Beating the Paid Media Pitfall

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Jun 26, 2018
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Andrew Chen caused a storm a couple of weeks ago when he tweeted:

“Many of the biggest implosions in recent history — especially ecommerce — have been due to start-ups getting addicted to paid marketing while fooling themselves on Customer Acquisition Costs. As spend scales, it always gets more expensive and harder to track — never less.”

It was fascinating to hear Chen talk about start-ups as the victims of spiralling digital channel complexity and costs in the context of the world’s biggest advertiser, P&G, only just starting to make progress here.

P&G eliminated $140m spend in Q3 2017 without seeing any drop in volume or revenue.

“Transparency shined a spotlight on reality and we learned valuable lessons which are driving profound change,” Marc Pritchard, P&G’s chief brand officer said at the Association of National Advertisers’ media conference in March.

On the surface, things have been deteriorating here ever since John Wannamaker claimed over 100 years ago: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half”. In fact, Fospha’s own research puts the figure today at more like 80% of Paid Media that can’t be directly attributed to a conversion.

It’s perhaps unsurprising too, considering how the marketing landscape has changes, with 94% of advertising spend growth to happen online between 2017 and 2020 (The Drum) and a 2015 Adobe poll finding that marketers claimed marketing had changed more in the last two years than in all the decades since the birth of television. (McKee R., 2018, Storynomics)

It’s also something Pritchard seems obsessed with correcting. He is targeting further $1.2bn cuts, claiming “We’ve already saved 20% in media waste across all mediums, and we’re going after the elusive 50% that Wannamaker was seeking.”

So if consumer giants are just starting to get this, what hope are there for the start-ups in Chen’s cautionary tale?

Certainly, when we talk with businesses starting out in digital marketing, there can be a certain resignation that in order to compete, they have to accept the inefficiency. In the worst cases, they’ll tell us they need to waste a ton of money in Paid Search to learn how not to waste money.

It’s a problem we firmly believe starts with a lack of understanding of how data management and attribution can be the foundation for sustainable cost of customer acquisition and lifetime value growth.

Attribution is a head-swimming topic, particularly with myth vs. reality challenges like the ones surfaced in a Harvard Business Review piece a couple of days ago. The confusion on the topic was evident in the Internet Trends 2018 report, which suggested marketers find attribution considerably less important for ad spend optimisation than metrics like impressions or brand recognition. In fact, these ‘metrics’ are totally complementary, with data-driven attribution enabling a deeper understanding of the role marketing activities are playing in driving conversions, so that marketers can understand and optimise them to drive customer acquisition and lifetime value.

The notion that businesses need an enterprise data stack and total 360 degree attribution to derive value from attribution is a notion we’re challenging on our quest to arm marketers with the data to understand and optimize ROI (the AI and machine learning-powered tools can come later!). Simply by stitching the cross-channel, device and session data a client has available, they can shine a light on the ad spend that has played no role in any historic or forecast conversion. Keeping it simple, as P&G have done, is where you’ll find the first 20% savings and take a significant leap forward on your digital marketing maturity journey.

Go to the profile of Sam Carter

Sam Carter

CEO, Fospha

Leveraging over 18 years of experience in cross-channel customer data engineering, Fospha helps marketers understand where to spend the next pound of their budget to optimise customer acquisition cost and lifetime value. Our multi-touch attribution solution measures the precise contribution of every marketing effort at each step of every customer journey, powering marketing performance optimisation at scale. Fospha is part of the Blenheim Chalcot portfolio, the UK’s leading venture builder.

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