March 9, 2018 Digital Advertising: Fear of the Unknown (The Epidemic)
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After spending the better part of a century crafting narratives to be shown across various broadcast media in spray-and-pray fashion, consumer packaged goods conglomerates have turned accusatory towards the most highly accountable forms of media of all time. Since Facebook and Google won’t guarantee results and won’t engage in endless dialogue about the dubious notion of “brand safety,” big advertisers are in saber-rattling mode.
As my friend Jonathan Mendez noted, this type of rhetoric says as much about P&G (and others, like Unilever) as it says about Google or Facebook.
P&G cutting their digital marketing budget (once again) says more about P&G than it does about digital marketing.
— Jonathan Mendez (@jonathanmendez) March 5, 2018
Google and Facebook are arguably light years ahead of the broader display advertising ecosystem, which some agencies and martech firms still seem to think they can tame with “smart machine learning.” So I wouldn’t be so quick to condemn Google and Facebook.
The “programmatic” (display) realm (smart, optimized, machine-learned, etc.) that big agencies have to sell to large clients – hungry for reach – in reality won’t perform unless the scope is narrowed.
That narrowed scope won’t do for P&G and the like, so they’ll wring their hands and blame martech, agencies, etc. for not “performing” or “committing fraud.” Talk about throwing out the baby with the bathwater.
But you don’t have to be a gargantuan spender to exhibit paranoia about where ad dollars are going. Or to somehow believe that, in industries that are powerfully driven by ad dollars, there is some alternative to spending those dollars.
Yes, Virginia, it works.
We’ve been fortunate to work for some clients that bring solid budgets to the digital realm. I guess you either face that reality – spend or be left behind – or you don’t. (I made a decision long ago to focus our services primarily on PPC, because as I met firms interested in SEO, many didn’t feel like they were “marketing” or needed a “budget.”)
One new-to-us client, in finance, came to us with a non-functioning PPC program. What had worked for them for many years? Some TV advertising, event sponsorships, and direct mail. These were performing worse and worse. Growth had stalled out. But having had initially poor experiences with it, they were skeptical that PPC would work for them. Perhaps keyword prices were just too high, or Google made things too complicated.
As it turned out, PPC did work, so the budget rose from around zero dollars to about $1.0 million per year in spend. Not the world’s biggest success story, but for us and that client, bread & butter.
Importantly, that client assumed that any talk of “marketing channels” equates to some kind of budget, and allocation decisions. They didn’t think they could improvise their way to free PR, free Google rankings, free viral love, or whatever. Their experience buying expensive media in traditional channels made them, if anything, more open to experimentation and to taking an aggressive stance. And – as is so often the story – they became addicted to the many moving parts that one can optimize in the digital realm.
By contrast, we’ve also met business owners slow to adapt to the drying up of fortunate loopholes in the digital lattice. They qualify as “hopeful.” Hope, as you know, isn’t a business strategy.
Some folks will accept any outside encouragement they can find to avoid spending the ad budget. They hear that advertising is “the tax you pay for being unremarkable.” This is attributed to Robert Stephens of Geek Squad. (More helpfully, Noah Brier writes that Advertising is Not a Tax for Being Unremarkable.)
At a smaller-than-P&G level, then, we’ve seen a thing or two over the years. We’ve noticed some common themes in (a) hopeful assumptions around “what, other than the most obvious, reliable growth channels, will continue getting us those leads/sales,” and (b) symptoms of deep-seated fear of waste in ad spend.
What are the alternatives again?
On (a), we’ve noticed certain channels or techniques (we won’t even count classic SEO!) are seen as “fallbacks” that exempt a business from the need how to study and iterate on a paid media strategy. The first is the “mystery channel,” as in “we’re already doing amazingly well with one of our other key channels – in fact, we have a $7 CPA in it!” Typically they mystery channel is affiliate marketing, and it offers limited growth potential precisely because of the low reward handed out to affiliates.
Similar to affiliate marketing is channel partners of one form or another. That’s great if you can figure it out, but it has to be admitted that various deal and coupon sites, for example, might themselves be advertising heavily. So the margin you’re giving up to the partner is arguably just them advertising so they can extract value from you by acting as a gateway between you and consumers. Perhaps they’ve even got the whole thing so well arbitraged that they can squeeze you. You’re overpaying. On the other hand, they might be a good deal; the partner’s advertising might be funded by IPO money and large annual losses (for now). But their goal is still to eventually squeeze you.
The second common fallback is really just SEO revisited. This idea of creating remarkable content that people (ahem, search engines) will love. At some point it became a movement spearheaded by a single tool company – “inbound” marketing. I like the sounds of that buzzword. It’s absolutely no different from the synonyms used by Danny Sullivan and Jakob Nielsen when they discussed the principles behind basic SEO back in the late 1990’s (“request” marketing, etc.). There are some differences between SEO, narrowly conceived, and puffed-up definitions of inbound marketing, but any digital professional should be able to grasp the fact that the user experience is holistic and that content is important. The question is, can you live on that alone?
One thing I’ve noticed: once you get serious and willing to invest a little more than feels comfortable, you’re already running clear of the majority of players who just aren’t serious. As you shell out for any type of edge in quality or customer growth, you at least have a shot at reaching the scale where you’re, well, less small… and hence less vulnerable.
You don’t have to be rich to do this, at least not in every case. You can nearly bootstrap this. Some of our clients are in the $5-10 million in revenue range, having started with zero revenues and small investments. A handful are much, much larger than that, also starting with small investments.
To be completely candid, some startups, and some content plays we’ve worked with, have lived on SEO alone up until very recently. Good if you can do it, but not everyone can do it.
Waste is a scourge. Cut as much of it as feasible, but no more.
Regarding (b): to be clear, our agency’s practice is obsessed with weeding out waste. When we take on new accounts, if we can find obvious waste and eliminate it, this can pay for the first few months of our fee… sometimes several times over. That’s a nice way to kick-start a client relationship.
But sometimes it feels like we in the SEM world have gotten almost too accurate, too accountable, too measurable for our own good. We are asked to achieve nearly impossible degrees of predictability and micro-targeting. And I’ve been game to try, I’ll admit. I’ll track performance down to individual postal codes, etc., if I think it can move the needle. (The prudent response, after time, is to realize some of this effort is wasted, and to Sunset Superfluous Segments, as I advised in my piece Geo-Bidding, Simplified.)
Even our greatest successes in digital marketing have been undervalued because up until recently, many of us used last click attribution, which is notoriously unfair to consideration-phase media and long sales cycles. Moreover: current, more accurate, attribution models can’t capture every human nuance, every phase of consideration, every influence. Some information is lost. There is still some guessing. Advertising’s impact is increasingly trackable, but much of it is still merely directional.
There will always be some waste in any ad program. For simplicity’s sake, though, let’s break this down into two basic categories: obvious waste that you can and should cut out; and apparent waste that is closer to random outcomes than poorly-deployed funds. Due to the Law of Inevitability, in any large dataset (especially if you arbitrarily begin slicing and dicing it into various subdivisions), you’re going to see pockets of random luck in both directions. Some big wins and some “losers” that (sometimes) later regress to the mean. If you know how to handle data, understand the customer base, understand how keywords in adgroups and campaigns overlap (and sometimes cannibalize) vis-à-vis the total relevant pool of relevant user queries – you’ll do fine.
Constant optimization is a given in managing paid search accounts. Nicely (and tellingly), robust small-to-midsized advertisers often exhibit less paranoia in their stance towards paid digital media than the fragilista big spenders. Having skin in the game and being close to the action makes it more likely that you’ve got things set up on a solid foundation. You can watch the profit-and-loss daily (or at least weekly), for example.
Still, there are some pockets of paranoia in the ranks of smaller and midsized advertisers, and that misplaced paranoia could also be causing them to misallocate their efforts at finding growth avenues.
Common symptoms of overblown concern about ad waste include:
- A fascination with click fraud and with unproven tools that claim to weed it out, despite Google’s massive efforts and statistically sophisticated profiling of invalid clicks;
- Pausing things, or chunks of things, instead of figuring out how to optimize things, or parts of things;
- Taking some metrics (especially around an individual ad, or keyword) in a report as “the” numbers, failing to notice how (for example) a certain broad match keyword was susceptible to fluctuations in performance and occasional flurries of buying. (“Spikiness” is a problem with all data, and totally normal distributions of events across a given time frame show more spikiness than people intuitively believe.)
- Developing an addiction to negative keywords, rather than taking a more balanced approach to negative keywords (and following a sounder structure and match type strategy that attracts fewer irrelevant queries);
- Swinging too far away from broader match types into a low-reach “exact match paradise.”
Invalid clicks, underperforming segments, spiky broad match impressions, irrelevant queries, etc., are all notorious potential points of waste in PPC accounts, there’s no question. But in successful accounts, well-structured accounts, based on sound business models, etc., hypervigilance around waste and fraud gives way to ordinary levels of tightening where warranted.
If we all agree that the task of grinding out growth and ROI from the PPC channel is devilishly hard, we can at least roll up our sleeves, put on our thinking caps, and resume the task of optimizing this, growing that, shrinking the other, and controlling how much profit we make from every dollar invested. Not every single dollar, of course, but the average dollar, per expected return from the average dollar (not knowing in advance, with 100% certainty, how each specific dollar will do).
The “alternatives,” while interesting and valuable, may only support zero growth (or worse).