Accenture Interactive – Point of View Series
Navigating the Digital Media Market How to maximize the potential of new advertising models
Navigating the Digital Media Market How to maximize the potential of new advertising models A new day, a new pitch. Each with more hyperbole than the last; and all promising untold riches for digital media budgets—lower costs, larger scale, faster speed to market, more granular targeting. The dizzying array of options to engineer targeted, efficient and scalable strategies for spending ad budgets is growing daily. No wonder that chief marketing officers (CMOs) are finding themselves uncertain of which service provider to believe, which ad strategy to follow, and which combination of media options is right for their business. Promising opportunities abound. From Programmatic Buying and Real-time Bidding (RTB) that automate both the targeting and buying of digital ads, and Convergence Buys that bring efficiency across screens, to Pay for Performance (PFP) buys where advertisers only pay when certain metrics are achieved. But what is sacrificed as these promises are met, if they’re met at all? What information does the CMO need to know to adopt the right strategy? And what questions should be asked at every phase?
1
K arsten Weide, “Worldwide and U.S. Internet Advertising 2012–2016 Forecast and Analysis,” June 2012
Horses for courses As spending on digital advertising grows from $87.4 billion in 2011 to an estimated $144.8 billion in 2016, a compound annual growth rate (CAGR) of 10.6 percent,1 the stakes for smart digital spending get higher every quarter. Digital is no longer an addition bolted on the side of a media plan or marketing effort, it’s now often the foundation of the effort to reach consumers and prompt action. To understand the potential of the new opportunities and highlight some of the issues CMOs need to consider before investing, let’s take a closer look at three popular digital ad buying models.
Real-time Bidding Real-time Bidding (RTB), or Programmatic Buying, are catchall terms to describe the growing use of automated tools to procure online advertising, one impression at a time, at scale, based on the unique characteristics of the ad’s recipient. RTB uses numerous technologies—demand-side platforms (DSPs), data management platforms (DMPs), ad exchanges and agency trading desks (buying platforms set up and owned by ad agency holding companies using DMP/DSP technologies). The basic function of these platforms is to allow advertisers to set up the parameters of their respective target audience based on multiple traits, such as demographic, geographic or behavioral traits. The moment an Internet user arrives on a Web page with unsold impression space, the user’s traits and Web history (cookies) are analyzed. Advertisers targeting users with the same or similar traits, bid for the available ad space. The highest bidder for that impression wins and the ad is immediately served to the user. The entire process should take no more than 500 milliseconds to preserve the customer experience. While there is some variance to that model (such as arbitraging), standard display banners are widely available using RTB. Video and mobile ads are increasingly available through these platforms as well. Promise RTB is a fast-maturing technology and will soon comprise significant shares of digital ad budgets in most global markets. Worldwide RTB-based spending is expected to grow from US$1.4 billion in 2011 to US$13.9 billion in 2016, an impressive 59.2 percent CAGR.2
2
K arsten Weide, “Worldwide and US. Real-Time Bidding 2012–2016 Forecast,” October 2012
Since RTB provides access to mass volumes of display inventory which can be targeted using a variety of demographic and geographic overlays, it allows advertisers to place efficient buys across fragmented display channels and target specific customer segments. This granularity of targeting is not yet possible in the mostly demographically-driven buying segments of traditional media. Providers of RTB services suggest that, apart from potentially bringing lower prices, this model automates the time-consuming process of buying and selling digital media, freeing up talent to explore new advertising opportunities. It is also often argued that consumers can benefit by seeing more targeted, relevant messages, bringing them an overall better Web experience. Reality While some of the promise of RTB may come to fruition, there are also issues that need to be considered. First, in most cases, advertisers using RTB lack detailed knowledge about their ad placement—which URL it will appear on, where on the Web page it will be, and whether or not the ad will be visible to users when the page loads. Improper ad delivery can result in wasted budget, or worse, brand erosion caused by appearing adjacent to irrelevant or inappropriate content. Additionally, RTB platforms, especially agency-owned trading desks, rarely share the actual price paid for impressions at auction (the winning bid price) with the advertiser. As a result, advertisers have no basis to verify the accuracy of media invoices, leaving them to wonder if they may have overpaid in fees and commissions. Often, advertisers are asked by their media agency or trading desk to waive the right to audit media that’s run through the trading desk, further obscuring visibility in this area. Given the heated competition for budgets in the space, advertisers are in a good position to demand greater transparency.
Tips for advertisers To harness the full potential of RTB, advertisers should consider asking the following questions: • What is the cost being charged relative to the market cost of the inventory? Advertisers should know the cost details upfront to understand any mark-up applied by the media agency or DSP technology partner. Having the right to audit the media spend is important for cost transparency. • What data sources are used for targeting ads precisely? Since third parties tend to use the same data across many clients, advertisers should consider relying on their own data as the primary source for targeting. • How important is contextual relevance? RTB and programmatic buying works on the general assumption that finding the right audience for the message is the main priority, and the context in which an ad appears is incidental. Definitions of “premium” exchange inventory will vary depending on the media buy and can result in some sub-optimal ad placement. • How is the quality of ad inventory verified? Details regarding the quality of display ads may not always be reported by agencies or publishers— low-cost inventory is only efficient if the targeting, delivery and ad visibility is verified. Contracting for independent ad verification is critical to assess the quality and value of ad placement. • What value do the agency trading desks bring to justify their fees? The RTB model levels the playing field and can be used by small and large advertisers alike, neutralizing the buying clout of large advertisers or agencies that’s common in traditional media. If the model is simply a matter of a technology solution, then advertisers need to seek value from their partners beyond operating the machine.
Convergence Buys Convergence buying provides advertisers with the opportunity to purchase media packages that consist of combined inventory from both traditional and digital channels. Through a single ad buy a company can span a combination of offline and online media— television, radio, print, out-ofhome, Web and mobile. This may be for a single or combined cost per thousand (CPM) inventory depending on the package bought. Increasingly popular are the convergence buys for video across multiple screens and properties from one media owner, often on the assumption that impressions are of equal value, no matter which screen they appear on. Promise Negotiating with one media owner rather than several different media publishers has its benefits—often this helps bring cost efficiencies and also can lead to greater integration, synergy or consistency across the ad buy. Advertisers can achieve economies of scale, reaching their target audience across all of the media owner’s properties in one go. There is also the opportunity to shift inventory relatively easily between channels to meet delivery goals, accommodating changes as needed.
3
aniel Terdiman, “How Oreo’s brilliant blackout tweet D won the Super Bowl”
Reality Some packages are currently sold for one price across screens. For instance, a 30 second ad on a media owner’s television network could be assigned the same CPM and value as a 30 second pre-roll online video running on the same media owner’s website. Or, an advertiser may agree that an ad on one screen is allowed to be used as replacement inventory for under-delivery on another screen. While that may seem rational, further investigation is needed to understand if the target audience is reached equally well on each screen in order to assess whether valuing the screens equally is actually warranted. In addition, given the relative scarcity of quality online video inventory, advertisers need to plan ahead so they are not left with underperforming ad placements. Tips for advertisers To harness the full potential of Convergence Buys, advertisers should consider asking the following questions: •W ill the ads be equally effective in offline and online channels? Advertisers need to know if their ads are getting equally targeted to the right content, demographics, channels and parameters across channels. If, for instance, a TV buy is targeted against consumers between the ages 18 and 49 years, and an online buy is targeted against certain shows, then there needs to be a formula that helps quantify equally effective results to advertisers (across the audience of the TV shows and that of the online channel). When advertisers pay for all channels as if they were equal, and a 30 second ad is found to be more valuable on one channel than another, then advertisers need assurances that the relative pricing for the inventory in each channel is adjusted accordingly.
• Which components of the package may be bought cost effectively in the open market? It is critical for advertisers to look at Convergence Buys in an itemized way to evaluate each component of the package independently. Instead of paying a premium for the entire package, advertisers may be able to purchase certain components of a package on the open market for less than the itemized value assigned in the converged package. Alternatively, advertisers may be able to negotiate an overall price that better reflects the perceived value. • Are there opportunities for advertisers to pursue “convergence” beyond the purchased ads? While Convergence Buys open up many opportunities for multiplatform messaging, the idea of convergence continues to expand beyond traditional ad spaces. Savvy advertisers are also considering how to converge messages across social media. Advertisers need to have flexible ad plans that provide them with options. They also need to think on their feet, to take advantage of these new “converged message” opportunities. Take the example of the Oreo cookie marketing “touchdown” during the 2013 Super Bowl when the stadium in New Orleans was plunged into darkness. Oreo had purchased a TV spot during the game, but the marketing team turned the darkness at the Superdome into an innovative social media opportunity that extended its message and involvement with the event beyond the traditional spot. Within minutes of the blackout, the team assembled a product shot and sent out a timely tweet to the spectators: “You can still dunk in the dark.” The tweet went viral—231,500 tweets per minute during the blackout.3
Pay for Performance Pay for Performance (PFP) buying began with pay per click (PPC) and pay per action (PPA) and is evolving rapidly, allowing marketers to buy not just ‘eyeballs’ but visits, leads, quotes, and even bookings. This media buy is ideal for advertisers looking for specific results or a conversion (for example, a purchase or an appointment) from an ad campaign, rather than just the ability to reach a target audience. The prototype of this approach is Google AdWords™ which delivers clicks to an advertiser’s website on a PPC basis. Adwords™ is so successful it drives the vast majority of Google’s total revenue.4 These buys tend to rely on specific buyer-seller matching, often at the geographic level, and are making inroads in local advertising markets.
4
oogle Inc., “Google Inc. Announces Second Quarter G 2012 Financial Results,” July 19, 2012
5
http://www.opentable.com
6
http://www.merchantcircle.com
7
http://www.zocdoc.com
8
http://www.digitalleadnetwork.com
Promise As the online marketplace evolves and becomes increasingly competitive, the demand to deliver tangible value from online ad campaigns is growing. PFP buys are attractive as the risk of converting an impression to an action is borne by the PFP network. The latter takes on responsibility for generating traffic and helping confirm that appropriate matches are made between buyer’s requirements and seller’s offerings in order to meet a predetermined performance goal. For a customer, being on the receiving end of a well-executed PFP ad should simplify the discovery task. By enabling a relevant offer or content to be served in a timely and effective manner, the PFP network can facilitate the path from message or search to reservation or purchase. The end result could be booking a restaurant via Opentable®,5 a mechanic through Merchantcircle.com™,6 a doctor via ZocDoc,7 or generating a lead from Digital Lead Network.8 Lead prices vary across each category, depending on the value of the customer and the cost of acquisition. The promise and real potential of buying results rather than reach, however, can be best illustrated with an example. Suppose a national removals company wants to generate additional leads in three metro locations where it is experiencing variable demand.
A traditional ad campaign approach would involve regionally targeted CPM buys, perhaps supported by local display advertising in the metro press. However, the company is open to exploring new approaches that provide price accountability and greater certainty of generated demand. Instead of spending its marketing budget on CPM and press, the company experiments with a PFP buy. It registers with a new online directory PFP service, which agrees to provide the company’s marketing team with 30 to 60 calls from qualified leads in the three problematic metro locations. The removal company reasons that the inbound call center will be able to convert the opportunities to quote at 3:1, yielding 10 to 20 new bookings for each location. Anticipating a rise in demand for its services, the company scales the size of the performance buy appropriately. The PFP network acquires the traffic, matches appropriate customers to the company and passes them through via a trackable phone number. Previously, the removal company paid US$4 per click (weighted cost per click) from its media budget for leads. With the new approach, it paid US$6 per lead to the PFP network, but converted the leads into bookings (through the call center) at twice the rate it converted click-traffic on its website. The end result—the removal company gets both the volume of leads desired in the problem locations and converts them to bookings at an acceptable ratio, while only paying for the quotes when and where it needs them.
Reality
Tips for advertisers
A number of transaction based networks are already focusing on the “Cost per X” acquisition type models—platforms such as Redbeacon9 and MyTime,10 and matchmakers such as ZocDoc, Quotify,11 Carsales.com12 and MerchantCirle.com™ to mention a few. Many of these organizations are making significant plays in the local and mobile advertising markets that are forecasted to be worth nearly US$150 billion in the United States alone by 2016.13 However, to really know if conversion buying is cost-effective, advertisers should carefully evaluate whether direct cost per action (CPA) from a performance network is delivering better results than buying media through more standard models like CPM.
To harness the full potential of PFP buys, advertisers should consider the following recommendations:
The current implementations of PFP are largely focused on social, local, and mobile markets and seek to improve the transactions between customers as well as local goods and service providers. As a result, many PFP networks are category-specific and often regionally fragmented, which may be less beneficial for national-level brand advertisers.
• Get local. It is important to verify that the PFP network has the ability to access geo-specific online search activity. Knowing which categories consumers are searching at the local level provides a specific picture of demand for services that can be matched to localized leads. Failure to do this could result in unsatisfied customers who do not return, leading to a longer-term decline in quality traffic and conversion rates. This is especially applicable to national advertisers with a local presence (including franchise networks).
9
http://www.redbeacon.com
10
http://www.mytime.com
11
http://www.quotify.com.au
12
http://www.carsales.com.au
13
IA/Kelsey Press Release, “U.S. Local Online/ B Interactive/Digital Ad Revenues to Reach $38.1B in 2016,” November 14, 2012
• Do the initial groundwork. A number of PFP networks may be appropriate to an advertiser’s category, each offering different price points per lead and different lead quality. However, if the lead to be purchased is, say, an opportunity to quote, then the onus to convert still lies with the advertiser. It is important for advertisers to not only monitor the leads generated by various partners, but to also analyze how valuable the leads were in terms of conversions. In addition, advertisers should assess the long term or lifetime value of a particular booking or sale.
• Know your customers. Having a good understanding of the customer’s decisionmaking process is crucial for serving them at the point of need. For instance, customers looking to buy a new house have a number of needs, each with their own specific decision process and criteria. Having prior knowledge of both (process and criteria), and also the ability to engage the services of a network that has a good ontology mapping technology, will enhance the quality of leads. It will also make the advertiser’s offering highly relevant to customers. • Be seen. Market presence still plays a role in this performance environment and can be driven by traditional forms of advertising. However, a more effective approach can include social commentary, recommendations, rating, and referrals to drive the volume and quality of traffic. • Verify, test, learn. Advertisers need to monitor and analyze media placement, contextual appropriateness, and CPA alongside other media strategies and continue to evolve their approach.
Look before you leap Irrespective of the type of media buy—RTB, Convergence Buys, performance buying or even direct buys—there is a need for rigorous analytics. Independent verification that the ads ran according to the promise made to the advertiser is critical. Tracking and verification technologies can help the marketing team assess buy performance, influence changes to their company’s forthcoming online display strategy, and revise media buying parameters to improve targeting and efficiency.
Buyer Beware The case for digital ad verification Take the example of a hypothetical consumer goods company considering digital media options as a cost effective way to reach its niche target audience in the United States. The company’s media agency recommends using an RTB platform to bring precise targeting at a low cost. Some months later, when results wane and there are reports of ads appearing next to irrelevant content, the company decides to investigate further. The CMO contracts a third-party service, independent of the media agency, to help verify if ads were running within the agreed environments and whether they even had a chance to be viewed.
These technologies can also be instrumental in determining the best performing vendor partners, outlining areas of potential quality and stewardship improvement amongst vendor partners and in finding a way to monitor and negotiate a fair price for actual delivery. Digital technology is empowering. It can enable media providers to offer more compelling, targeted and efficient ways for advertisers to purchase inventory. Moreover, with analytics and insights, advertisers can determine which new buying model is proving most effective.
Using proprietary tracking technology, the verification provider can identify the exact websites on which the ads appeared, the geographical location where they appeared, and the extent to which they could be viewed by the target audience. The findings are sobering: • Over 50 percent of impressions were served to websites that were completely irrelevant to the company’s products and not well aligned to the core target audience. • There was a major spike in impression delivery, with nearly 22 percent of the campaign delivered on a single day instead of paced evenly over the entire month.
This is why the new digital media buying models are gaining in popularity. In fact, in the not too distant future, TV and other ad placements may more commonly be bought and sold in the same way as digital media— all tied to even more rigorous targeting and delivery analytics. Daunting or confusing as the current digital media buy may now appear, advertisers can leverage them to their advantage by asking pertinent questions and having the right tools in place to verify if a particular deal is right for their business.
• About 35 percent of the impressions were delivered on just one website, increasing frequency with one audience and limiting reach to other audiences. Based on these insights the CMO instructs the agency to make significant changes to the company’s forthcoming online display strategy and to revise buying parameters, improving targeting and efficiency on buys by more than 20 percent.
To learn more about evaluating new media buying models, contact: Kerry Bianchi kerry.bianchi@accenture.com Jason Juma-Ross jason.juma-ross@accenture.com Kevin Rettig kevin.rettig@accenture.com
About Accenture Interactive Accenture Interactive helps the world’s leading brands drive superior marketing performance across the full multichannel customer experience. Working with over 4,000 Accenture professionals dedicated to serving the marketing function, Accenture Interactive offers integrated, industrialized and industry-driven marketing solutions and services across consulting, technology and outsourcing powered by analytics. Follow @AccentureSocial or visit accenture.com/interactive.
About Accenture Accenture is a global management consulting, technology services and outsourcing company, with approximately 261,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com.
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