Re: online targeting

From: Clint Ballard <clint_at_accelerationsw.com>
Date: Thu, 4 Mar 1999 10:47:38 -0600 (CST)

JOE BARTLING WROTE:
> Impressions CPM CTR* CPV** CPS#
>Targeted 40,000 $25 0.25% $9.80 $143
>Untargeted 200,000 $5 0.46% $1.18 $500
>
>and ADSDAQ's:
>untargeted 300,000 $2 .23% $.85 $200 (3 sales)
>
>
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

This alternate Untargeted campaign makes the analysis a lot
tougher. With the cost per sale within $57 of the Targeted,
it becomes a lot more likely that the value received from
the non-conversions, eg. almost 300,000 people who saw the
banner and 700 people who visited the site, could compensate
for the extra cost per conversion. If all of that exposure
results in a single extra sale in the future, the cost per
sale becomes $150. At that point, I would think that the
extra 260,000 banner views and over 600 visitors should
outweigh the extra $7 per sale.

The key is to determine if the extra 600 visitors that came
from Untargeted #2 was worth the extra $185. At a cost per
clickthrough of around 31 cents (which is only slightly more
than the 25 cents www.clicksales.com charges for
clickthroughs, end of blatant plug), odds are pretty good
that this is indeed a good deal. Notice that I haven't even
considered any value from the 260,000 extra exposures. The
reason for this is that the only value of branding on the
Internet for companies WITHOUT an offline presence would be
an increase in traffic levels and such an increase can be
approximated by inflating the CTR (or decreasing the
effective cost per sale) of the campaign. I doubt if the
lifetime increase in visits would warrant more than a 10%
increase of the CTR, eg. industry average of 1% increased to
1.1%, so beware if you are banking on banner branding to
generate positive ROI in the fullness of time. Of course,
if the banner clearly displayed an easy to read and remember
URL, then maybe you could see increases of more than 10%.
What this means is that for companies without an offline
presence, ALL the branding value can be measured by
increased spontaneous traffic levels. This can be computed
by counting the number of people who arrive independently of
any paid links and simply add up the cumulative number of
such visits. These visitors represent the ENTIRE branding
value generated from all previous campaigns. However, if a
company has a significant offline business, the person who
is influenced online will increase offline purchases and we
get more value. Let me digress into a mathematical analysis
of the value of branding for companies WITH offline sales...

Let's assume that a company sells OFFLINE an average of $10
per year of products to a certain set of people, with a
gross margin of 20%. Let's say that babycenter has 80% of
its audience as the company's offline customers and Burst
and Adsdaq have 20%. Let's also say that we know that a
visitor to the site will increase their annual purchases by
15% and each time they see the banner, they will purchase
0.5% more. For sanity's sake, let's assume that the
banner's effect is linear within the frequency parameters of
all 3 campaigns, this is hard enough without non-linearities
of branding effects to deal with.

        Impr. Cost Visitors Sales Banner Site New Cost
                                             Branding Branding


Babyctr 40,000 $1,000 100 7 $320 $150 $530
Burst 200,000 $1,000 920 2 $400 $276 $324
Adsdaq 300,000 $600 690 3 $600 $207 ($207)

With the above assumptions, and changing the Cost Basis for
the campaign by subtracting the branding value from the
actual cost, we get an adjusted cost per sale of $75.71 for
babycenter, $162 for Burst and N/A for Adsdaq. The Adsdaq
campaign would have generated more profits from the branding
value than what the campaign cost. Now, all of these
numbers are made up numbers and you need to plug in real
numbers for whatever scenario you have. The clear point is
that for companies with an OFFLINE presence, the branding
value can be a very significant amount. I would be
interested to know if anyone out there has scientifically
measured results on the increase in offline purchases to
confirm my analysis. I also assigned value to having a
visitor to the website and since we magically knew what the
increase in offline sales from that is, we are able to
compute a tangible value. My assumption is that having a
visitor to the actual website will be much more powerful
than a banner impression.

The above analysis indicates that the value of an online
campaign will be dramatically different depending on if the
advertiser has a significant offline presence or not. In
fact, the larger the offline presence, the higher the value.
 Are we headed for a two tiered market? I would be very
interested in running experiments for offline companies that
want to measure the branding effect on offline sales to
validate/invalidate my assumptions.

Clint Ballard
clint_at_accelerationsw.com
http://www.clicksales.com/


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Received on Thu Mar 04 1999 - 11:52:22 CST