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Is It Time to Cut Your Digital Ad Spend or Simply Shift Your Strategy?

November 3, 2017

A three-part series on what’s happening with digital ad spends and online advertising strategies in 2018; what you should understand, what you should challenge and what you should do in order to make digital dollars effective.

This summer P&G cut $100 million out of its digital ad spend, Restoration Hardware recently followed suit. Agencies and AdTech platforms are nervous as the doors of the hidden world of digital advertising (and its pricing) are starting to open. The wizard is now being revealed and OZ is open to all.

  • Should marketers and Ad Tech be shaking in their boots? Yes.
  • Should C-Suite executives challenge where their digital dollars are spent and what their return is? Absolutely.

Over the years, I’ve worked in all areas of marketing. From social media to content, SEO to email –– I ultimately found my passion in developing and managing marketing automation and SEM programs due to the data available in any analytics suite. I loved it so much, in fact, I built a small consultancy around it.

Because of the transparency the data provides, I love telling my clients the truth about what’s working and what isn’t (including the very services they’re paying me to provide). So as the news of companies challenging their digital spends in display and SEM programs roll out, I’m thrilled to see people taking closer, harder looks at the costs and ROI of those efforts.

Question How Your Ad Exchange Works

Several years ago, I took on a large B2B client. My job was to manage PPC campaigns designed to meet their three primary KPIs. In that, I inherited programs run through AdRoll, Quantcast and numerous other display companies.

Macala’s Expert Insights: Banner blindness hasn’t disappeared. Any marketer worth their salt knows the average return on banners running through the Google Display Network is less than 2%. Marketing teams just love to show others soft metrics like impressions and clicks to validate budgets.

When I did an initial performance review of these platforms, I was amazed at the results they were getting. They were reporting hundreds of conversions at an extremely low cost per lead. But when I looked at their numbers and compared them to what was shown in the company’s internal data (tracked through destination URL and campaign codes), there were extreme discrepancies.

  • How could I find only six actual conversions when an agency running banners through AdRoll reported 735 conversions?
  • How could I find just five of the 450 conversions reported directly from Quantcast?

Five and six internal conversions was a far cry from the hundreds being reported, I knew I had to dig into the data to find out how such a large disparity was being reported. I didn’t have to look very deep into the data to figure out that:

These ad platforms were leveraging retargeting tactics and taking credit for attributed touches in order to produce larger conversion numbers.

This meant that if someone had a) clicked a banner and cookied or b) they had been identified from an email list belonging to the company, and came back to the website and completed the desired action, the ad platform took credit for these conversions. Because they’d been able to match them and “touch” them in some way and had “assisted” in the completed action, they were counting them in their numbers While assisted (attributed) conversions are legitimate, the way in which the platforms were counting them wasn’t.

Reviewing Ad Network and Agency Fee Structures against Actual Results

The next step I took was in asking the platforms just how the ad budget was being spent, where our ads were being seen most, and where the conversions they were reporting were coming from. They weren’t overly eager to answer my questions or show me the deeper analytics, but we got it. For example, with this particular client I found:

  • Over 80% of conversions were happening within the Google Display Network.
  • Yahoo and Bing yielded little to no results, though banners were served through their ad ecospheres.
  • Companies or agencies managing the Ad Networks received 10-25% of the spend as a commission fee, in addition to a standard monthly fee the company was already paying them.

While receiving a percentage of spend is a standard model, when I added that percentage back in, then all campaign costs (CPC, CPL and CPA) were wrong due to reporting results on the total amount spent with them, versus the total actually spent on ads after receiving their percentage.

When I applied the total spent to five and six verifiable conversions, then the actual CPL was astronomical and remarketing was extremely ineffective (something any good marketer knows should be the opposite).

Managing Ad Programs First Hand instead of Fully Automating Them

These findings led us to start managing display programs in-house versus farming out to ad networks or using third-party services. Since 80%+ of our clients’ conversions happened on Google-owned properties, we developed our own display campaigns that synced with all of a client’s Google Adwords search, display and video advertising campaigns. This lead to two things:

  1. A better return on ad dollars spent (CPC, CPL and CPA all went down).
  2. An increase in performance that led to more conversions.

This confirmed something we found true with every client we currently work with –– active, hands-on management of campaigns and non-use of automated services allowed us to better target our ads and get results that aligned to the each client’s set of KPIs.

Macala’s Expert Insights: Remarketing and Retargeting efforts (and there’s a difference between the two) always yield the best results in paid programs; targeting new audiences is more challenging, costs more and sometimes requires a change in campaign KPIs as brand awareness and trust are the #1 impact on lack of conversion and high campaign costs.

The Demise and (RE)Evolution of Ad Tech

The moves of two large corporations are going to have a trickle down effect in marketing and advertising. Agencies are going to have to change their service offerings; advertising technologies are going to develop new models and serve new use cases (which they already are).

From what I’ve seen, we’re going to see more and more clients requesting audits, deeper explanations of how their dollars are spent and educational sessions on “how” their programs are run. We’re also going to see increasing requests for us as marketers to give them a deeper understanding of how it works and even onboard client team members in order manager simpler tasks and campaigns in-house. Are agencies, platforms, and the clients ready for this? Time will tell.

Thank you for reading, this is the first post in a series of articles on what to look at and analyze as part of your digital advertising in 2018. The next installment will be out soon!