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The Digital Marketing Slush Fund

By Andrew Frank | August 27, 2015 | 1 Comment

A CIO, CMO, and CFO walk into a bar.

The CFO says, “OK gentlemen, who’s buying?” (Yes, they’re all men.)

The CIO points to the CMO and says, “He should, after all he always drinks more than both of us combined.”

The CMO smiles and says, “That may be true, but I think our friend in Finance should sign, after all he’s the one who’d have to approve it on my next expense report.”

The CFO scowls, leans in and says, “Look, our Tech Leader here should do the honors; he’s got the master password so he can just delete the line item from the ledger after I approve it.”

The CIO shakes his head and says, “Too risky. Why not have Don here just bill it to the media budget, as usual? No one ever checks that.”

So they all agree and the CMO opens a tab, dreaming of the lavish vacation he’ll take with all his Titanium Card reward points.

Ever since Eric Schmidt called brand advertising “the last bastion of unaccountable spending in corporate America” (five years before Google started buying billboards and Super Bowl ads) media budgets have been under increasing scrutiny – but this increase will pale in comparison to the crackdown ahead. I’m not just referring to the wild economic volatility that’s making news, nor to the well-documented woes of the television industry. Digital media is due for a reckoning.

Digital media was supposed to give us transparently accountable advertising, and multitouch attribution has come a long way toward delivering on that promise. Ironically though, as consumers have migrated to mobile devices and apps, accountability has receded, for a number of reasons. Let’s look at four of them.

  1. The Metrics Gap. Digital advertisers are feeling nostalgia for the days when cookies and clicks made return on ad spend a relatively straight-forward calculation – especially for search ads. But even desktop display ads, with their notorious click-through rates, were easier to measure than today’s evolving mobile formats. Part of the problem is a lag in standardized measurement methodologies, but a bigger issue is the growing consensus that consumers are less likely to respond to mobile advertising at the time it’s displayed, and more likely to respond later on a different device, such as a desktop. This finding has been reported in a recent report by Merkle RKG (cited in CMO.com) which found “the average revenue per click for phones was 58% lower than that produced from desktop traffic in Q2 2015…when we include conversions that take place on one device following a click on another, however, phones are credited with 21% more orders than they would be through traditional tracking methods.” This echoes findings of an earlier study, by Marin Software (cited in Forbes): “while 63% of clicks on Facebook ads came from mobile devices in the fourth quarter, only 34% of ‘conversions’ – purchases and other actions a marketer aims to prompt –happened on smartphones and tablets.” This makes ad accountability much harder to establish.
  2. Viewability. This topic has only escalated since Google revealed research earlier this year finding that 56.1% of all impressions are not seen. The IAB and MRC leapt into the breach with new standards and guidelines, but the mobile world and its emerging social video formats of course complicate things. In May the MRC issued interim guidance pending a planned release of new standards for mobile viewability in Q4, but its release seemed to fan the flames of confusion by introducing a new category of mobile ad, in between viewable and not, called “loaded.” This was a clear nod to the challenges of establishing viewability on mobile devices: “measurement of both pixels in view and time in view may be particularly challenging in mobile at present,” it said.
  3. Fraud. Click fraud and impression fraud have rivaled viewability as concerns in the desktop ad world, but now mobile is joining the fray. Forensiq recently released a study suggesting that mobile device hijacking – in which infected apps run in the background and generate false clicks and impressions leaving the user unaware (as they drain her battery and data plan) – affects more than 5,000 apps and could be observed on more than 12 million unique devices, generating estimated annual losses to advertisers of more than $857 million globally. Needless to say, conversion rates on bots is not good.
  4. Ad Blocking. Since I wrote about this in May, PageFair and Adobe released a bombshell of a report concluding that ad blocking had grown 41% globally over the last 12 months, was now employed by 198 million (mostly mobile) users, and would cost advertisers an estimated $22 billion — far more than viewability and fraud combined. If this weren’t bad enough, Apple recently announced plans to allow users to block ads on their iPhone and iPad devices in its next release of Safari. While this would clearly have a devastating effect on publishers, advertisers also suffer when they can’t reach their audience. With buying quotas in place, ad blocking will no doubt result in more clutter and overexposure of the unblocked population. Advertisers’ reaction (encouraged by their agency) is often to throw more money at the problem, with sophisticated native formats that can’t be blocked so easily. But retreating from open standards is hardly likely to improve either efficiency or accountability.

How much could the average advertiser save by avoiding these pitfalls? When the CFO, CMO, and CIO meet to discuss gaps in the accountability of the media budget, hopefully they’ll agree on one thing: true accountability doesn’t come for free. It’s going to take more resources – people, processes, and technology – to create a reliable system of measurement that can finally deliver on the promise of effective attribution and optimization to make the media budget contributions transparent. The good news is that it appears this investment can deliver a solid return just from trimming the waste that’s accumulating in the digital media budget from circumstances beyond anyone’s direct control. When that happens, the CMO can buy the next round, on him.

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1 Comment

  • Shona says:

    Great review on the current state of determining Marketing ROI. Until digitisation of mobile catches up (assuming it will) it’s down to Finance to piece the puzzle together yet again. Historic analysis is considered dull by most marketers but it might be their only hope of proving their worth until the promise of big data analytics is realised.