only 6th in NZ, behind billboards.

This data is also reinforced by the recent Forbes study into what C Level executives believe are the more valuable channels. Internet 1, Print 4, TV 8.

Is online really that hard, or are people just too comfortable with the status quo, or is the truth just simply not out there enough? Education of the marketplace certainly seems to be a challenge and advertisers are paying the price.

Is it the fact that online is actually measurable and thus makes agencies accountable? After all, how many advertising awards are there for actual results, rather than creative excellence? Could it be that there is less agency margin in online? Or is it that for some of the key decision makers, TV and print is what they know best?  It’s not that these do not have a significant part to play, it is the over reliance on them that is telling.

Or is it the high profile failures? Think Flying Pig and Ferrit—online strategies deployed with an above-the-line mentality and offline marketing strategies.

Whatever the reason, the change will come to NZ and those organisations that recognise the opportunity online can make some early gains.

Click cliques

So, what’s the story online? Where do visitors actually come from and what do they do when they arrive at the site?

The beauty of online marketing is that it is immediate, measureable and flexible, yet it is our experience that many organisations and agencies are not exploiting online effectively.

If we look at some research, the most effective channels stick out like a sore thumb.

Attracting visitors to your website is the first challenge, we should also consider the effectiveness of each of the digital channels in terms of delivering web traffic that converts these visitors.

Forbes data suggests an interesting insight into results versus expectations for different online campaigns.

Quite clearly, search (SEO and SEM) sit in places 1 and 2 and display is last. Overseas, we have clearly seen a shift in spend from the non-performing online channels such as display to proven performance channels, most notably search.

This is reinforced by the view of C Level executives in the US about the effectiveness of online channels, again search in top place, more than 400 per cent more effective compared to ad networks.

Track and trace

One of the fundamentals that all marketing managers and senior executives should insist on is accurate measurement and reporting. There really is no excuse today as reporting systems, such as Google Analytics, are quite capable of delivering marketers with a wealth of data about the effectiveness of different online channels, not just search. Even where some form of analytics package is in place, reporting is often misinformed or misrepresented due to a general lack of understanding, meaning that apples are rarely compared with apples. The most common misrepresentation is that of post-impression tracking, potentially a gross over-representation of the effectiveness of certain types of online advertising due to the common lack of a comparison control group.

Consider a simple example: over the last month you may have seen hundreds of different banners on hundreds of different websites, but can you even name more than 10? Yet, post-impression tracking will “claim” any sale you make online to any of those advertisers – in some cases for up to 90 days into the future. This is regardless of what you would have purchased anyway and is not dependent upon whether you even saw the banner as a lot of these appear below the fold of the webpage, let alone actually clicked on the banner. It is in this manner that banner effectiveness is grossly overstated compared to other channels. Compare that to search, where you have specifically entered a query yourself and then clicked through to a website. Studies have shown that post-impression tracking without a control group is often 200 times overstated. Look at this recent example I read about from Australia. In this instance, the search organisation had taken over an account and recorded the following:

With cookie windows of up to 60 days this introduces a high level of bias into reports. But today the problem goes deeper, some digital media plans are unethically designed to introduce a cookie spraying methodology into the media plan. Cookie spraying is a deliberate tactic to buy as much low performing, low placement, cheap remnant digital inventory as possible. This type of media strategy can ensure upwards of 70% of an available Internet population (e.g. Australian internet users) always have a cookie on their machine. In some instances, I’ve seen a single client drop 4 billion post impression cookies in a 12 month period, with only 13 million active Internet users in Australia you do the math. So a user may never ever click, engage or even see a brands ad, navigate to the brands site either by direct entry of another medium (e.g. Search) and the value is attributed on a post impression basis to an advertising / media plan that had little or no effect on consumer behavior.

So, where does that leave us, apart from paying too much for too little

Well, the tide will eventually reach NZ, but for now can I ask that marketers demand certain answers from their agencies?

• What is our online strategy?
• Are we spending on our money on the highest return channels?
• Can you prove it?
• What key performance indicators are we measuring?
• What reporting tool are we using to measure these?
• What measurement system was used to record the conversions?
• Are the conversion numbers based on successful conversions only?
• Were search conversions attributed to the last cookie only (last-click)?
• Was the measurement based on post-click or post-impression? Or was a blended metric of post-impression and post-click used?
• Were the number of conversions reported unique (1-conversion-per-click) or where these transactions non-unique (many-conversions-per-click)?
• If unique, what was the timeframe in which the conversions are treated as unique?
• Was the CPA inclusive/exclusive of GST, and inclusive/exclusive of agency margins?

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Kevin Francis is CEO of First Rate, a search marketing agency. First Rate publish regular internet marketing news and online industry research on their blog.

Tags: First Rate, online marketing, search marketing