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01 Microsoft Advertiser and Publisher Solutions Engagement Mapping Engagement Mapping counts every customer touch point (not just the last) and enables advertisers to be more effective, more creative, and more relevant with their digital marketing Thought Paper > Engagement Mapping A new measurement standard is emerging for advertisers > Marketers Know They’re Not Calculating Digital Advertising ROI Correctly 2 Table of Contents > The “Last Ad” Model vs. Conventional Wisdom 2 > The “Last Ad” Model Miscalculates ROI 3 > New Research Underscores the Need for a New Conversion Model 5 Understanding the interaction between channels is critical 5 Overlap drives higher conversion rates 6 Branded search skews results from search advertising 7 > Technology Driven Marketing 8 > With Engagement Mapping, You Can Get There from Here 9 Weighting factors 10 > Practical Application of Engagement Mapping 10 An easy transition 12 Stay on course, but go a lot further 13 > About Microsoft, Atlas and the Atlas Institute 13 © 2008 Microsoft. All rights reserved.

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Microsoft Advertiser and Publisher Solutions

Engagement Mapping

Engagement Mapping counts every customer touch point (not just the last) and enables advertisers to be more e�ective, more creative, and more relevant with their digital marketing

Thought Paper > Engagement Mapping

A new measurement standard is emerging for advertisers

> Marketers Know They’re Not Calculating Digital Advertising ROI Correctly 2

Table of Contents

> The “Last Ad” Model vs. Conventional Wisdom 2> The “Last Ad” Model Miscalculates ROI 3> New Research Underscores the Need for a New Conversion Model 5 Understanding the interaction between channels is critical 5

Overlap drives higher conversion rates 6 Branded search skews results from search advertising 7

> Technology Driven Marketing 8> With Engagement Mapping, You Can Get There from Here 9 Weighting factors 10> Practical Application of Engagement Mapping 10 An easy transition 12 Stay on course, but go a lot further 13> About Microsoft, Atlas and the Atlas Institute 13

© 2008 Microsoft. All rights reserved.

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Marketers Know They’re Not Calculating Digital Advertising ROI Correctly. Until Now, Their Hands Have Been Tied.

Marketers don’t need to change the way they think. They need digital marketing

technology and measures to conform to their standard marketing tenets. The outdated

model for measuring return on investment from digital advertising falls short… but a

new model is gaining momentum.

Digital marketing continues to incur an enormous amount of growth. The quickening

proliferation of new digital channels, compelling web sites and countless new opportu-

nities makes it difficult for marketers to keep pace, and even more challenging for them

to reach and engage their audience. Moreover, the increasing percentage of people

accessing the internet over high-speed connections has profoundly changed the

consumption patterns of media. Large brands and direct response marketers are

constantly seeking the right mix of channels, sites and interesting creative to engage

their audience as effectively as possible. Yet when a digital advertising campaign is

successful, they can only credit one of the many touch points their audience experi-

enced. Typically, between 93% and 95% of audience engagements with online advertis-

ing receive no credit at all when advertisers review the ROI on their campaigns. While

the universe has been getting bigger, marketers have been forced to view it through a

very limited lens. And the limited view constrains marketers’ vision, creativity and

success.

The reason for this misalignment is that the industry has been using a method of ROI

measurement that only attributes credit for advertising effectiveness to the last ad

clicked or viewed prior to a customer conversion. The “last ad” standard forces market-

ers to pay attention to a small set of data, and ignore key information required to

properly calculate the return on investment for each site and channel. In addition, it

goes against conventional marketing wisdom, and therefore stands in the way of

adoption, creativity and the innovative evolution of digital advertising by marketers who

are seeking better results.

The “Last Ad” Model vs. Conventional WisdomThe current “last ad” model attributes 100% of the credit for a conversion to the last ad seen or clicked. This is the current standard the industry has relied on to justify their digital media spend. The problem with this approach is that it ignores the contributions of any previous ads that led the customer down the road to that conversion.

The “last ad” model forces marketers to place greaterimportance on the aspects of their advertising that supportthe model, rather than the aspects that support theiradvertising success.

© 2008 Microsoft. All rights reserved.

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The “Last Ad” Model Miscalculates ROIThe “last ad” model is based on only a single engagement, so it forces marketers to

place greater importance on the aspects of their advertising that support the model,

rather than the aspects that support their advertising success.

Since the “last ad” model has forced marketers to attribute 100% of the credit to only

the last click, marketers have logically allocated their marketing dollars entirely to media

that sit at the bottom of the conversion funnel: search engines, sites and networks that

are the last stop on the conversion path.

Contradicting the “last ad” perspective is the notion that most marketers believe in the basic tenet that individuals respond to marketing messages differently depend-ing on their awareness of, interest in, or intent to buy a particular brand or product. To date, the industry’s online ROI measurement models, including click-through rates and the “last ad” standard have been significantly out of alignment with these basic marketing fundamentals.

Additionally, a critical marketing concept, the sales funnel, is completely disre-garded by the “last ad” model. The idea is simple: different marketing messages play different roles for consumers. Some marketing messages drive awareness, others close the deal. In the offline world, broadcast media have typically been at the top of the funnel while other channels, such as direct mail, have been used to induce a purchase. In the last ten years, online media have moved from strictly a direct response medium to a multifaceted channel with the potential to reach consumers across every point in their journey. The “last ad” model is exceptional at measuring ROI if your only goal is to measure the bottommost touch point in the sales funnel. In this regard, our current conversion attribution standard is sadly out-of-touch with the reality of online marketing today.

The “Last Ad” Model Miscalculates ROI

by attributing credit to only the last click before a conversion.

The model works as if the consumer doesn’t see or click any other

ads along the way.

© 2008 Microsoft. All rights reserved.

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Microsoft Advertiser and Publisher Solutions

To illustrate the faulty logic of the model, imagine that you’re standing in the grocery

store knowing precisely what you want to buy. You’ve seen the product ads on TV, the

full page ad in a magazine, and a full color mailer that actually made you hungry just

looking at the pictures. You’ve even clipped a coupon and brought it with you to the

supermarket. When you ask the grocery clerk where to find the specific item, he smiles,

points and says, “Aisle five.” Off you go to aisle five, find the item, pay, and leave the

store.

If you applied the “last ad” model to this scenario, the grocery clerk would get 100% of

the credit for your purchase (no wonder he’s smiling). As a result, marketers would invest

heavily in grocery clerks, and they’d pull their advertising dollars from the marketing

channels that actually piqued your interest or moved you through the funnel toward the

purchase. Of course, everybody likes grocery clerks, but marketers need to invest in the

most effective ways to get customers into the store and map each milestone along the

way.

Right now marketers are optimizing their media buys based on the very last step in the process. But the “last ad” model is flawed. It ignores some very important questions:

1. How can marketers accurately reach their audience and plan campaigns if they are unable to calculate the return on investment on each of the touch points upstream of the conversion? 2. What other factors beyond exposure (such as frequency and interaction) may lead to a conversion? 3. What is the interaction between different media? How much, for instance, do search and display advertising interact? 4. Different ads, messages and media are employed at different points in the conversion funnel. Which touchpoints make the greatest impact along the way? Which make the smallest?

This is the way that it really looks for an

advertiser as people spend more time

online.People interact with

many channels. They see video online, interact with rich media, view

and click on display and search ads, etc

Site A Site B Site C Site D Site E

© 2008 Microsoft. All rights reserved.

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Microsoft Advertiser and Publisher Solutions

The “last ad” model is opaque. With an inflexible, black-box model, marketers can’t make sound marketing decisions. Imagine a world where you could see exactly which advertising experiences contributed to a conversion, and which were less effective. To experience that world, you have to be able to see what you’ve been missing.

New Research Underscores the Need for a New Conversion ModelRecent research proves that marketers benefit by understanding and considering additional factors in their ROI calculations. Evaluating the positive effects of the synergy between multiple channels and duplicated reach can lead to a greater ROI. Research also shows that marketers benefit by reconsidering their reliance on search and the concept of the “last ad.”

Understanding the interaction between channels is criticalWith the last ad model, not only is credit given to a single ad, but also a single channel.

While the audience is viewing display ads, clicking on search ads and viewing web video

ads, marketers can never attribute credit to more than one of those things.

The reality is that multiple channels actually work together to increase conversions.

Consider the impact of two popular channels, search and display. Search produces great

CPAs. It can be a very effective channel if you look at conversion rates and cost per

conversion. It can also be a highly-qualified channel, reaching most consumers at the

last step of the conversion funnel. Someone who searches on your terms and clicks is

prequalifying themselves as somebody who's interested in what you sell. In the

presence of such high prequalification, does it even make sense to incorporate display

advertising in your campaign? If you've got this universe of search clickers that are

largely self-identifying, is there any benefit to also supplementing that experience with

display impressions from the same advertiser?

Multiple channels area good thing.

Multiple touch points can move customers your way.

How can you measure, plan, optimize and justify

a multichannel media plan that reaches

audiences across their many channels, when

you only give credit to the last ad your

customer clicked before they converted?

22%Lift Over

Search Alone

DisplayClick

SearchClick

Search &Display

Co

nv

ers

ion

s

© 2008 Microsoft. All rights reserved.

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According to Atlas Institute research, the answer, overwhelmingly, is yes. When market-

ers supplement search with display impressions, they get a significant lift in conversions.

Unfortunately, most advertisers that run both search and display are unaware of this,

because there hasn’t been a way to measure it. A recent Atlas Institute study demon-

strated that users exposed to both search and display ads convert at a higher rate: an

average of 22 percent better than search alone and 400 percent better than display

only. The lift of search over display is well-known and well accounted for by the “last ad”

model since the searches in this study came after the display impressions. Those

preceding impressions, however, are completely disregarded under current conversion

reporting. Using this information today in post-campaign reporting required time-

consuming custom analytics. If you’re measuring your search and display campaigns

separately, you are missing the complete picture and undervaluing your display impres-

sions. The ability to track all of your media in one central place and all of your engage-

ments with a single model allows advertisers to measure cross-channel impact, and

reveals important information about the user’s conversion experience.

Overlap drives higher conversion rates Another recent study by the Atlas Institute revealed that about a third of the reach of an average campaign is overlap, meaning a third of the people you reach on a campaign are going to see your ads on two or more sites (This statistic varies from advertiser to advertiser - generally, the bigger the advertiser, the greater the overlap). Those overlapped users disproportionately represent your converters, the consumers that actually buy from you, register with you, and become your sales leads. 2

Fowler, Jed (2007) “Overlap’s Impact on Reach, Frequency and Conversions.” The Atlas Institute.

Strong, Esco (2006). “The Combined Impact of Search and Display Advertising – Why Advertisers Should Measure Across Channels.” The Atlas Institute.

The Reality ofCross-Site Duplication

Overlap can driveconversions. Two-thirds of converters view ads across multiple sites. But the “last

ad” model only allows advertisers to attribute credit to one of them.

Site ASite B

Site C

Site DSite E

The

Reality of Cross-Site Duplication

1

© 2008 Microsoft. All rights reserved.

2

1

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Taking these two dimensions into account, the research revealed that the majority of

sponsored search clicks are navigational. In fact, the study showed that 71 percent of

sponsored search clicks can be attributed to navigation. This tells you that almost three

quarters of your sponsored search buy is not bringing in new prospects—it’s simply

delivering people who are already actively looking for your URL. The Atlas Institute took

cost into account as well, and discovered that across many advertisers, navigational

clicks actually accounted for over half the cost of their sponsored search buttons.

Imagine a user who clicks on the term “basketball shoes” today, does some research,

and decides to by a pair of Nikes. The next day that user returns to the search engine,

searches on “Nike basketball shoes” and then makes a purchase. Which keywords

deserve the lion’s share of credit for the conversion? Under the last ad model, 100

percent will go to the branded search term.

Technology Driven MarketingGiven all these factors and research, it’s fair to wonder why the industry still uses the

“last ad” model. The reason is that, until now, digital marketing technologies have

enabled only a limited set of capabilities and measures of digital media.

Though imperfect, early digital advertising metrics like click-through rates were

accepted by marketers who needed a logical measure as they felt their way through the

burgeoning medium. And that model ultimately became a standard because it was what

we had. And that was a good start.

A few years later, Atlas introduced the “Action Tag,” a new technology that enabled

marketers to accurately track conversions by identifying consumers who clicked on an

ad and then visited the advertiser’s site and converted. At last, marketers could see

which ads resulted in the actual conversion. In the late 1990s, the online channel was

very different. There was little overlap between sites, and most people consumed little

media online. There really was only one marketing vehicle (display advertising), and

“search” was a utility, not a channel.

Today, advertisers agree that both models fall short because neither approach meets

marketers’ basic requirement of defining and measuring programs that align with their

marketing objectives and programs. Marketers need to be able to calculate the ROI of

every brand exposure and interaction the audience experiences on each media owner’s

site (not just the last one). This new measurement is known as “Engagement ROI.”

Advanced digital advertising technologies now make it possible to comprehensively

calculate Engagement ROI.

© 2008 Microsoft. All rights reserved.

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With Engagement Mapping, You Can Get There from HereThe new model is called Engagement Mapping. It’s based on three simple premises:

1. Marketers need to attribute credit to multiple sites and engagements, not just

the last one.

2. Marketers need to have the flexibility to be able to weigh the importance of

influential factors such as ad size, frequency and rich media interactions in their

ROI calculations.

3. Marketers need to be able to easily adopt and transition to the new model

from the old.

Engagement Mapping is made possible by back-end technology that analyzes many factors behind the scenes, so marketers don’t have to worry about the technological aspects managing the terabytes of data today’s campaigns generate. In the new model, key influential factors can roll up into a very straightforward site-by-site analysis to succinctly summarize Engagement ROI. Factors that can be taken into account include Frequency, Ad Size, Recency, Ad Format, Interaction, and Order. Considering these experiential factors will enable advertisers to learn from previous campaigns, and fine-tune their media strategy while their campaigns are still in progress. Marketers can manage their digital media investments by channel, placement, site, media type, etc.

It is easy to lose sight of the forest for the trees. At its heart, Engagement Mapping is a simple concept, throwing light on the entire conversion funnel. Engagement Mapping is about two things: reach and the quality of that reach. The role of a third-party ad servicer is to deliver advertising across accountable media and measure to whom the advertisements are delivered. This is the reach component. It is up to advertisers and agencies to decide, for their business, how the quality of that reach will be assessed.

© 2008 Microsoft. All rights reserved.

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Weighting factors The Engagement Mapping model is supported by a new level of measurement flexibil-

ity. Your application of the model can be easily customized to the factors you deem

important for measuring your specific campaign. Each of those different factors can be

weighted differently in your Engagement ROI calculation. All types of events may

receive different weights, with, for example, passive events like viewing a text link or a

display ad receiving a relatively low weight. Active events, like clicks and rich media

interactions, that convey a level of interest, can be assigned higher weights. If you aren’t

sure how much weight you should assign to a factor, you can start by simply choosing a

default setting that reflects your marketing objectives.

Factors that impactEngagement ROI

FrequencyHow many times did your customers see an ad across multiple sites and channels?

Ad Size Which ads are more impactful when you factor in their size? Should a bigger ad get more credit than a small text link?

Recency How much should impact diminish as engagements move further away in time from the action? Was it the first exposure that caught the audience’s attention?

Media typeIs a rich media ad more effective than a skyscraper banner ad? How should video be weighted versus display?

InteractionHow much time is a user spending interacting with a rich media ad, or visiting your website before seeing a banner ad and clicking on it?

Order of engagement What if you determined that order matters, such that the first ad gets most of the credit or the last ad gets less, or vice-a-versa?

Passive EventsText link

Active EventsClicks

RM Interactions

Display

Flash and Java

Rich Media

Video

Last AdAdvanced

Model

Engagement Mapping is a flexible attribution model that enables advertisers to include many factors in their Engagement ROI calculations.

Practical Application of Engagement Mapping: Single Site ExampleEngagement Mapping isn’t just conceptual. It’s a model that you can begin to apply

practically today. When the model is applied, each exposure and interaction can be

attributed a portion of the credit for a conversion.

Here is a hypothetical example of how Engagement Mapping attributes credit differ-

ently. Let’s say you have a site right now that gets 1000 conversions under the “last ad”

model. When frequency is figured into the calculations using the new model, it actually

boosts the attribution number up to more than twice as many conversions. So your

number of conversions credited to the specific site has jumped up to 2000. But it turns

out a lot of these impressions that are frequent are not very large. By factoring in ad size

the number of conversions attributed to the specific site is revised downward to 1400.

© 2008 Microsoft. All rights reserved.

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Continuing down this path, the Engagement Mapping model also accounts for inter-

action, creative type, reach, recency and order and the model ends up attributing 1600

of your conversions to this one site. When you use Engagement Mapping to evaluate

the sites that produced the greatest return on your media investment, this one site looks

very different than it did when you used the “last ad” model.

Today, advanced technology that powers digital advertising behind the scenes makes it

possible to apply the Engagement Mapping model to your campaigns with very little

effort.

By being able to weigh the importance of various factors, you can put a greater focus on

those that matter more if you’re a direct-response marketer (such as clicks and recency).

If you’re a brand marketer, you may want to be able to read things differently and give

more credit to more passive engagements (such as video views and ad size), even if

there’s no interaction. Or, your objective may lie somewhere in between. Flexibility in

the way you measure each factor lies at the heart of the new model.

If you use Microsoft’s Atlas advertising platform, transitioning from the old model to the

new requires only two things:

1. A decision on your part to measure Engagement ROI differently and more

accurately

2. A simple selection of your basic objective (direct response, brand marketer, or

both).

Stay on course. Go a lot further.Great marketing comes from a healthy combination of both right and left brain thinking.

Digital advertising has a tendency to be constrained creatively because the “last ad”

analytics make advertisers believe that the best results come from channels and sites

that limit creative options. Imagine how much more creative you can be, how much

more attention your ads can garner, how much more effective your media plan can be

when you can measure and justify the incorporation of a greater variety of formats, sites

and channels. Engagement Mapping gets you there. And you can go there today.

Engagement Mapping will allow you to calculate your EngagementROI from every site you purchase, whether through passiveexposures, active interactions, or both.

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2,000

1,500

1,600conversions

1,000

1,000conversions

500

100%

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11%

-14%

4%

6%

0%

Engagement Mapping is a transparent model

that enables advertisers to determine and view

how each factor impacts their ROI

calculation. Here is an illustration of how

those factors can enable the attribution

of credit for conversions to be more relevant and

comprehensive in the new model.

© 2008 Microsoft. All rights reserved.

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An easy transitionWhether you’re seeking more conversions or improved brand experiences, you can start

getting a better read and return on your media investments immediately. Begin by

taking a closer look at the impact of key campaign elements that are upstream of the

“last ad.” Atlas can help with a number of tools and analyses that are designed to do

just that.

Atlas Consultation: Your Atlas representative can be a helpful resource when you decide

that it’s time to look further into Engagement Mapping. Atlas team members can

provide immediate expertise, connect you with analytics specialists and put tools in your

hands that make it easy to understand how to apply the model to your business.

Atlas Engagement Visualizer: The Engagement Visualizer is a software tool that enables

you to plug in a few key values and then visualize how your results would be reflected

more completely if you applied the Engagement Mapping model.

Side by Side Comparison: If you’d rather be cautious about the way you measure your

ROI, you can continue using the “last ad” model and apply the new model at the same

time. You can begin to see the side by side comparison of the results calculated through

the two different models.

The Atlas Media Console: In the Atlas Advertising Suite, the Engagement Mapping

capability will appear as a check box. You can simply click to turn on the capability and

select a default model for either direct response, brand marketer or both. The software

will automatically calculate Engagement ROI by applying the new model.

Customize: Once you begin using the model and seeing the results, you can begin to

adjust the weight of the various factors based on the level of importance you place on

each factor.

By selecting one of the three objectives, the settings within the Atlas Media Console will

default to reflect specific weights for each of the factors. As you get more familiar with

the new model and how each factor affects your results, you can begin to test your

well-exercised intuition. For example, most marketers that employ rich media do so

because intuitively they know that it’s a strong way for the audience to experience their

product or brand. The new model gives advertisers the ability to make specific adjust-

ments, and set the dials to reflect the impact of the factors they believe have the

greatest impact on their Engagement ROI.

© 2008 Microsoft. All rights reserved.

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To view a full listing of the Atlas Institute’s Digital Marketing Insights, please visit

www.AtlasSolutions.com/insights.

Atlas serves its clients from offices in Seattle, San Francisco, New York, Denver, Raleigh

and London, Hamburg, Milan, Tokyo and Sydney.

About Microsoft Atlas and the Atlas Institute

Atlas, a subsidiary of Microsoft, is a leading provider of digital media technologies for

advertisers, agencies and publishers. Atlas solutions for agencies and advertisers enable

the unified management of digital marketing campaigns across display banners, rich

media, search, video, and Web sites. Atlas solutions for publishers maximize advertising

revenue across all available and developing digital media platforms. With industry-

leading tools, uniquely insightful research, and close collaboration, Atlas helps advertis-

ers, agencies and publishers achieve dramatic, measurable results.

The Atlas Institute is the research and education arm of Atlas, The Institute publishes

Digital Marketing Insights, a series of publications by Atlas senior marketing analysts

and digital marketing experts that help advertising clients improve their digital market-

ing effectiveness. Many of these findings are also made available to the digital market-

ing industry at large.

If you would like to learn more about Engagement Mapping,please drop us a note. We’d be happy to help.

[email protected]

© 2008 Microsoft. All rights reserved.