Running with the Big Dogs

The challenges of direct mail

My co-worker Pete Kim has posted a great graph:

http://www.petekim.com/

Please, please do more with our medium

Calling all creatives...and especially creative technologists (aka technically-savvy creatives). Online needs help!

Every once-in-a-while, you see something that resets your understanding of the possible. Awhile back, one of the savvier creative technologists I know sent me a few links to "living one-sheets." Here are a few examples: Bride Wars, Marley & Me and Step Brothers.

Or, check out this video:

The "ah-ha" for me was that video isn't an ad format -- it is a creative tool. All these ads use video with the sound OFF -- and they have the potential to make a standard banner engaging: they could make you cry, laugh or just pay attention. All we need is talented creatives to put this technique to use in the service of branders. Have at it.

DSP is to Display as SEM is to Search

I hate acronyms.  They are classically illustrative of insiders-talking-to-insiders. But in this case, I think that what the insiders are talking about (DSPs), should be of great interest to marketers (and other media-savvy folk). There is also a lot of confusion about exactly what a Demand Side Platform (DSP) is, why marketers should care and why DSPs will help online display advertising become a big dog of media.

So first, let me explain the analogy in the headline: Demand Side Platforms do for online display advertising exactly what Search Engine Marketers (SEM) do for search advertising:

• They innovate on top of publishers' inventory to get better ROI for advertisers.
• They facilitate (in the case of SEMs) / will facilitate (in the case of DSPs) the growth and success of the medium because they enable both small and large advertisers to take advantage of sophisticated marketing technology and better ROI.
• They also are (for search) / will be (for display) hugely important to the success of the leading publishers. Google makes much more money because they chose to enable SEMs. In display, Google and Yahoo! are (as they should be) racing to do the same thing with DSPs because they know that when advertisers get better results, advertisers spend more money.

DSPs will likely help change the game in a couple big ways for display advertising, too. For top-of-the-funnel campaigns, DSPs will tap into publishers / exchanges real-time-bidding interfaces to optimize on reach and frequency across publishers. Today, this is exceedingly hard to do...but just like SEMs made bid optimization much more scalable and much more common in search, DSPs will drive better reach / frequency optimization.

Secondly, DSPs will eake out better performance for bottom-of-the-funnel advertisers. At first, I'd guess a lot of this performance improvement will come in the form of finding bargains through information disparity (where the DSP knows more than other bidders on the exchange)...but just as in the SEM world, competition will soon force DSPs to provide real value in their performance optimization.

My prediction: as DSPs take hold, we'll see lots of winners: advertisers will get better performance (at both top and bottom of the funnel), publishers will get better CPMs as perfomance improvement brings more advertising dollars into the marketplace...and DSPs will have carved out a healthy business.

Online Data Changes the Game

I spoke recently at a Piper Jaffray conference with another Yahoo!, Dev Patel (article here) who knows more about data than I -- and it prompts me to share a couple of thoughts (borrowing heavily from Dev's view).

First, data allows you to do a couple of things quite well: (1) buy online media with great precision and (2) select or construct a message that is as relevant as possible to the user. The key for marketers (and particularly top-of-the-funnel marketers) though, is not so much the value / importance of the data, but the reach that you have with whatever data you determine to be most valuable.

Second, one of the comments I made at the conference was that I was an "ad network pessimist." This is -- fundamentally -- because ad networks don't have reach in association with their data. Sure, look them up in Comscore and you'll see many with 70, 80, even 90% online reach. Comscore might even tell you that they reach a similar percentage of women or men...but the real question is: how many women, men (or "auto intenders") do they know are women, men and auto intenders? The answer, by-and-large, is very few.

For example, there are roughly 60-70 million dog owners in the United States. Ad networks don't have that kind of information (by-and-large they simply serve ads). So most buy that type of insight -- and the largest provider of that data can identify < 500K (or, < 1% reach).

If you're a Big Dog, an ad network is no threat. If you want to be a Big Dog, you have to have the depth, quality and trust in your relationship with your users that gives you this kind of insight at scale. So I'm a Yahoo! optimist.

Reach vs. Frequency...and a Threshold for "Measurable" Reach

A friend recently sent me a link to Erwin Ephron's 1995 Journal of Advertising article "The Shelf Space Model of Advertising" which explains why TV is the biggest of the big dogs: it has better reach.

The article is a must-read for both TV and online planners. While it is grounded in TV research, the conclusions likely extend to all media. The key nuggets:

1. There is 60% more impact on purchase from reach (1st impression to a new user) versus frequency (the 2nd or following impressions).
2. There is a "threshold" of measureable effectiveness in reach: "The caveat is we need to [...maintain...] a weekly reach of 35% to 40%, a monthly reach of 65% to 70% and a quarterly reach of 80% to 85%, so we talk to enough people to have a measurable effect on brand sales."

We have seen very similar analysis to point number 1 in online. Frequency studies differ in what is optimal frequency, but all the ones I've seen agree with the TV research in that they conclude that the first impression to a new user (reach!) is the most valuable.

But the second point is the truly stunning insight for online: the biggest media buys on the web very rarely -- if ever -- achieve 35-40% weekly reach. This isn't because the Web doesn't enable reach at that level (it does!)...it's because online publishers don't generally optimize reach (and online advertisers generally let them get away with it).

Amazingly, too, a typical 40% reach (to say W18-49) online schedule could probably be had for 1/5 to 1/10 the cost of that same schedule in TV. This is not (by the way) to say that anyone should stop buying TV and move it all to online...but perhaps paring back the excess frequency in a TV schedule and spending it on online reach could deliver the same impact to marketers that Ephron suggests recency planning would deliver for TV advertisers -- double-digit sales increases for no incremental spend.

Upcoming Speaking Engagements

I've got a couple of speaking engagements coming up and have been remiss in posting:

Next Friday, July 10th, I'm talking about online advertising as a monetization strategy along with other online publisher and ad network folk at Garage.com's Revenue Bootcamp.

And with a little more warning, I'll be keynoting the 2nd day of the Vancouver Internet Marketing Conference on Sept. 17. IMC organizes conference that focus on the ROI of online marketing as well as current trends and latest developments. My topic will cover the past, present and future of online advertising -- some myths, best practices and (as you can imagine) suggestions on how online needs to evolve to be a media Big Dog.

I hope to see you there!

Why GRPs?

If I offered to trade you three feet of gold for six kilos of silver, what would you say? How about 10 million online impressions to W18-49 in DFW for 100 GRPs of TV in DFW? If you chose “not enough information” as your answer, no need to read further.

The conversation about whether online should embrace GRPs, or Gross Ratings Points, befuddles me. GRPs are the fundamental “unit of trade” for most marketers – especially brand marketers. Our reticence to adopt them (as an industry), is somewhat like the shopkeeper who keeps selling feet of gold in exchange for pounds of other metals. Sometimes they might make out like a bandit, and sometimes not. Generally, though, business will be slow.

A gross rating point is a unit of marketing reach equivalent to 1% of the total US population (of a particular demographic, e.g., women 18-49) reached with one impression. 100 GRPs of W18-49, then, might be 50% of the US audience of W18-49 reached 2 times…or 25% reached 4 times. Typically, GRPs are cited along with average frequency, e.g., 100 GRPs of W18-49 with an average frequency of 3 (which implies 33% of the US population of W18-49, reached 3 times).

Now, why is a GRP important? The obvious reason is that for a lot of marketers – especially brand marketers who need millions of buyers to have business success, optimizing reach and frequency are the most significant factors in campaign success. With a single simple metric (or set of metrics if you include average frequency), they can define a target for and measure media planning success.

The non-obvious importance is the derived benefits of having such a simple standard for campaign success. Imagine if you know that campaign A reached 200 GRPs of your targeted audience at an average frequency of 4 and campaign B reached 300 GRPs of your target audience at an average frequency of 5, that there are many things you can easily answer:

• given the price you paid for campaigns A and B, which was / is a bigger bargain? Divide cost by GRPs to get the “cost-per-point” of each campaign

• given the sales lift you saw for campaigns A and B, which is more important to optimize: reach or frequency? Correlate reach and frequency of campaigns to sales and take the higher r-squared.

• if A was an online campaign and B a TV campaign, do results justify moving money from online to TV or vice-versa? Divide sales by CPP…and move to the higher ROI medium

This last point is the critical non-obvious insight. Today, online sells impressions while print sells reach. Which performs better? I don’t know. Would you like a meter of gold or a pound of platinum?

Much as you would expect given that they’ve had 50-plus years to refine their approach, the Big Dogs of media have built their entire way of doing business around this standard unit of measurement (or unit of success). TV salespeople price their media based on reach – the higher the reach (which enables the most efficient spend) the higher the price per point of reach. This works because reach is so important to marketers’ success. Online literally does the opposite: the more impressions you buy, typically the lower the cost per impression. Why is this? If larger buys correlated to more (per capita) success (as they do in reach-based marketing mediums), prices should be higher. Because online buys typically have higher frequency at higher impression levels, though, larger buys often don’t correlate to more per capita success.

This simple example is just the tip of the iceberg, though. Almost all decisions in traditional media come back to GRPs. The best example of this is that GRPs and average frequency are the fundamental inputs to the media mix models that determine media spend allocation (radio spend vs. TV spend vs. print spend). These models predict the downstream (sales) performance of brand media spend based on historical input-output analysis. This is only possible because 1 GRP of TV at frequency of 1 has historically performed (in terms of sales) in a relatively predictable way when compared to 1 GRP of print at a frequency of 1. Media mix models are very sophisticated models that look at many different spend scenarios…but are fundamentally possible because all forms of media are measurable in a standard way: the GRP.

The decision to embrace the GRP is a simple one. Online can keep its (lucrative) corner store selling impressions, or it can start selling (pricing and delivering) on GRPs and average frequency and let marketers determine if what we sell is good enough for the mainstream market. I say we measure up.

Better science will set us free

The debate about whether online advertising is art or science (and here) misses the point (though I agree with Cory's point that we aren't as balanced as we should be). Most pundits ultimately come to the realization and conclusion that it is both art and science…but what we fail to recognize is that we as an industry are behind traditional media on both axes.

 

The challenges and opportunities on the art side of online advertising are well-trod territory and I can’t add much to Randall Rothenberg’s recent challenge to the industry.

 

I want to focus on the science side because I haven’t seen online marketers and online publishers acknowledge the scientific acumen of traditional media. And we should, because traditional media does it better. Take a look at this screen shot from Nielsen nPower, which is the de facto standard for TV media planning.

 

 

Front-and-center in this tool are the metrics that matter to a marketers’ success: reach and frequency. Every show is understood in terms of its unique reach and frequency – and here is where the science of TV planning leaves online behind – Nielsen tells the planner each show’s contribution to cumulative reach and frequency. Knowing this data and having it in a scenario-generating tool makes it simple to optimize for cost-effective reach with low waste…or to focus on the art side of TV media planning (e.g., shows with the right type and level of engagement with attitudinally receptive viewers).

 

Online cannot deliver this kind of precision in media planning – despite the fact that our precision in media delivery (e.g., targeting women 18-49, which is this marketer’s goal) is far better than TV. With TV, you buy the whole show, the women, the men, everything. With online, you can be much more efficient and just reach the women. But when you’re planning your buy on TV, you know exactly how many people in your target demo you will reach (and TV makes good against the reach), whereas with online, reach “forecasts” on a particular site are an inexact science at best. And understanding cumulative reach across sites and networks is almost impossible in online today.

 

Kudos to Comscore and Nielsen for stepping into the online reach and frequency arena with Comscore R/F(tm) and Nielsen NetView(tm), which provide high-level forecasts (perhaps closer to guesses) at cumulative reach. This is the first step toward delivering what 50 years of TV buying experience has taught the TV media ecosystem: media planning can’t be reduced to a science, but the science can take a lot of the complexity out of the process and give us the freedom to focus more on the art.

Why "Running with the Big Dogs?"

Running with the Big Dogs takes the view point that the big dogs – TV, print, radio, etc – and the marketers that buy them are good at what they do. They deliver real value to customers and their place in marketers’ media mix is well-deserved today. Online advertising isn’t there yet – in part because the conceit bred of rapid growth and stunning ROI for online marketers has blinded us as an industry to the wisdom and experience of traditional marketers.

 

This blog is about online advertising, but it takes the view that online is still a puppy when it comes to finding its place in marketers’ integrated marketing and media strategy. To find and earn that place, we have to take a hard look at the wisdom, principles and big dogs of traditional media, as well as celebrating the successes of online advertising.