Online advertising is neither fresh nor understood by 2020 and yet the role it plays is still fundamentally misunderstood.
Businesses consider all digital ads to be in the same bucket as TV or posters and so they are paying for it from their marketing budgets, tracking their return on investment and increasing it on other channels’ expenses.
For some types of online advertisements it makes sense, but for some, conventional advertising is not like that. It is not their job to raise demand. Rather they are ‘the new rent,’ as a recent article in The Economist points out. Since e-commerce is now so widespread, less companies need a physical presence in a high street store but need a virtual presence, which is why they buy these advertisements.
Their goal is to help people arrive safely, who are already on their way to a company. The sign above the store, the lights inside, the shelf area and even the yellow pages are replaced.
The statistics show that digital publicity does not push new sales
My task is to estimate econometric sales models, and these forms of digital marketing frequently indicate that they are not driving increasing sales. Econometrics is not an excellent analytical methodology, but we are still doing so in accordance with IPA guidelines, and we think the conclusion is: these advertisements do not drive new sales, but they encourage or advocate sales motivated by other things-price, economy and conventional channel ads.
The macro data shows that digital ads are rentable as well. It demonstrates that digital advertising is rising and increasing, and that e-commerce is rising and increasing. Correlation is not the cause, but definitely it is not the coincidence that the digital share of expenditure in the chart below goes in parallel to the bars to the northeast, a retail share which is online.
There is also the proof The Economist used – the response to the recession this year. Drawing from US info, conventional publicity formats are reportedly down, but online advertising is flat or a bit up. It’s because ‘online retailers have to keep their presence clear, recession or not.’
Search is evident, but not the only digital “ad” that rents
The archetypal example of rental-like digital advertisement, or use of its terms, is search engine marketing which is really “physical availability,” emphasises by Byron Sharp.
His argument is proven by how Google ads search revenue handles. Any hypothetical search ad that would tell a storey, persuade or otherwise create demand could not automatically convert Google to clicks. Insiders say that Google’s auction algorithm does not directly support this kind of search ad.
That’s not to suggest, as Faris Yakob said when I contacted him, that any search engine marketing is cheap. Search will raise knowledge of and from there, new sales both now and in the future, for relatively unknown products or established brands that launch a new product.
However, also quest is not to claim that rent-like digital advertising is the only example. Online programming videos or display advertisements also serve as shepherds for the final sale as well. People do not respond to these advertisements because they are especially compelling, but because they are a convenient way to go.
A further contestant are affiliates. Their prices are often purchased as publicity and charged from the marketing budget, but often more like the shopfront, which stocks the product. “What’s the difference between them and Tesco?” asks James Hankins, on a recent blog.
Rent-like advertising should not be charged from the advertisement budget.
The correctness of this misunderstanding of search and other rentable digital ads has three significant consequences.
The first and most important point for CMOs is that this is not a marketing cost. If such digital advertisements are merely a cost of on-line purchases, they are based on the same budget that the website and the buildings in which the call centre operates are charged for.
49% of marketing budgets have been spent digitally in 2019. If even half the cost was for rental advertisements, the capacity of the CMOs to create demand through advertising was possibly seriously reduced. This can be explained by the recent finding of the IPA that the efficacy of award entries has been decreasing. Maybe advertisers are required to devote disproportionate budgets to events that do not improve revenues.
The second implication is that the control of these advertisements in another section of the company is stronger. What does a marketing or merchandising specialist do? Perhaps they will reduce the expenditure on these announcements to the extent they used to spend on the yellow pages or the amount of signage. A CMO should go down the hallway and ask them. It’s a smart idea.
Finally, digital analytics marketers need a revision. At this point, rent-like ads are not differentiated from demand-building ads. They count anyone who goes past the door sign and say all the items they purchase as guided by the sign. Now we are facing the challenge to switch to an improved framework in which analytics first define which ads look like rentals and create demand and then avoid reporting rent-like return on investment.
Maybe then we can be sure if we pay too much rent or not.