Analytics Strategist

May 20, 2013

Hi Mr. Wanamaker, only half of your money is wasted?

Filed under: Advertising, metrics — Huayin Wang @ 6:09 pm

Everyone working in the advertising industry, or related fields, has probably heard of the famous Wanamaker Quote: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”

What he said seems obvious at first; however, when read a little deeper, it could be problematic.  Below are a few related points:

a) The waste may not be 50%; it may in fact be as high as 99%

Let’s begin by asking, how did he estimate the advertising waste?  Can someone know that amount of waste without being able to identify which part?

There are two ways to estimate media waste: the first one involves breaking down advertising campaigns into different tactics identifying ineffective ones.  The tactics can vary by audience attribute (age, gender, behavioral), geo and creative etc.. Take gender as an example, you Male audience maybe twice as effective as Female, so you treat Female tactic as Wasted. The problems with this estimation methodology: the ineffective tactics are not all “wasted” and the effective tactics contains waste tool.  The estimation is also quite subjective, since it depends not only on how you define “effective”, but also on how you breakdown campaigns into “tactics”.

The second way of estimating waste, the only defensible one in my view, relies on counting outcome directly.  Take direct response campaign as an example: if conversion is the outcome, the money spend without resulting in conversion will be wasted.  If display ads reached 30 millions of users and only 3,000 converted, then the spend on the 99% of users is wasted.  The actual waste number can be even higher, when considering that the ads shown to the converters may themselves be ineffective and should not be counted as incrementally effective.

b) It is not just about measurement (alone ), but more about granularity of the underlying measurement

Knowing how to measure the waste, the next question is: how to solve the waste issue?

The common (traditional, offline) scheme is to define a targeting audience first, following up with a “waste” measurement that is then defined as media delivered outside of the targeting audience.  This practice ignores the waste inherent in the definition of the target audience.  Age 20-34 maybe five time as likely to convert as others and therefore a valid target audience.  However, if the average converter rate is 1%, then conversion rate for this target audience is only 5% – which means 95% is waste as well.

Creating different targeting tactics and measuring them does not necessarily addressing the issue of waste! I am horrified to see how many people believe that bring offline GRP metrics to online solved the display advertising waste problem.  Age and Gender data do not generate tactics that are waste-less.  You need to use higher dimensional data to create and identify much more granular audience and context/creative groupings in order to truly combating the advertising waste problem!

 

Is GRP metrics the cure of online advertising waste?  I do not think so.  In fact, I think it will do more harm than good.

c) Targetability is key, but often ignored

To not making this a long writeup, I will make the point really short: without event level targeting, we are not going to solve the waste problem; in fact, we are not even facing it straightly.  If nothing else, the most granular level of media transaction mechanism, such as implemented in AdExchange RTB today,  is necessary.

Advertisements

Blog at WordPress.com.