Is Display Advertising Worthwhile In A Down Economy?

Many companies are slashing their marketing budgets and evaluating how marketing dollars are spent due to the tough economic times. Slashing budgets is a clear sign that “Lean and Mean” is the current theme for many businesses. On average most research suggests that (while growing) online advertising still only represents less than 10% of where marketing dollars are spent. Yet even online advertising budgets are getting scrutinized. J.P. Morgan recently predicted a downturn in online spend specifically impacting display advertising as advertisers turn towards more performance based advertising. A recently released study by MarketingSherpa further supports this trend:

For advertisers who wish to get the best ROI for their online marketing dollar the focus tends to shift to display advertising and whether or not they should keep spending in that category. We all know that display advertising (e.g. banner ads on websites bought on CPM or cost-per-thousand impressions) is typically the hardest online advertising initiative to measure. Comparatively, CPA (cost per acquisition) campaigns can be directly tied to ROI. Therefore, when under pressure to justify every marketing dollar spent the inclination is to slash display advertising budgets and increase more accountable marketing channels such as affiliate marketing. At the surface this seems to make sense. However, if you take a holistic approach to looking at this situation you may find that display advertising plays an important role.

At NETexponent we have seen how display advertising can boost other online marketing efforts such as paid search and affiliate programs. We evaluate all marketing channels in order to get a holistic view of our clients’ online marketing effort. This outlook has shown us time and time again that spikes and dips in performance driven marketing channels such as search and affiliate can sometimes be directly related to display advertising efforts. When significant display advertising campaigns are running for clients we usually see a boost in traffic and conversions in other online marketing channels. Therefore, display advertising can play an important role even in ROI focused advertising efforts.

Measuring the impact of display advertising on other media channels and choosing the right allocation of marketing dollars is where the tricky part comes in to play. I am not advocating that all advertisers go out and boost display ad spending because it may not have the impact they want. It is true that even boosts in performance related to display could come at a price that is too high for advertisers. My main point is that companies should evaluate the impact display advertising has on other online campaigns and use that data to determine exactly how much spend to allocate to this channel in order to maximize online marketing ROI.

About Peter Figueredo

Having worked in the online marketing arena since 1997, Peter Figueredo has seen the ups and downs of this industry. He is currently the CEO of Affiliate Management and Search Marketing Agency NETexponent. which he co-founded in 2001. Prior to that his online direct marketing experience came from working at interactive agencies such as Mass Transit Interactive, as the EVP Director of Performance Marketing, and i-traffic, currently a division of Agency.com where Peter held the title of Director and helped establish and grow their Affiliate Marketing Services division. At a time when affiliate marketing was relatively unknown Peter was building and managing affiliate programs for leading Fortune 500 companies.

Peter’s company recently launched an Affiliate Marketing Research division called Affiliate Benchmarks to provide Affiliate Marketers with more insights and data.

You can find Peter on Twitter: @figueredo.

13 Responses to Is Display Advertising Worthwhile In A Down Economy?

  1. Thanks for the great comment Carsten! I agree that many companies may be better served to update their display ad campaigns with direct response messaging if the ROI makes sense. It can also be a great time to take advantage of declining CPM rates and test new display areas if you have the flexibility. However, I think most companies will follow a more conservative route and cut back in order to save money without considering the full impact on their business.

  2. I also read about the study my the Sherpa. B2B Magazine wrote about it in their November 10th issue.

    They also conducted a small survey with B2B readers and confirmed that it is mostly the large advertisers, who are more conservative are the ones, who reduce their marketing spend on display advertising and concentrate more on their in-house email list, but also in Web 2.0 applications, which I find interesting.

    Different story for the smaller and mid-size companies. Those don’t bail as quickly and are also more flexible with adjusting their marketing campaigns rather than abandoning them altogether.

    In my opinion is the cut of the marketing budget a mistake. Companies are better off by changing campaigns to address the changing needs of their customers who are now rather looking for facts and real value in products than feel-good properties to identify with.

  3. Matt Lillig says:

    Great post Peter! Study after study has shown that when display ads are run in combination with search ads, advertisers receive a nice boost in conversions, increased traffic, and brand awareness.

    So when various groups predict a down turn in display advertising because advertisers are looking for better performance based advertising, I'm shocked. The reason why I'm shocked is because display advertising actually does perform very well. Advertisers just aren't using the right metrics to understand the full performance of their display ads. While display ads might not always convert well on their own, they do perform very well at driving conversions, traffic, and brand awareness to other channels of online advertising such as search. By not running display ads, advertisers could actually be risking a 22% + lift in conversions.

    For more information about this, check out my post on the Official Yahoo! Search Marketing Blog at: http://www.ysmblog.com/blog/2008/11/03/measuring-

  4. Thanks Matt, advertisers need to evaluate each marketing channel on its own as well as the overall marketing mix to get a complete picture of their true online marketing ROI. Take this further and by using a universal tracking platform (Omniture may be the closest one that exists) they can also start to give each marketing channel partial credit for the resulting customer acquired based on that channel's role…but ill save that discussion for another post.

  5. Matt Lillig says:

    Agreed. Actually, many advertisers may not realize that they can use the free Full Analytics platform (already available in their Yahoo search marketing accounts) to track all of their online advertising channels under one roof. By doing that, they'll automatically get Yahoo's campaign attribution Assist metric for each channel that is tracked. Assists give the advertiser's channels the true credit they deserve for driving conversions to their other online channels.

  6. Hi Matt,

    Everything looks good if you look at it through the lens of the "right metric". I think the best policy when managing advertising campaigns is to first remove any rose tinted glasses you might be wearing.

    Fact is that conversion is an important metric. Each every channel in an advertiser's arsenal should be evaluated by how it converts individually as well (as Peter pointed out) as how it contributes to the complete marketing mix.

    It is correct to say that often advertiser's fail to use CPM advertising for what it is designed to do (increase branding, develop awareness, create uplift in other channels), but it is misleading to say that display advertising "performs well" by itself.

    Advertisers who have the technical capability and the marketing know how to maintain a mix of display advertising in their marketing arsenal should do so even in a down economy. Many don't. So it is hardly surprising that in a recession they turn away from a channel that simply burns money when improperly used.

    Angel

    By the way Peter, great post.

  7. Matt Lillig says:

    Hi Angel,

    I never disputed the fact that you should also measure display ads individually. In fact, it would be ridiculous not to.

    Also, I don't think I mentioned that display advertising “performs well” by itself. I said it performs well at driving conversions for other online channels such as search. As I mentioned above, "While display ads might not always convert well on their own, they do perform very well at driving conversions, traffic, and brand awareness to other channels of online advertising such as search."

    My comments aren't simply based on my data. It's based on data from many other studies such as the one from Atlas Solutions that found, "When marketers 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…” The study demonstrated 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."

    http://www.atlassolutions.com/uploadedFiles/Atlas

    The problem is that most web analytics solutions don't provide attribution metrics across multiple campaigns. So an advertiser would never know, for example, that his display ads are valuable at driving conversions for his search ads.

    Metrics such as Assists in Yahoo (or any other campaign attriution metrics) are very valuable for advertisers when it comes to making smart online advertising budgeting decisions. Think about it as a sports analogy….

    Let's say you were a basketball coach and you had to make a decision about which players you were going to play and all you had were conversions to look at. Let's say in a game that Player A scores 2 conversions (for 4 points) and Player B scores 7 conversions (for 14 points). If you only had conversions to look at, which player are you going to bench in the next game based soley on conversions? Player A of course because of poorer performance.

    But let's factor in Assists now. Let's say that while Player A only had 2 conversions (for 4 points) he did have 12 assists (which helped his team score 24 points). Now are you going to bench Player A? No, because while Player A didn't convert well himself, he was very valuable at assisting his team in scoring 24 points (12 Assists).

    Imagine the consequences of benching Player A. You would have lost out and additional conversions as a team because Player A wasn't around to provide assists.

    Same goes for managing the budget for online campaigns (display, search, email, etc). Imagine an advertiser lowing the bid for one of his search keywords because it didnt have a sufficient amount of conversions atached to it. But if he was using the "right metrics" (like Assists from Yahoo for example), he would have recognized that the keyword he just lowered the bid on was actually vauluable at assisting conversions for his other other keywords. That's lost opportunity.

    You don't know what you don't measure. 🙂

  8. Wow, this is a great…one of the most rewarding things for a blogger is to spark intelligent discussions. The topic is timely and my colleague Brad Waller also made an interesting post about it recently.
    http://revenews.com/bradwaller/the-banner-is-
    so I invite those following this thread to check it out.

    Thanks for the comments

  9. Hi Matt,

    A study by Atlas is hardly unbiased. As part of what was the Aquantive family and now part of Microsoft Advertising, Atlas provides the tracking and optimizing for a large portion of the display advertising online. It only behooves them to publish a study that demonstrates the tie between search and the work which is core to their business model.

    But let's use Atlas as an example. Back when DrivePM was also part of the Aquantive family I did several large media buys of remnant display advertising on a CPA basis (technically it was a hybrid model but let's not get too caught up in the minutia). DrivePM ran those remnant buys using Atlas's tracking system to optimize banners based on how they converted. Ones that didn't convert, Atlas automatically optimized out of the system.

    In this case, unlike typical display or remnant campaigns, the publisher, the tracking network and the advertiser were all in sync to insure the best possible conversion was reached while at the same time creating brand awareness and benefiting search. If I had purchased the same amount of display advertising directly solely on a CPM basis I would not have achieved the same value in part because the publisher (much less the tracking network) has NO incentive to optimize the banners it displays on my behalf.

    PS. Your basketball analogy is well done.

  10. Todd says:

    Hi Peter,

    A great read. I believe (supporting data anyone?) that you also see this banner impression effect just with PPC where a merchant's PPC ad appears at the top, and helps to support CTR/CR for an affiliate PPC ad appearing lower in the auction (especially for smaller brands).

  11. I have to take the side of Matt here. The multiple touch point analytics is still in its infancy and mostly large advertisers only are doing something with this today.

    I blogged about this subject here at ReveNews.com about a year ago btw.

    The user simply seeing an Ad a number of times at the right time and right frequency has impact on the conversion down the line at direct response campaigns. Studies have shown that too many or too frequent exposures also can have negative impact on conversion further down in the funnel.

    People except certain kind of advertisers to advertise at certain places in order to demonstrate their status within an industry. People see the ads and might not react on them (e.g. click or even convert), but if the ads were not there at all, the person who is ready to buy might not considers that company as much as he would have, if the appearance of an advertisement by that company at a major portal in the niche wouldn't have reinforced the status of the advertiser as one of the leaders in the space.

    The same psychology is going on when it comes to buying paid ad positions in the search results, even if you are already ranking no.1 organically for a certain keyword, including your brand.

  12. Very relevant stats on how Display can positively impact SEO http://bit.ly/4uIW6s

  13. TrishaLyn says:

    […] and Peter Figueredo both discussed it over at ReveNews: The Banner is Dead by Brad Waller and Is Display Advertising Worthwhile in a Down Economy? by Peter […]