“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Jean-Baptiste Rudelle, CEO and co-founder at Criteo.
Return on investment (ROI) is the only thing that matters for an advertiser: How much return am I really getting for my money?
To calculate ROI, typically you will define a key metric against which you’ll measure the impact of display ads. With a retail or travel website, for example, you would measure direct sales generated from your display ads or, more specifically, visits generated by those ads and the conversion into sales. For other verticals, such as automotive or CPG, conversions can be a test drive, an application submission or other industry-specific business metric. Once the metric is chosen, you need to decide when and how to attribute a conversion to this specific ad campaign.
This is the point where things become slightly more complicated.
Click-through conversions have no issues. Getting a user willing to interrupt their browsing to click on a banner ad is incredibly hard. As a result, it’s a very strong marketing signal. Furthermore, it’s very easy to control quality of click-through conversions. You just have to monitor conversions of those incoming post-click visits during a predefined attribution window, which is typically 30 days. This has been done at scale for years on search campaigns. As a result, advertisers are usually very quick to spot the difference between high-quality clicks generating strong post-click conversions and poor clicks that need to be eliminated from the marketing mix.
The implicit assumption of a cost-per-click (CPC) pricing model, which guarantees clients always pay the right price, is that only click-through conversions should be taken into account for the calculation of the ROI. This is why the CPC model is so popular among advertisers, as it makes both ROI calculation and quality control so easy.
The challenge is that it can be difficult to show a decent ROI with pure click-through attribution. Very few service providers are capable of offering technology that performs at scale under this demanding attribution model.
As a result, it’s very tempting to add to the mix some view-through conversions on top of the click-through conversions. Suddenly, the ROI looks so much better. View-through conversions are based on the idea that a banner ad impression has “influenced” the user causing him or her to visit the website at a later time. View-through attribution gives ad banner campaigns some credit for those conversions.
This is where things get messy.
View-Through Dirty Game
How do you know if a particular user was truly influenced by a banner ad or just visited the site for another reason?
In practice, there is no way to make this distinction. View-through advocates try to circumvent this issue by asking for a very conservative attribution window. For instance, while click-through conversions typically have a 30-day window, they will measure view-through during a 24-hour window or even just a few hours. This tight attribution window looks very reasonable at first glance, but in reality, even a small view-through window can completely distort the ROI calculation.
To explain why, we need to go back to a little secret of the display industry: A very large fraction of the ad banner inventory is below the fold – more than 70% of impressions on certain networks. Those impressions are very cheap to buy, precisely because almost nobody sees them.
To artificially boost view-through conversions, you just need to buy large amounts of those very cheap below-the-fold impressions. Users won’t see them, but who cares? The cost is minimal and the point is to simply drop a tracking cookie for each of those impressions and then claim credit for any conversion later. This is what experts call “cookie stuffing.” Unfortunately, there are still some advertisers that are unaware of this dirty trick – and even when you are, it’s very hard to prevent – which makes this technique even more tempting.
Furthermore, if retargeting is a significant part of your mix, giving credit to view-through conversions starts to make things really unpleasant. By definition, users who leave your website are the ones most likely to come back spontaneously. So if all your own traffic gets tagged with cheap below-the-fold cookies, you will end up with a massive number of illegitimate conversions wrongly attributed to your retargeting campaign. It looks like great ROI, but in reality, it’s a complete waste of money.
Ultimately, the only way to measure the precise uplift of display ads is to run a statistically significant and valid A/B test where you expose only one group to your display ads and you then measure the difference in results. To avoid any sample biases, A/B tests require a very tight protocol, as rigorous as implemented for drug trials.
Based on hundreds of A/B tests, experience has shown that actual total revenue uplift is, on average, around 20% higher than when only click-through conversions are taken into account. In other words, view-through conversions typically generate around 20% of the overall value for display ads.
So if your ROI calculation requires a contribution of view-through revenues significantly higher than 20%, it should immediately raise a red flag. A share of view-through conversions above 50% is very suspicious, and most probably grossly overestimates the overall value of your display ads.
Furthermore, to guarantee that interests are truly aligned, you want to incentivize your service provider for click-through conversions only. Focusing on click-through conversions is also the only way to rigorously compare different solution providers. Beautiful view-through conversions are just, at best, icing on the cake.
Don’t be fooled. Your money is too precious and you should demand real ROI.