How to Measure the Performance of Online Advertising

WHAT'S MISSING ARE NOT THE TOOLS, AND MUCH LESS THE DATA. COMPANIES NEED TO DEFINE THEIR BRAND COMMUNICATION GOALS AND SET KPIS ACCORDINGLY

by Anna Uslenghi, Dept. of Marketing, Bocconi
Translated by Alex Foti


Attribution Models, data-driven creative processes, programmatic buying. While the advertising industry is turning from Mad Men to Math Men, companies are constantly worried by the difficulty of measuring the effectiveness of advertising investment. So much so that the 2017 Toolkit published by WARC, probably the most authoritative marketing intelligence service for online advertising, lists Return on Investment (ROI) in relation to advertising spending as one of the most debated topics of the moment.
 
A time-honored question is  how to make tangible the ex-ante and ex-post effectiveness of communication actions. Still, digital and data, the two drivers of change currently affecting advertising, seem to give useful answers in this regard. In fact, technology offers many more channels to reach consumers, with unprecedented hyper-segmentation capability, and the ability to take advantage of micro-moments to take the right message to the right target at the right time.
 
Algorithms enable the automatic planning of online activities, so that, for instance, they factor in the effect of rising temperatures on beer consumption, or take into account the spread of flu in given regions with respect to the purchase of paper tissues, and even contact sleepless mothers dealing with infants. All of this, thanks to virtually limitless heaps of data that help define the contribution of different media to the achievement of business results, affecting budget allocation decisions, and real-time campaign optimization that takes into account feedback from social media. The good thing about digital is that what's happening there always generates data (a view, a click, a like, a retweet, a share, an phrase) and almost everything becomes measurable to the point that the science of crunching numbers seems to have become the new standard in the advertising industry.
 
In fact, massive amounts of data are also available for offline advertising media: audience detection tools are sophisticated and often assisted by information technologies, in media agencies and marketing research institutes the know-how with respect to market measurement and metrics is well advanced and provides reliable models to predict communication performance across alternative investment scenarios. Not only that, while businesses have equipped themselves with a wider array of media other than commercial media, either owned (shopping, packaging, events, websites, social media accounts, proprietary apps..) or earned (word-of-mouth, consumer reviews, facebook likes, etc.), analytical tools have been developed that can weigh the contribution of each channel to the generation of brand experience, so to guide the coordination of various media touch points.
 
So the problem does not lie with information, which is reliable, or metrics, because the repertoire is really large. The real problem is to know what to expect from investment: the definition of specific goals, and their Key Performance Indicators (KPIs), is the fundamental step that companies need to take for building a system capable of measuring the ROI from communication activities.
 
Another step should precede it, when campaigns are still at the design stage, because it's then that the conditions of their effectiveness are generated. The trend is going towards stronger focus on content. The attention that people give products and brands is so low that they need to communicate something really relevant and exclusive to have an impact. Here, for example, data coming from social media platforms on unknown aspects of consumer behavior are certainly useful for conceiving interesting messages targeted at particular segments, but it is the interpretation of the data that makes the whole difference. It's not the task of big data research to provide ideas. And the talent for creativity is no less rare than a knack for mathematics.