Wanaker's dilemma finally solved

Start Up Magazine, July/August 2008 issue
By Steve Shearman, CTO, Touchpoint

The measurability of digital media is revolutionising advertising. But getting the best bang for digital buck requires marketers to think differently. Perhaps counter
-intuitively, doing things 'on the fly' will often yield better results than conventional planning.

-- When advertising industry legend and US department store founder John Wanaker in the late 19th Century uttered the words "Half my advertising is wasted; I just don't know which half," little did he know that advertisers would wait more than 100 years for decent answers.

The mystery of advertising effectiveness has to a large extent been solved for many of today's marketers, who might look back to 1998, the year GoTo launched the first commercially successful cost-per-click advertising service, as the industry's turning point. (GoTo was subsequently renamed Overture and then bought by Yahoo!).

Pay-per-click search has revolutionised the allocation of media spend and expectations of advertising return. It's measurability has driven a fundamental shift in media value - from measurement defined by media companies to those defined by advertisers, who, instead of paying for eyeballs (impressions) pay for responses (clicks). But this is just the start. Underlying technology lets advertisers track customer interaction, from click-through to lead capture and ordering. Consequently, cost-per-sale figures and measuring the true financial return of media investment increasingly influence media buying decisions. Programs like Google AdWords take things a step further, providing advertisers with tools to discontinue 'the half that doesn't work' and spend more on the half that does. Look where it's got Google.

As paid search campaigns go mainstream it's worth noting the change sweeping through as marketers trial PPC Search:

• Initially, advertisers typically spend small amounts online (currently six percent of overall advertising locally, which is typically split 80/20 between display and search advertising)
• But early results often show that while only 20 percent may be spent on search it often generates up to 10 times more clicks than online display. So, in the next campaigns the ratios are often swapped, resulting in an even larger jump in sales (search traffic is better targeted, so increases in sales can be exponential)
• While search is initially only a small percentage of overall budget, it accounts for a much bigger slice of total media driven traffic. Consequently, more budget is progressively being allocated to search advertising by marketers.

If you talked to a search marketing expert, someone like Mark Sceats from SureFire Search, he'll tell you that it's not uncommon for online retailers and other companies tracking responses to invest up to 50 percent of their advertising budgets in search advertising - simply because it's more profitable. "Unlike traditional media, which is bought on potential eyeballs and brand measures, running a search campaign is more like a sophisticated accounting exercise," Sceats said. "We break the client's budget into small media purchases, based on thousands of keywords. Then it's case of applying a combination of creativity, experience, technology and basic accounting to continually replace the worst performing keywords and ads with new ones that generate higher sales or profits."

He said, for example, a search campaign used by an appliance retailer might show that the keyword 'green fridge' ends up costing $50 per sale, whereas the keyword 'cfc free fridge' costs $70 per sale. Logically, the retailer spends more on 'green fridge' and changes the advertising copy and landing page accordingly.

Unlike traditional media buyers, search marketers don't plan everything at the start of the campaign. They use a process of trial and error and continual feedback to refine their current work, applying lessons to future campaigns. Value isn't just in bottom line terms - search campaigns provide insights about key products, features and purchase criteria important to customers during different stages of the purchase cycle. And if you think this applies only to search, think again. Today, advertisers are also using tools like Txt4Info to track and fine-tune the performance of traditional media placement.

If John Wanaker were alive today his lament might go something like: "I know what advertising works best. It's just that I can't buy enough of it at the right price."

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