How do we measure effectiveness of online advertising?

This is the idea that if agencies could agree on a single way of measuring “effectivness”, irrespective of whether the ad is online or offline, the industry would get back to normal.

The problem
Performance marketing has confused advertisers. Online they can track leads generated, impressions created and track clicks that lead to purchases.  So they go back to their agencies and demand that they justify their offline adspend, their latest TV commercial, their employment of coke snorting “creatives” who keep telling them that their ideas are going to help sell more cameras.

Of course the agencies are struggling with this justification. No-one’s saying that drumming gorillas on the telly don’t sell more chocolate, but it’d be great to quantitatively measure exactly how much more.

Of course this is not a new problem:
“I know that half of my advertising money is wasted … I just don’t know which half”
John Wannamaker
But given the measurability of online, advertisers are more likely to now claim the wasted half is the un measurable half.

Solution

“every discussion we have now with most traditional advertisers is about how we get more effectiveness: how do we get more out of the digital realm… “there is this sense that they’ve got to have a different mix formula” involving some combination of TV and online advertising.
Beth Comstock CNBC

Offline advertising has a whole discipline devoted to measuring effectiveness.  Research companies offer testing models, different gathering methodologies, response measures and analytical approaches.

Theoretically it is possible. Sure you could come up with a standard set of methods, weight web advertising in (as well as web, TV, direct mail, email marketing, posters etc etc) and arrive at a single measure.

But it’d just never gonna happen.

Online effectiveness is massively measurable. Offline is not.

My view is that when faced with this predicament, advertisers will in the future “over weight” online at the expense of offline.

Conclusion
Advertisers are not currently “over weight” on web.  In fact quite the contrary, particularly so in certain sectors like FMGC.  Why not?
1)    The web is still relatively new form of ad inventory (our research has shown brand managers and agencies are surprisingly backward when it comes to the web)
2)    We have still not worked out how to use the web to communicate the more emotional mass market ideas that offline is well known to do.  This will change: we are still only at the beginning of how the web can be leveraged for new advertising techniques.

Opportunities
•    Given I am so bullish on the long term “over weighting” of web inventory I am clearly long on web publishers, short on offline is about the mark.
•    I am convinced there will be growth in agencies who can continue to help brands create compelling web promotions.  I am not currently convinced there is sufficient scale to justify VC investment.
•    Planners will become the most important people within agencies.  If they understand the new inventory and can use the online tools the client will do as they say. 

Comments

[MKM]

Paul,

Your recent series of posts on "online advertising" (the advert, etc.) are intriguingly insightful. So much so in fact, that I would suggest (respectfully) that you go back and consider all that you've ruminated on - and you may well have your own start-up. I'm as far from the advertising business as one can get but I think you're right - so far they're missing the point and opportunity. With some grist and a good team... you can knock this one.. with the right mill.
Anyway, I found your posts interesting.
Cheers.

[Joe Fry]

I do agree, to an extent...but online advertising isn't as easy to measure as one would like to think.

http://tinyurl.com/3rz8zl

This article basically makes the same point, other than it focuses exclusively on online - only when a single currency is developed intra-disciplinarily can a cross-discipline or "standard set of methods" be developed.

And furthermore, is this even desirable? To the client, yes, but to creativity...I'm not so sure. When you talk about the industry 'returning to normal' as a result of standardized effectiveness measurement, what is this norm? Back in the good old days of creativity in ad agencies (an idealized view I'm sure, and perhaps not desirable today - but still, something you seem to allude to), there was a very different call for accountability.

The key is in balancing stats, quants and standardization with a creative, engaging and dynamic context for brands in a cross-platform space.