Monday, October 31, 2011

ROI – Return Of Intelligence

Last week, Daisy Whitney wrote a piece on how media buyers are having a hard time reporting back to their clients whether their dollars were well spent with their online media buy.

This is not good news at a time when projections are indicating a 25% increase in digital video in the next year. (Forty percent of advertisers already say that it’s too hard to measure ROI to make online video a practical consideration.)

As Ms Whitney says, “…if you can’t measure it, that’s a problem.”

No argument there.

My argument is that they’re trying to measure the wrong thing.

In the past, any ROI measurement correlated to sales. Why? Simply because it’s all we could really measure. TV doesn’t give us any data that is particularly helpful in this regard. Impressions are the best TV can do and we know how little help they are.

The digital platform is different.

Instead of too little data, we have too much. But the one piece of data that’s still missing is how the media buy truly relates to sales.

So maybe sales isn’t the salient point with online. I know, that’s sacrilegious, but hang with me.

What digital data gives us is a way to hold different groups accountable on the way to a sale.

Media is accountable for how many people are exposed to the message.

Creative is accountable for how long people are involved with the message.

Two different sets of data. Two different ways to deliver a ROI.

And the reason it works is because there are two different budgets involved – media and production.

In regards to creative—since we can now measure the amount a time a viewer spends with a commercial—the advertiser can get an immediate ROI on the production dollars spent to produce the creative.

If all thirty-seconds are consumed by viewers, that’s a better ROI on production dollars spent than if only 10 out of 30 seconds are consumed.

Now, if advertisers paid their creative agencies based on how long viewers watched the commercial for—rather than how long the agency worked on it for—then their Return on Investment would be based more on outcome than effort.

Obviously, sales are the end result for any dollars spent.

And, it used to be simple to hold an agency accountable for sales when only one agency was involved. If sales went down, the agency got fired.

But now instead of an agency of record, advertisers have a record number of agencies. If sales go down, do you fire the whole bunch?

Chaos.

But, by using data to hold each individual agency accountable for what you hired them for, then you can more easily find the weak link.

And then, fire intelligently.

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