I posted a text about the rise of performance based online advertising a while ago on my personal blog but, given all the recent positive reports about the growth of online display advertising, I am going to post it here in an adapted and more elaborated way.
Because I don’t know if the rise of the online display ad spend and also of performance-based advertising is good or bad news in a social media world. So, please read and comment away.
When the Internet rose as a “commercial” medium, everything was about the ‘almighty click’. At last a medium that was measurable and had an immediate impact. Internet was seen as the new direct marketing. Email was broadcasting, banners were meant to generate traffic, click, click, click.
Later, research companies – not coincidentally often sponsored by online publishers – made lots of effort to prove that online advertising also has a significant impact on a variety of brand parameters. And of course it does. Everything a brand does has an impact on the brand.
Online advertising is mainstream now and new data from, among others IAB and Econsultancy, show that search, PPC and display ad budgets are on the rise.
We also see that, in general, expenses in the field of more performance based types of interactive advertising are rising year after year.
Performance based online advertising, all forms of interactive advertising in which the payment to the publisher, media partner, agency, etc. are based upon the ‘return’, is hot.
What this ‘return’ exactly is depends on both the advertiser and the type of medium.
Traditionally, with performance based advertising, we think of search engine ads, affiliate marketing, and display advertising, where the advertiser pays in proportion to the number of clicks (CPC), the number of leads (CPL), sales (CPS), or acquisition/action (CPA). In other words: everything that is not based on impressions or Cost Per Mille (CPM).
The rise of performance based: a false sense of control?
Almost all companies that are active in one of these segments are doing well for themselves. In fact: newcomers join the performance based market constantly.
Especially the big international advertising and media groups have been strengthening themselves over the last few years when it comes to performance based.
Advertisers also wish to buy more ads based on performance. That’s obviously the reason why the market is growing and acquisitions are done by the large groups.
Managing costs, the call of Marketing ROI, the recession, etc. all play a role in this evolution. But there is more.
Marketers believe performance-based interactive marketing diminishes their risks. A false sense of control and security? Obviously the agencies and publishers don’t agree since they feel they now have to take the risk instead of the advertisers.
And the latter can’t control the ‘performance’ as well, since the ‘click’ strongly depends on the creative that is being put online but most of all on the perceived value of it for the people that are targeted.
The purchase based on clicks or on performance responds to very precise activation or traffic criteria, but when one concentrates himself solely on that aspect, one underestimates the impact of online advertising on branding.
Advertisers know very well that the communication in traditional media has a brand impact, yet they often forget this impact once they start talking about online advertising.
Of course, this doesn’t mean that only the branding aspect of online advertising counts.
Who and what controls the impact of online ads?
Now, let’s take this a step further and think about online (display) advertising, regardless of the payment model, whether it’s CPC, CPM or cost-per-whatever.
Who is in control of the impact of an ad? People, not agencies, publishers or advertisers
The question is what has the most impact on your online brand nowadays: ads or peoples’ opinions and the stories that are told and shared? And what makes people click or buy? The ad, the perceived value or how it generates word-of-mouth and engages people?
I think we already know the answer. Both conversion and branding are function of value provided to and by people and of engagement. If it’s not relevant, valuable and engaging it doesn’t work.
The consequences for publishers, media houses and advertisers are huge and they certainly go beyond the debate about performance based or not.
In the end for advertisers and publishers, it’s a debate about risks, value, responsibility, efficiency and most of all control.
But how much control do you have? I’ll come back to that later. Let me say that control lies in the value you offer and how people perceive it, across all channels and by listening, involving and participating.
How and when is online advertising valuable?
Let me take it another step further.
Everything can be measured and monitored these days so I guess you know the ROI, cost-per-lead etc. of all your online advertising efforts, at least I hope so.
You can measure conversion, financial “value”, brand value and perception, customer satisfaction, whatever. And a good and strong brand certainly adds to the bottom-line.
Measuring is not about clicks or impressions, it’s about financial value, engagement, customer satisfaction, interaction and the “human” and “connected” value (word-of-mouth…) you get through offering value.
If the value of a brand is defined by people and, as I believe, marketing increasingly is about data, listening, CRM, participation, engagement and the way you act in customer-centric relationships, then how valuable are traditional online advertising formats such as display ads? I guess it’s not about the formats, it’s about how they are used and appeal (or not).
But if they are about positioning and are the online equivalents of, for instance, print ads (which they still often are) instead of about engagement, relevance and value (which can mean many things in this context), they have no intrinsic value.
Do they also provide a false sense of security like performance-based advertising seems to offer but here in the form of the sense of “safety” IAB formats and good old “proven” forms of online advertising, such as display, offer?
The allocation of advertising and marketing budgets: think twice?
Let’s take the debate one more step further and look at the control advertisers have again.
As I wrote several times before, brands are defined by people within and around the businesses, the so-called “brand owners”. Ask yourself again: how much do we own in fact when it comes to our brand? And how much control do we have over the performance of online ads?
What makes an ad perform? I said “people” before. But what makes people interact with online ads? Is it the creation, the chosen payment model and medium, or could it be the story and response of the Internet user who, in these times of social media, decides by himself what is relevant and useful? It’s always a mix but in the end the Internet user has most control.
So, isn’t it just about time to gradually refrain from talking about clicks, impressions and even brand-related parameters and start looking at interaction, perceived value, word-of-mouth, engagement and social impact? Customer-driven and -centric metrics?
People talk about ads, that’s for sure. Let them talk more by making your ads more relevant.
But maybe, most of all, think about your marketing spend. The time to shift budgets from ads to conversations, content and value is now. Think about it. More for online ads? Or more for blogs, more compelling content, cross-channel marketing, social CRM, etc.? And thus more for value, buzz, stories and…leads?
In an era where word-of-mouth, data, cross-channel, customers and customer satisfaction rule, I would think twice.