Greg Krehbiel on Publishing and Online Marketing

A professional marketing that I know says that “marketing ROI” is mostly nonsense. He says you really can’t accurately attribute marketing costs to sales. There’s just too much chaos to pretend that a simple formula really works.

I’m not quite as skeptical as he is, but I do agree that it’s a far more complicated problem than our models and spreadsheets and projections would indicate.

The “marketing ROI” entry in Mother Goose’s Book of Marketing Fairy Tales, might say this is what happens with your ad campaigns.

1. A prospect sees your ad and clicks on it
   • The ad server (e.g., Google Adwords) drops a tracking cookie that corresponds to that effort
2. The prospect goes to your custom landing page and through the purchasing process
   • Your page is coded to match that effort so your back-end system knows the source of the order
3. Your new customer gets a “thank you for your order” page
   • The conversion code records an order from the ad

   • Your back-end system records an order on the corresponding priority code
4. All the codes match up nicely. Yeah.

In Grimm’s Nursery Rhymes for Real-World Marketing, this is what happens with your ad campaigns.

1. A prospect sees your ad

2. Life happens
3. Your new customer purchases
4. Your codes are all screwed up

Digging into step #2 a little deeper, here are some examples of the kinds of things that can happen to make the conversion code from your ad campaign different from the code that gets into your back-end system.

Scenario 1 – the no-click conversion

1. Your prospect sees your ad but doesn’t click on it

2. The prospect googles some of the words in your ad, clicks on a natural (not-paid) search result and lands on some other page that has nothing to do with your ad campaign
3. Your new customer purchases the product from the wrong landing page
4. Your back-end system records an order on some irrelevant code
5. The money you spent on the ad seems to be wasted.

Scenario 2 – the click and print conversion

1. Your prospect sees your ad and clicks on it
   • The ad drops a tracking cookie that corresponds to that effort
2. Your prospect reads your customized landing page with all the right promotion codes on it, prints it out and shows it to his boss / wife / palm reader.
3. The boss approves the purchase.
4. Your prospect goes to your site and navigates to a generic order page with the wrong promotion codes
5. Your new customer purchases and goes to “thank you” page.
   • The ad system records a conversion, because the customer got the tracking cookie and made it to the “thank you” page.

   • Your back-end system disagrees because the order came in on a generic order page.

Scenario 3 – the click and delete cookies conversion

1. Your prospect sees you ad and clicks on it
   • The ad tries to drop a cookie, but your customer has them turned off, or deletes them later
2. Your prospect goes to the custom landing page and purchases
3. The thank-you page can’t record a conversion because the tracking cookie is gone.
4. Your back-end system shows an order, but the ad interface doesn’t.

Scenario 4 – The “can I find a better deal?” conversion

1. Your prospect sees your ad and clicks
   • The ad drops a tracking cookie that corresponds to that effort
2. Your prospect reads your customized landing page with all the right promotion codes on it, then wonders if he can get a better deal on another page.
3. Your prospect spends ten minutes searching the web for a better price and ends up on some other page with coding that doesn’t match your ad campaign.
4. Your new customer purchases and goes to the “thank you” page.
   • The ad records a conversion, because the customer got the tracking cookie and actually purchased.

   • Your back-end system disagrees because the order came in on a generic order page.

Scenario 5 – The 30-day cookie conversion

1. Your prospect sees your ad and clicks
   • The ad drops a tracking cookie that corresponds to that effort
2. Your prospect reads your customized landing page with all the right promotion codes on it, then gets distracted by something and gets on with life.
3. 29 days later you send an email to this same person promoting the same product. The customer thinks, “yeah, I want to buy that,” clicks on the link in your email and goes to a custom purchase page – for the email campaign.
4. Your new customer purchases and goes to “thank you” page.
   • The ad records a conversion, because the customer got the tracking cookie and actually purchased within 30 days.

   • Your back-end system disagrees because the order came in on an email promotion page.

Scenario 6 – The “I don’t buy online” conversion

1. Your prospect sees your ad and clicks
   • The ad drops a tracking cookie that corresponds to that effort
2. Your prospect reads your customized landing page with all the right promotion codes on it, but wants to purchase by phone, mail or fax.
3. Your back-end system records on offline order. The online ad gets no credit.

All these scenarios happen all the time, and as you can see, there are any number of ways that the tracking from your online ad system can get messed up — either in its own right, or in its relationship to your back-end system.

The conclusion is that you have to hold on to your marketing ROI calculations somewhat loosely.

It’s fair to compare the ROI of two campaigns within the same system — for example, two different keyword campaign in Adwords — because it’s reasonable to assume that all the chaos mentioned above would happen about equally to both of them.

But it’s not necessarily reasonable to disbelieve the conversion statistics from an online marketing campaign because your back-end system isn’t showing the same results.

It’s important to track things as well as possible, but at some point you just have to believe that it’s working something like what the reports are saying.

Greg Krehbiel Adwords, Analytics, Display ads

From what I’ve heard, only about 18 percent of web users ever click on a display ad. But studies have clearly shown that display ads affect people’s behavior. Sometimes people see the ad and enter the URL directly. Sometimes it leads them to search on a brand-related term.

For example, a web user might see an ad for a Dell Lattitude on the side of the page and then type “Dell Lattitude” into his handy little google search box at the top of his browser. At that point he might click on an organic link or a paid link.

What advertising campaign is going to get credit for any resultant conversion? If you’re measuring by clicks, it won’t be the display ad.

Which leads us into “view-through conversions,” where the display network takes credit for some percentage of conversions based on the fact that the ad was displayed to the user some time before conversion. (The time window can vary.)

But is that fair? Maybe the person was going to convert anyway. Maybe he never even saw your ad.

Another option is re-marketing, where a visitor comes to your site, gets a cookie, then goes out into the world and sees ads to draw them back to your site. It’s effective, but how do you measure how effective it is? What are you measuring against what?

It seems to me that the logical way to do this is to use a combination of re-marketing and an A-B split.

IOW, some number of people come to your site and get a cookie. That population is split into two groups. Group A goes off into the world and isn’t exposed to any of your ads. Group B sees your ads. Compare the behavior of Groups A and B. Any difference can be safely attributed to the ads on that network.

For some odd reason, display ad networks don’t seem to be able to do this, and I’m not sure why. It doesn’t sound technologically difficult, and it would convincingly prove the effect of the ads.

Greg Krehbiel Display ads

Yes, they do.

Display ads don’t usually work in isolation (i.e., on a click to purchase model).

However, several studies have shown that display ads result in more searches on branded terms and more visits to your website. The display ad salesman will tell you that if you’re making a profit in those areas — and if you’re not you might be in the wrong business — then display ads could make up for their dismal click-to-purchase perfomance by helping your channels that are making money.

The problem with this kind of analysis is that it doesn’t account for how much you have to spend on display ads to get the lift.

For example, just to make the numbers easy, let’s say you get 100 “direct” visits to your site every day (from people who type in your address), 100 visits from natural search results and 100 visits from paid search results.

Let’s say you can convert 5% of your visitors into $10 sales. That gets you $150 a day in revenue. (5% of 300 visits times $10.)

Of course you’ll have different numbers for the different sources, but let’s keep this easy.

Now let’s say that a display ad campaign can increase each of these by 50%. So now you’re getting $225 in revenue. (5% of 450 visits times $10.)

If you spent less than $75 on your display ad campaign, you’re doing well. If you spent more, maybe not. You have to look at the numbers more carefully than we’re doing here.

The point is that the simple claim that display ads increase search by 50% doesn’t tell me anything useful. How much do I have to spend on display ads to get that 50% lift?

What we really need is a study that compares PPC spend with display ad spend. IOW, what percent of your PPC budget do you have to spend on display ads to get what percent lift?

Greg Krehbiel Display ads

This is an old story, but interesting. New Study Shows that Heavy Clickers Distort Reality of Display Advertising Click-Through Metrics

“The study illustrates that heavy clickers represent just 6% of the online population yet account for 50% of all display ad clicks.”

Greg Krehbiel Display ads

I get calls from time to time from ad salesmen who want me to spend $10,000 (or more) in display ads on their sites.

They promise to give me a great deal and they say their site is a great fit for my products, so I ask them if they’ll take the risk and charge me on a cost per acquisition basis?

Of course they aren’t interested in doing that, so I’m stuck with plopping down $10,000 (for which I might get $200 in purchases — if I’m lucky), or just giving up on display ads.

(They’ll also give me the story about how you can’t calculate the value of display ads on a click-to-conversion basis, and that the ads pay for themselves in branding and increased search, etc. I’ll post something on that another day.)

If I don’t want to buy specific real estate on specific sites, I can also run display ads on a network, like Google Adwords. I can even target specific sites on Adwords, which gave me a good idea the other day when a salesman called.

Salesman Joe from mygreatsite.com asks me to spend $10,000, and I go through the old cost per acquisition pitch (just for fun — it never works), and the conversation lags. Joe says “sign up for $10,000, and if it isn’t working after a couple weeks, we’ll cancel it and save the balance.”

That’s a little nicer, I guess. That way I only waste $3,000 and get no revenue at all.

But then I pull out my trump card.

I take a quick look at mygreatsite.com and notice that it runs Google ads, so I set up a site-targeted campaign in Google — text and display — that might cost me a couple hundred bucks. I tell Joe to check back in three weeks and we’ll look at the data. If the Google ads worked, that tells me there might be some hope for selling my products on mygreatsite.com, and I’ll consider the $10,000 gig. But if the Google ads don’t work, it’s not worth the risk.

(Of course I’ll always take the cost per acquisition deal if they’re so sure it’s a great opportunity.)

Greg Krehbiel Display ads