Re: online targeting

From: Rick Bruner <rick_at_imtstrategies.com>
Date: Fri, 26 Feb 1999 18:38:53 -0600 (CST)

Greetings all,

It's been a long time since I posted to this list, and I
apologise that I do so now only to resurrect this
long-suffering thread on "ad targeting." But I must.

I am doing some research for two presentations I'll be
giving at this summer's Web Advertising conference (by
Thunder Lizard), on "Measuring ROI" and "Ad Targeting," and
someone referred me to this thread. I just got done reading
the entire mind-numbing discussion in one go, so as you may
appreciate I'm a bit frazzled. While there were main
compelling insights within, there was also a lot of bad
craziness.

One point, however, has me totally baffled, which is why I
write. In response to the Iconocast example,


LEO SHEINER WROTE:
>If anything in the stats [from Iconocast]
>he [Tim Lee] quotes is interesting (and probably typical) it is that the
>bottom line cost of making a sale in this comparison is cheaper
>with the untargeted campaign because of the considerably
>higher (five fold) cost of targetting.
>
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

...to which Tim Lee, the thread's creator, replied:

>I am glad finally we have something to agree with. Leo, if
>you think the bottle is half full, we may have more to agree
>with.
>
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Huh? I clearly must be missing something. Here are Michael's numbers again:

>--------------------
>Targeted vs. Untargeted Banner Campaign ROI Analysis
>
>
> Impressions CPM CTR* CPV** CPS#
>Targeted 40,000 $25 0.25% $9.80 $143
>Untargeted 200,000 $5 0.46% $1.18 $500
>
>
>* Clickthrough rate ** Cost per visitor # Cost per sale
>Source: Dec. 1998 GrowthSpurts.Com
>----------------------------

You agree, Tim, with Leo that the "cost of making a sale" is
*cheaper* with the *untargeted* campaign? How on earth do
you both figure that? The last column clearly states that
the "CPS" (cost per sale) of targeted is $143 vs. untargeted
at $500. I may not have had enough coffee to fully follow
the complexities of Tim's original forumula that kicked off
this thread or Clint's "Valuation of Target Pricing" stuff,
but unless I did much worse at math than I remember,
$143-per-customer is cheaper than $500-per-customer. No?

In this example, both campaigns cost a total of $1,000, yet
the targeted one produced 7 customers, while the untargeted
produced 2 customers. Who gives a rat's ass how many
impressions were shown or what the CTR was. If we're talking
in direct marketing terms, cost-per-acquisition is the only
metric that ultimately matters (unless of course, the goal
were lead generation or something equally tangible; in
whatever case, its the cost per ultimate goal that matters,
not the intermediary CTR).

Yes, there is the whole argument to be made for branding,
which I respect up to a point, but it really seems to me
that this (admitly statistically limited) study is pretty
conclusive that the greater-than-threefold edge the targeted
campaign had over untargeted in terms of cost-per-customer
aquisition is what is most compelling. It also seems clear
to me that the 39,993 visitors who saw the targeted campaign
but who didn't buy are a lot more likely to visit another
time and buy then than are the 199,998 who saw the
untargeted ad but didn't buy.

I'm really curious, did you simply misread something, Tim,
when you agreed with Leo above, or are you using "new math,"
or am I missing something really obvious here?

BTW, no one pointed out that GrowthSpurts.com, the source of
Michael's campaign data, is a baby goods e-commerce site.
After browsing it for a few minutes, it's clear that there
are only a handful of items on the site that cost more than
$143 (much less $500), namely a few strollers. The majority
of the merchandise are books and toys under $20. You'd have
to build a *hell* of a lifetime value equation to justify
either of those acquisition costs.

Looking back to Michael's original post, a few other
interesting points become a lot more clear. First, his
original headline at the top of the newsletter makes it
obvious that he, too, agrees with me where the value is:
"Targeted vs. Untargeted Campaigns --> Targeting improves
CPS".

Also, to use this whole example as a basis for a discussion
on "targeting," where Tim began the thread talking about
Ultramatch's neural network technology, is misleading, as
the "targeting" in question in this case was strictly on the
basis of editoral positioning. Namely, the untargeted ads
were run of network on the Burst ad network (whose members
are not exactly top-name sites to begin with), while the
"targeted" campaign ran on BabyCenter.com, which is itself
another baby goods e-com site.

Why on earth BabyCenter runs banner ads for their
competitors is another good question (does Amazon.com run
ads for BarnesandNoble.com to supplement its red ink?), but
let's not go there. It is obvious to me, however, why those
"targeted" visitors had a low click-through rate yet a high
conversion rate. Visitors to the first baby site were well
primed to shop for baby goods, yet they were primed to shop
on the site they were already on (hence the low CTR), but
those who did click were highly motivated to buy baby goods.

The results are signifantly more disturbing for Burst. The
0.46% CTR is already less than the industry CTR average
(0.6%, according to Net Ratings, generally, if
optimistically assumed to be 1% by the industry at large
these days), and the 1 in 100,000 customer aquisition rate
(from the original impressions shown) is 10xs worse than the
1 in 10,000 average rate I've been quoted from Be Free and
ValueClick. (The ugly truth of "1 to 1 market": 1% CTR & 1%
conversion rates are the average.)

BTW, before anyone asks, those of you who recognize my name
as the former editor of the Executive Summary newsletter,
yes it's been about 8 months since my last issue, despite my
having promised only a 6 week respite. Mea culpa. But
*really* I am about to send an update message to all
subscribers shortly, as soon as the Web developers for my
new company, IMT Strategies, get one more page online: ETA 2
weeks. REALLY.

Rick

Rick E. Bruner, Vice President, Senior Analyst
IMT Strategies http://www.imtstrategies.com
Author, "Net Results: Web Marketing That Works"
http://www.amazon.com/exec/obidos/ISBN=1568304145/executivesummaryA/
(415) 351-2489 rick_at_imtstrategies.com


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Received on Fri Feb 26 1999 - 20:02:57 CST