The average return on Facebook ad spend rises 26% in Q3, according to social media advertising firm Nanigans.
New tools help marketers figure out which of the growing number of online ad channels led to a sale
From the upstate New York offices of Oneida Ltd., whose reputation for making and selling flatware and other tableware goes back more than 100 years, director of e-commerce Andrew Ruggeri is contemplating the impact of selling ads on Facebook.
Even with its formidable brand, Oneida faces tougher competition than ever and, as director of e-commerce, Ruggeri must consider every new form of online advertising that can bring shoppers to Oneida.com.
But how much of his marketing budget should he put into Facebook, as opposed to such established channels as paid search, e-mail, online display ads, affiliate marketing and coupon sites? That decision is complicated because a consumer may see several ads from a retailer—for instance, a display ad, an ad on an affiliate site and a paid search ad—before buying. Which really led to the sale?
That question has bedeviled online marketers for years and becomes more pressing as more new marketing opportunities arise, such as advertising on social networks or promoting to mobile consumers through text messages. Ruggeri is taking advantage of new tools that help marketers understand how much each channel contributes to a sale, and he says those tools make a big difference.
"We're definitely able now to more accurately value the impact of the several advertising referrals, regardless of where they were in the advertising funnel leading to a sale," Ruggeri says. "And that's truly helping us to allocate marketing spend to get the most return on investment."
Allocating big bucks
Many vendors are rushing to help e-retailers like Ruggeri make better decisions about how they spend their marketing dollars. "It's a very hot space now," says Joanna O'Connell, a marketing analyst at research and consulting firm Forrester Research Inc. "New solutions are bubbling up and there's a lot of competition among technology vendors to be leaders in advertising analytics."
And with an increasing share of advertising budgets going toward online channels, the stakes are getting bigger when it comes to allocating them. As a percent of all advertising dollars, spending on Internet-based ads hit 15% last year, up from 6% in 2005, according to figures from ZenithOptimedia and J.P. Morgan. The same reports estimated that Internet advertising totaled $23.12 billion in 2010, third behind TV advertising at $55.79 billion and newspapers at $29.67 billion. But the web grew the fastest, at a year-over-year clip of 13.6%, while TV ad spend grew only 6% year over year and newspaper ad spend declined 10%.
Other figures, from eMarketer, show online advertising rising from $25.8 billion in 2010 to $40.5 billion by 2014, when they're estimated to account for 21% of total U.S. advertising spend.
With all that spending on online ads, of course, comes the responsibility for showing a return on investment. So Oneida's Ruggeri and his peers at other retailers are clamoring for ways to better measure the impact of those dollars across multiple online advertising channels. Fortunately, he and others say, the technology and systems for monitoring, analyzing and acting on the performance of multiple online advertising channels are making their jobs more doable.
Tools for a complex job
"Overall, online advertising is becoming more complex, but the tools for monitoring online advertising are improving as well," says Matt Stelter, assistant manager of Internet marketing at web and catalog pet supplies retailer Drs. Foster and Smith. "The options for marketers seem to be expanding exponentially."
To be sure, advertising attribution is still a new discipline that many retailers have yet to truly explore, says Fiona Dias, a former retail executive who is executive vice president of strategy and marketing at GSI Commerce Inc. But interest is strong and growing, she adds.
GSI estimates that about 40% of retailers are looking for advertising attribution technology. GSI responded to that interest in January by acquiring ClearSaleing, a provider of ad attribution technology that now operates as part of GSI's Global Marketing Services division.
"In our meetings with clients, advertising attribution perks up everyone's ears," says Ellen Duffie-Fritz, head of marketing analytics for True Action, a GSI digital marketing agency that uses ClearSaleing's technology to help some 60 clients attribute results to advertising campaigns.
Analyzing the full funnel
ClearSaleing is one of several advertising attribution system providers, including [x+1], Visual IQ and Theorem, that focus on a wide range of online advertising channels—or the "full funnel," in advertising lingo—that help bring consumers to a retail site to make a purchase. Although each vendor has its own secret sauce for attributing results back to ads, the general idea is to use software cookies on web sites and in web browsers to track the path a consumer takes before making a purchase. In some cases, these systems combine that information with a retailer's sales data and apply algorithms that weight the importance of each ad channel in leading to sales.
Advertising attribution technology is coming to encompass applications that formerly focused on single areas such as paid search advertising or comparison shopping engines, but now also analyze the impact of web display ads and ads on social networks (see story below).
The marketers who are using the new ad attribution tools, however, say it's still a mix of art and science to judge the performance of advertising across multiple channels.
"We never get perfect information," says Stelter of Drs. Foster and Smith. The same customer might come to Drs.FosterSmith.com several times to make a purchase, and each time arrive after clicking through a different advertising channel, he says.
Stronger negotiation position
But with ready access to reports from Marin Software and Omniture on how visitors arrive on the pet supplies site, the retailer obtains information it uses for several purposes. Rather than just manage its paid search campaign by looking at the search ads that led directly to a purchase, for example, Stelter will now look further up the ad funnel to learn more about how search ads clicked earlier in the customer's research and buying process contributed to the buying decision. That can highlight ads that ultimately contributed to a sale, which previously got no credit. "I will certainly be more willing now to go with a lower return on ad spend for keywords higher in the funnel," he says.