Measuring the effectiveness of online advertising ACA webinar April 15, 2011

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1 Measuring the effectiveness of online advertising ACA webinar April 15, 2011

2 Agenda 1. Introductions 2. Background Online Advertising & Measuring Effectiveness 3. Market Context Rapidly Changing Consumer Behaviour Complex Value Chain Massive growth in digital advertising spend 4. Structured Approaches to Online Advertising Understanding how to measure the effectiveness of each approach. 5. Summary, Conclusions, and Bibliography 2

3 Canada In Canada (and globally), is the leading professional services organization for the Entertainment and Media ( E&M ) industry. We have industry-experienced professionals, working to provide solutions to the critical issues facing E&M companies. Digital transformation is a priority for Video Games Television Theme Parks Sports Advertising Radio Business Information Services Entertainment & Media Publishing Filmed Entertainment Internet Gaming Hospitality & Leisure Music Advertising and subscription models Revenue forecasts and business case modeling Cost efficiencies and economic modeling Go-to-market strategies Process mapping Pricing strategies and Pricing Processes 3

4 Consumer and advertising spending forecasts in 48 countries Internet access spending Internet advertising TV subscriptions and license fees Television advertising Recorded music Filmed entertainment Video games Consumer magazine publishing Newspaper publishing Radio Out-of-home advertising Consumer and educational book publishing Business-to-business Entertainment & Media Trends Page 4

5 Background The original promise of the internet and online marketing was: Greater targeting than TV or Newspapers Interactivity versus passive viewing or reading Recommendations from trusted sources Deeper access to better research before buying...leading to a much higher efficiency of marketing $ spend But measuring the effectiveness of online advertising is complicated. The online world does not operate in a vacuum, and advertisers often have many platforms, mixed media, and multiple objectives for their campaigns. 5

6 Objective & Sources for this study Objectives: Pull together and analyze a wide range of secondary research and studies Provide a structure to help advertisers compartmentalize measurement criteria Draw out the key measures for differing campaign objectives Give advertisers benchmarks and empirical data of industry activity The information in this presentation has been gathered from numerous sources: Review of 70+ market studies and reports E&M Outlook Interviews with advertisers and media agencies 6

7 Market Context Audiences are now watching multiple channels, often at the same time. Online campaigns can have many objectives, and are being integrated to all levels of marketing activity. A majority of advertisers believe that online activity will affect the brand, including awareness, recognition, brand loyalty and purchase intent. Finding the best mix across all platforms and media is an art not a science. Online campaigns offer the ability for increasingly granular levels of customer insights and targeting. The availability and preferences for advertising formats (e.g. Video and rich media) are continuously and rapidly changing. For Consumers and Regulators it will be increasingly critical to encourage Opt-In... All of which means that the ways to measure the effectiveness of the marketing activity has increased exponentially... 7

8 Measuring effectiveness Brief Highlights from recent Primary Research A majority of advertisers feel that their current measurement tools are inadequate. To effectively evaluate investments in online advertising, more needs to be done than monitoring traditional click-through rates. More insight is needed to understand the impact of formats on online campaigns. The majority of advertisers express the need for transparent and comparable measurement methods and indicators. Monitoring & analyzing web traffic, assessing customer engagement levels & behaviours, and identifying actions more systematically are just some of the critical measures Converging web data with data from other communication sources (e.g. TV, print) is key in order to enhance multi-channel monitoring to measure and compare the impact of advertising formats on campaign performance. 8

9 The Digital Advertising Value Chain is Complex (1) Source: Entertainment & Media Outlook,

10 A Structured approach to effectively measuring online advertising: 1 Online advertising campaigns with defined objectives Contribution to the Brand Impact of Format on Brands and Sales Integration to Offline Sales 5 6 Importance of Targeting to the Campaign Effectiveness of the Media Mix 7 Impact of Advertising on Browsing Behaviour 10

11 1. Online Advertising Campaigns with Defined Objectives 1 Online advertising campaigns with defined objectives Contribution to the Brand Impact of Format on Brands and Sales Integration to Offline Sales 5 6 Importance of Targeting to the Campaign Effectiveness of the Media Mix 7 Impact of Advertising on Browsing Behaviour 11

12 Online Advertising Campaigns with Defined Measurement Five key levels of objectives for effectively measuring online advertising Indicators Level of maturity and trend in use Awareness Number of impressions Mature, minimum indicator Consideration Interaction Repeat interaction Engagement Number of advertisements viewed, exposure time, display surface Interaction rate/ length of interaction Number of visits, time, depth, recurrence Committing interactions (newsletter subscription, catalogue requests, credit stimulations, quotes, etc.) On the rise, being trialed by many advertisers. Not yet fully available. Developing rapidly, inline with growth in rich media and video. Often only partially y exploited. Mature and fundamental for online retailers. Developing for brand-focused advertisers. Developing, depending on advertisers. Often associated with purchases through recommendations. Still not widely used for measuring branding 12

13 Online Advertising Campaigns with Defined Measurement Which indicators should be paired with which objectives? Objectives 13

14 Online Advertising Campaigns with Defined Measurement Measurement Indicators The key is to understand which indicators are relevant to which objectives 14

15 2. Contribution to the Brand 1 Online advertising campaigns with defined objectives Contribution to the Brand Impact of Format on Brands and Sales Integration to Offline Sales 5 6 Importance of Targeting to the Campaign Effectiveness of the Media Mix 7 Impact of Advertising on Browsing Behaviour 15

16 Contribution to the Brand Branding represents a key priority for online advertisers Original concept was that active internet users should be directed to action. Recent studies have shown that campaigns are valuable for branding activities, not just direct sales through Pay per Click or Pay per Action Individual objectives of advertisers: Retailers increasing web traffic and online sales Luxury Goods and Consumer Goods promoting a brand and not necessarily acquiring customers or increasing sales. Telecoms and Automotive industries combining branding with online sales and customer acquisition. Bain & co, United States

17 Contribution to the Brand Using the Web to build brand awareness Brand recall at D+1 of viewers exposed to a TV or online video advertisement For some sectors, the Web doubled the brand recall compared with TV. Higher online rates can be explained by: Internet s capacity to retain the user s attention Lower number of advertising spots Web is proving to be a successful means of stimulating message recall (e.g. video formats) Panel Nielsen IAG,

18 Contribution to the Brand Processes and resources to measure branding impact Post-tests are used to assess impact of online advertising campaigns on different aspects of branding. Measuring interaction with rich media formats is a key indication of the impact a campaign has on a brand. Measuring exposure to online displayed advertising is done by comparing performance of various display formats (e.g. square, standard, dynamic banner, skyscraper, etc.) in terns of their visibility time. 18

19 3. Impact of Format on Brand and Sales 1 Online advertising campaigns with defined objectives 2 Contribution to the Brand 33 4 Impact Impact of of Format Format on on Brands Brandsand andsales Sales Integration to Offline Sales 5 Importance of Targeting to the Campaign 6 Effectiveness of the Media Mix 7 Impact of Advertising on Browsing Behaviour 19

20 Impact of Format on Brand and Sales Growing number of formats and development of rich media Video advertising and rich media are expected to represent 63% of the market in Changes in the market share of advertising formats in western Europe (in millions) A Forrester highlighted that the current CPM rate for videos has largely declined, which provides advertisers with an opportunity to test the attractiveness and relevance of this format. Given the proliferation for formats, advertisers are faced with the challenge of effectively managing them i.e. Selecting the most appropriate format to meet campaign objectives. Forrester Research Inc., 2010 *According to the IAB s definition, rich media is an advertising format that incorporates visual animation or sound with user interaction 20

21 Impact of Format on Brand and Sales Different formats produce different results in terms of conversion and branding Study shows that interaction and clickthroughs are highly correlated to the size of the advertisement and its positioning. Static ads generate a higher clickthrough rate than those in flash format. Flash and rich media formats appear to be most effective for brand awareness, recognition, promotion (more creativity, visibility); but more invasive format. DoubleClick, EMEA, 2009 Assess and compare performance of different formats (static, rich media, video) Align formats to campaign objectives 21

22 4. Integration to Offline Sales 1 Online advertising campaigns with defined objectives 2 Contribution to the Brand 3 4 Impact of Format on Brands and Sales Integration to Offline Sales 5 Importance of Targeting to the Campaign 6 Effectiveness of the Media Mix 7 Impact of Advertising on Browsing Behaviour 22

23 Integration to Offline Sales A recent Europe study even showed that internet has become as influential as TV in promoting the impulse to purchase in France Online advertising is proving to be an effective means of enhancing product visibility, reinforcing purchase intent and triggering the decision to purchase. Understanding the impact on offline sales has become essential for advertisers to develop their media strategies. 23

24 Integration to Offline Sales Online advertising plays a key role in the purchasing process. For 29% of French internet users the internet is the most reliable medium for finding information about potential purchases (tourism 63%; automotive 53%). 69% of internet users associate online advertising with the possibility of finding printable coupons. Consumers rely increasingly on the internet as a source of information and a medium for preparing their purchases. 24

25 Integration to Offline Sales Processes and resources to measure offline sales impact The impact of online advertising on sales is often measured empirically. Point-of-sale surveys can be used to gather information concerning consumers origin and reasons for visiting. Cross-checking sales data with the advertising media plan also reveals trends and impact of different media on sales (by geographic, demographic criteria) Post-tests are often used to measure the impact of national advertising campaigns on sales in the distribution network, which often requires the involvement of market research institutes in order to collect and analyze data. 25

26 5. Importance of Targeting to the Campaign 1 Online advertising campaigns with defined objectives 2 Contribution to the Brand 3 4 Impact of Format on Brands and Sales Integration to Offline Sales 5 Importance of Targeting to the Campaign 6 Effectiveness of the Media Mix 7 Impact of Advertising on Browsing Behaviour 26

27 Importance of Targeting to the Campaign Behavioural targeting and retargeting are on the rise Online advertising lets advertisers more accurately segment their audience and interact with users. Behavioral targeting and retargeting are gaining ground, particularly in ecommerce. Behavioral targeting is widely used to increase conversion rates (click-through rates x2 vs. traditional online advertising). It was also proven that it has positive impact on branding. Retargeting is an effective tool for online retailers needing to boost conversion rates and online sales; needs to be managed in terms of frequency and capping to prevent overexposure. 27

28 6. Effectiveness of the Media Mix 1 Online advertising campaigns with defined objectives 2 Contribution to the Brand 3 4 Impact of Format on Brands and Sales Integration to Offline Sales 5 Importance of Targeting to the Campaign 6 Effectiveness of the Media Mix 7 Impact of Advertising on Browsing Behaviour 28

29 Effectiveness of the Media Mix Expanding role of online on media plan mix adds to cross media measurement complexity Consumers are increasingly using different types of media simultaneously, especially TV and the Internet. A 2010 study from IAB Europe demonstrated that, for the same budget, advertising campaigns were more effective when at least 15% of that budget was spent on online advertising. Numerous studies demonstrate that combining internet and TV advertising, for the same budget, optimizes the impact on the brand. Challenge of measuring effectiveness of cross media advertising: Several ways of measuring the impact of media mix: Conducting post-tests with consumer panels Use statistical models to measure the contribution of each medium to the overall campaign i.e. measure performance of different media mix scenarios on the basis of historical sales data, media plans and customer segments. 29

30 7. Impact of Advertising on Browsing Behaviour 1 Online advertising campaigns with defined objectives 2 Contribution to the Brand 3 4 Impact of Format on Brands and Sales Integration to Offline Sales 5 Importance of Targeting to the Campaign 6 Effectiveness of the Media Mix 7 Impact of Advertising on Browsing Behaviour 30

31 Impact of Advertising on Browsing Behaviour Online advertising exposure stimulates online search Increase in the number of search engine requests following exposure to an online campaign (in %) Display advertising boosts online searches related to the brand. Challenge for advertisers is to ensure consistency between: display advertising campaigns and keywords purchased in search engines advertising and creative content across media platforms, Europe, 2009 Comscore 31

32 Impact of Advertising on Browsing Behaviour Display advertising promotes site engagement Internet users site engagement on advertiser s website after exposure to an online campaign Display advertising has an impact on internet users behaviour on advertisers website, in terms of time spent and number of pages viewed. OPA, Unites States,

33 Summary Identification of objectives by campaign is crucial There is no one must use indicator per objective, and new measures will continue to evolve There are, however, appropriate indicators depending on objectives Branding is a key priority of measurement challenges New indicators are being developed: exposure, interaction and engagement Web traffic analysis is no longer only a conversion issue The impact on offline sales remains difficult to measure Multiple-exposure analysis is on the rise 33

34 How Can Help? Business Cases, Quantification, and Implementation of Digital Programs Pricing Strategy, process and modelling Process Management and Program Office Management Evaluate and implement measures of effectiveness Audit of performance Evaluation and Implementation of Measurement Systems Incentive Programs for original work 34

35 Bibliography 35

36 Contacts Andrew Light Vice President Tel Mob: Aurélie Olives Manager Tel

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