I recently went to the final event of Unrulyversity in London for 2014: busting marketing myths. It was such a great insight into what aspects of online advertising are profitable, I decided to share some of the precious gems with you.
If you’ve never been to Unruly HQ, a visit is well worth the train ticket. The talk was held in the Clubhouse, in a room that felt like a fancy Shoreditch living room turned into a cinema. Full marks for interior decor, though the carrot and celery sticks let the side down when it came to nibbles. So, with a grubbing stomach I sat down waiting to start busting marketing myths.
Online advertising as an industry is worth more than $35 billion worldwide and that number is growing every year. With such large figures being poured into the sector, it is really crucial to work out which aspects of the industry are actually producing profit for companies.
This was the mission of Anja Lambrecht, who presented at the talk. For those less experienced in online advertising, the whole process is often described as an art. You get a lot of data on your adverts and then you are expected to work out from all those numbers how efficient your ads are (a lot doesn’t really describe the amount of data you get from advertising such as AdWords). In short, you need to calculate your return on investment (the famous ROI). How do you do that? Well, that’s where it gets difficult because you need to quantify the value of different outcomes from having employed an ad. That isn’t always straightforward but let’s keep things simple.
Let us assumes, says Anja, that an ad is costing you $0.5 for each conversion (let’s say a conversion is a sale, for the purposes of this example) and that the margin of profit for each conversion is $30. You need one every 6000 people who click on your advert to break even. You have to pay for 6000 clicks and hope that one of those translates into a sale just to stay at cost price. If your advertising is highly targeting, that statistic generally improves by 10%.
Obviously, making sure that every click on your ad is worth the expense is key. So what do businesses often do, which is costing them money rather than gaining for them?
1. Big companies really shouldn’t bid for their company names
First one probably doesn’t apply to you but it’s a fun fact: if you’re a big and famous brand, don’t bid for your company name. If someone types in Mercedes into Google they are most likely looking for the Mercedes website anyway: there’s no need to compete in the fight over ad rank for your brand name. It’s pointless: users are looking for you anyway. In fact, Ebay has taken the message onboard and their ads for computers don’t bid money for anyone typing Ebay: those people will find you without spending the money on advertising to them. This is probably different for small or unknown companies but you should look into this and possibly test it.
Fun fact number two about Ebay: they don’t need to advertise that they sell phones. That kind of advertising is losing them money, people know so anyway and promoting such ads is simply costing clicks which would be gained through organic search anyway.
2. Retargeting doesn’t have to be particular
Retargeting is one of the big crazes of online advertising currently. The basic principle is as follows: you visit a website. Let us suppose you really want to buy your mum that fancy pair of bright orange wellies she always wanted but never dared allow herself. You go on a website, you find those orange wellies. You think about it and then you stop: you’ll think about it. Well, you then go to your favourite news website, you move onto a free online games platform passing via some random blogs you’ve never visited before. It’s only when you get to the second blog you realise something sinister: those orange wellies are following you! An advert keeps popping up on each website you visit reminding you of those orange wellies. Finally, you give in. Mum really did want those wellies, didn’t she? So you click on the ad and get them for her.
Remarketing identifies potential buyers by leaving a cookie on their computer after they have visited your website. Then, when those potential buyers go to other websites, that cookie on their computer gets activated and your ad appears on the website they are now on, which has nothing to do with orange wellies. Your remarketing campaign will follow them, like a virtual stalker in the dark streets of Internet-metropolis. Pretty scary, eh? Well, it’s a good way of finding buyers more likely to buy your product: they have actually seen your website already, so they are receptive.
The myth is that remarketing is most effective when the stalker-ads are very precise, e.g. when the orange wellies appear, rather than an ad about “wellies in general”. Well, Anja Lambrecht’s study has found that at least for purchases with long decision-making processes, precise ads are not as effective as is believed. In other words, an ad about “holidays in the sun” as opposed to “holidays in Greece, at hotel X, leaving on day Y, as you searched earlier” is more effective, or at worst roughly as effective as the precise ad. The broad idea of what the users want is more important than the particular details. This is most likely connected to the stage in the buying process at which most people are retargeted: they want the general concept rather than the particular details. In fact, even buyers in the later stage of the buying process aren’t affected particularly better by particular ads rather than general ads.
3. Twitter trends? Don’t bother
The final myth blown out of the water by Anja has to do with twitter trends. Lots of companies spend ages trying to engage with trend-leaders on twitter, targeting ads at them, thinking that a trend-leader is more likely to engage and respond to ads placed carefully to fit in with twitter trends. For those unsure, a trend-leader is a twitter user who tweets about things and uses hashtags which become popular (and appear as trends in your twitter sidebar) early on. Back to the believers: how wrong they are! In fact, Anja’s study showed that the most responsive buyers to promoted ads on twitter were those who came across the trend on the third and fourth days of the trend. Moreover, the response was no better than for ads that were not connected to trends. Moral of the story, don’t bother creating targeted ads around trends, aiming at the trend-leaders. The only unknown quantity in this study – a very important one – is how influential and important those trend-leaders are in determining and promoting trends and ads…
So, moral of the story: not all online advertising is profitable advertising. Do your research and test all your advertising to make sure it really is returning on your investment.
If anything in this post was complicated, incomprehensible or unclear, you probably need a bit more background into online advertising and how it works. Comment below with any questions or check out Google’s help pages on AdWords, which will help you understand online advertising in general.