It's beyond dispute that the lack of agreement on branding metrics has constrained the evolution of advertising, and probably harmed marketers, agencies and publishers.
Because of "inconsistent metrics, and a reliance on outdated media models, marketers are failing to tap the digital world’s full power," McKinsey consultants Jacques Bughin, Amy Guggenheim Shenkan, and Marc Singer concluded after a recent study of global marketing decision-making. "Unless this problem is addressed, the inability to make accurate measurements of digital advertising’s effectiveness across channels and consumer touch points will continue to promote the misallocation of media budgets and to impede the industry’s growth."
The McKinsey survey of 340 senior marketing executives worldwide, almost all of whom are using digital channels, is an astonishing exposé of marketing malpractice. Consider a small sample of its findings:
- Of companies stressing the importance of brand building, only half try to measure increases in brand strength from their digital efforts
- Fewer than one-third of companies attempt to measure the offline effects of online marketing
- Eighty percent of respondents use subjective judgments instead of quantitative analysis to allocate budget across media.
- Only half the companies using the Web as a direct-response vehicle use click-through rates -- "the most basic of metrics," as the consultants put it -- to assess the effectiveness of their campaigns
The McKinsey judgment is harsh. When asked why they weren't shifting more of their spending online, the marketers surveyed trotted out the habitual response: “insufficient metrics to measure impact.” But the real reason, the consultants found, is "a startling failure to measure."
This research underscores a vital, valuable, and ultimately hopeful point: Assessing the effectiveness of interactive advertising for the purpose of media-mix allocation is not a measurement science problem -- it's a business-process problem. Science can take a long time; business processes can be designed, negotiated and, if the parties to them agree, implemented.
To be sure, there are multiple points of view about the metrics that matter. Many advertising doyens want to find a way to measure engagement, which the Advertising Research Foundation has defined as "turning on a prospect to a brand idea enhanced by the surrounding context." But engagement is proving to have as many tributaries and navigation systems as the Amazon River and, at least for now, appears to be adding complexity to media analysis rather than simplifying it.
Industry guru Jack Myers argues for a more pointed measure of effective brand advertising. In a fascinating and well-reasoned historical review, he says marketers "will have no choice but to accept measures of persuasion and motivation." Several industry efforts to calculate advertising "view-through" -- a metric that comScore's Mr. Fulgoni, among others, favors, and which promises to relate subsequent consumer actions back to advertising exposure, even absent a
click -- may achieve this goal. But here, too, there are sectarian differences, with some measurement firms favoring cookie-based approaches to judging effective view-through, others promoting pixels, and still others favoring panels.
There's a great deal of evidence that the work to calculate brand effects is itself having a significant effect on marketer attitudes. The EIAA study, for example, found that more than 20 percent of marketers believe online is a very important vehicle for changing brand perceptions, up from 15 percent two years ago.
Marketer spending patterns also are changing. As Nielsen Online Senior Vice President Charlie Buchwalter noted after the IAB released its mid-term interactive revenue report for 2008, the four growth industries were packaged goods, automotive, telecommunications, and computing; together, they grew their online spend by nearly 30 percent over the equivalent period in 2007.
"Do you see what I see?" Mr. Buchwalter wrote. "These industries have consistently been the big overall ad spenders for a long, long time. Companies within these four industries make up 42 of the Top 100 national advertisers, and 52% of the advertising spend. And note that the two largest ad-spending industries, i.e. CPG and Auto, have been largely absent from the digital world until very recently."
But to further propel growth, we have to reduce transactional confusion. Almost certainly, it will be necessary for industry leaders -- Chief Executives and Chief Financial Officers of brand marketers, agencies, and publishers -- to come together and reach agreement on the metrics that matter, and on ways to simplify the processes by which audience measurement is factored into media planning and buying. Happily, the IAB and the AAAA are attempting to do just that. Several months ago, we established a joint task force to attempt to systematize media measurement, based on objective. We call the initiative "Beyond Counting Exposures."
The Services Imperative
But advanced publishers aren't waiting for a set of magic metrics to instantaneously ignite a brand-advertising renaissance online. Instead, they have determined to build multiple paths to customer value and their own prosperity.