How Much For That Cookie in the Window?
In the early days, everyone was excited about click-through rates (CTRs) and the first ads which could garner CTRs of 30% or more. Over time, there were debates about view-based conversions versus click, online GRPs, online reach, etc. These debates are still raging as new vehicles (e.g., video) have been added to the marketing mix; the complexity has only increased.
The latest trend has been how to bridge search and display with attribution modeling. At the end of the day, marketers are using these tactics to evaluate the impact of different vehicles at different stages in the marketing funnel and are trying to get to an overall Return on Ad Spending (ROAS) for their boss or their client.
Simultaneously, there has been a real shift from buying impressions or views to buying audiences across media. The new question facing a marketer is “how do I value my online audience?” – which can be simplified to “how do I value a cookie?”
To answer that question, a breakdown of the current model is needed. Traditionally, marketers have evaluated the performance of their display advertising campaigns based on action-oriented goals (e.g., CPA, CPC, CPX). If a campaign does not hit the minimum, many marketers deem it a failure and cancel the flight, which prevents them from capturing an immense amount of value—especially when it comes to retargeting.
While customer targeting, re-targeting and re-messaging have all been around for a while, it seems to really have caught fire over the past three to four years. Part of the current debate centers on whether a display campaign that fails in terms of its CPX goals actually has value in terms of building an advertiser’s cookie pool.
The challenge for most centers around time. How long do you have to run a campaign before you can expect payoff from your cookie pool? It is best to think of display campaigns in terms of two equally important stages: “audience acquisition” and “customer retargeting.”
In Stage 1, a marketer launches a display campaign and hopes to build awareness and generate actions (e.g., registrations or purchases). With the traditional model, a marketer would base their judgment of success or failure solely on this first stage and these initial actions. In other words, I spent $X and I generated this many leads or this many sales and so my ROI for the campaign is either positive or negative compared to other marketing vehicles.
The traditional model misses the fact that with each site visit (or e-mail “open”) the marketer has the opportunity to place a cookie — (i.e., identify an individual). Over the length of the campaign, you will have added to your cookie pool, also known as your online audience.
In Stage 2, a marketer is able to capitalize on these cookies through a retargeting campaign—which are often the most effective campaigns you can run since you are connecting with people who have already visited your site, opened your e-mail, or expressed interest in your product/service. A marketer is able to continue that conversation across the internet by creating personalized ads that—we all hope—are highly relevant to each prospect. Thus, by using retargeting, marketers will generate additional actions and at a better scale than just through audience acquisition.
However, it has been hard to capture this additional value in the classic CPA model. In fact, an inexpensive CPM campaign that delivers no actions and does nothing but increase an advertiser’s online audience (i.e., cookie pool) can be one of the best campaigns once the retargeting actions are factored in over time. And to make sense of it all, one has to be able to value a cookie.
Determining the Value of Your Online Audience
To determine the value of a specific cookie, marketers should consider the following six factors:
1. Action Value – What value does each action warrant based on your business model?
2. Conversion Rate – What percent of people who visit a landing page convert (i.e., take the action you are measuring)?
3. Cost of a Click – If you bought media on a CPC basis, what is the resulting cost of a click?
4. Cookie Value – Based on the “Action Value” and “Conversion Rate,” what is the gross value of each cookie that comes to the marketer’s landing page?
5. Marginal Value of a Cookie – What is the net value of each cookie that comes to the marketer’s landing page once-acquired, including of the cost of obtaining the retargeting click?
6. Marginal Value of each Acquisition Campaign Click – What is the net value of each cookie that comes to the marketer’s landing page, including of the cost of acquiring the cookie, and the subsequent retargeting click
While 1-3 are pretty standard, 4-6 are more esoteric. This approach has the power to change the way advertisers are running and valuing their display campaigns. But not all cookies are created equal. Here are a few “gotchas” to keep an eye out for:
First: Cookie Pool Decay. Just like Oreos, cookies have a shelf life and can expire or be deleted. To counteract these trends, marketers need to continually run both audience acquisition and customer engagement campaigns.
Second: Brand Fatigue. How many times can a brand hit a prospect before losing them or numbing them to the message? Marketers need to determine, maintain and frequently review metrics that shed light on their audience behavior and drop off. They must then use these insights to continually optimize media with tools.
Third: Landing page limbo. Any good marketer will tell you that an online marketing campaign will fail if the value proposition is not strong and the conversion process is un-engaging. So marketers must continually evaluate and optimize their “digital storefront” to ensure the maximum number of conversions.
Today, most marketers evaluate display campaign effectiveness on initial actions. Unfortunately, by doing so, they may be missing a completely different source of value—building their cookie pool—that enables them to execute more effective retargeting campaigns over time. And this, in turn, can change the very way they think about display marketing.
- Pingback from Operative's Monday Morning Mashup | Operative Blog