Ken Cassar, Vice President, Industry Insights, Online Division
Recently, a client and I were discussing online advertising metrics, with topics ranging from engagement to awareness to intent, and of course, Return on Investment. It wasn’t until after the meeting when it struck me that not once did click through rates enter into the conversation. My hope is that this, and other similar conversations, is a signal that the online ad world is moving beyond its longtime fascination with the click through — the low-hanging (and sometimes over-ripe) fruit of online ad metrics.
Toward the goal of helping the industry move beyond the click through myopia that had historically characterized online ad measurement, I pulled together some analysis that is pretty interesting.
At Nielsen, we’ve done extensive work, particularly in the consumer packaged goods and retail industries, to help advertisers quantify the effect that online display advertising has on offline purchases. The results are quite positive. Looking at more than 300 campaigns over a span of about 5 years, using the basic formula below, we find the average ROI is a positive 157 percent.
What’s the bottom line for those watching their bottom line? Display advertising — particularly targeted advertising — works.
OK, But What About Those Clicks?
In an effort to measure the relationship between click through rates and ROI, we ran an analysis across 200 of those campaigns. The table below summarizes our findings. On the Y-axis we’ve plotted ROI percent percent and on the X- axis we’ve plotted click through rate.
If there were a relationship between the two metrics, we’d expect to see a grouping of red dots with an up/rightward inclination (the more clicks, the better the ROI). Instead, what we see is something more like a blob or a swarm. For you quantitative thinkers, the correlation between the two metrics is a negative .07, meaning that there is no relationship whatsoever between the two metrics. More to the point: across the campaigns measured, click through rate was in no way predictive of a campaigns’ overall effectiveness.
Beyond the obvious finding that advertisers should not be overly focused on click through rates, the big idea here is that advertisers should be including online display advertising in their overall marketing mix, increasingly taking advantage of flash/video ad units to reach the consumer, without the hope that the person exposed to the ad will be one of the few that actually click on ads.
Does this mean that display advertising works as well as it could? No, it does not. The online advertising medium is still immature. Great Don Draper-like story- tellers have not yet had their Kodak Carousel moments. While metrics don’t make great creative, in the long run, a focus on the right metrics will ensure that the creative that we consider great creative actually makes money for advertisers.
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