BUSINESS

BI and pay-per-click ads: A perfect match

March 7, 2007

More science, less guesswork. Whether it's strategy or tactics, more and more companies are adopting this as their mantra for success.

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"I've seen a very strong trend in recent years toward organizations that make decisions and take actions on the basis of science," says Tom Davenport, Professor of Information Technology and Management at Babson College and author of the Harvard Business Review article Competing on Analytics.

"They have become [...] 'analytical competitors,' basing their strategies and the way they go to market on data and fact-based decision-making."¹

Online advertising: the value of streaming data

This is especially true for marketing. And internet advertising lends itself perfectly to this new data-driven paradigm. What marketers get is a constant stream of data about the decisions and choices consumers make as they navigate online.

By 2010, European markets will spend almost €3 billion on search engine marketing, up from €856 million in 2006. By 2008, the internet will account for 6.5 percent of all advertising. – The Economist, World in 2007

With the right tools, these actions can be counted, tracked, and analyzed in ways that can't be replicated by established mass media.²

It also offers a way to bring the customer to the message, rather than the other way around. "The idea is based on consumers taking the initiative by showing up voluntarily and interacting with what they find online," says The Economist.³

So advertisers have a way to not only directly engage a target audience, they can also see whether their efforts are getting results.

The forecast: continued growth

That's what makes online advertising so powerful, and some marketers are catching on. By 2010, European markets will spend almost €3 billion on search engine marketing, up from €856 million in 2006. And the internet will account for 6.5 percent of all advertising by 2008.⁴

At the same time, TV advertisers are about to lose their most desirable demographic. According to The Economist, 2007 will be the year that the 18 to 34-year-old male moves his attention online.⁵ That audience, says BusinessWeek, spends $100 billion each year.⁶

Analysis shows people what's working and what's not in terms of customer response and interest. This information cycles back into the process, so messages can be tested and improved in days or hours.

One click, one message

Pay-per-click (PPC) is the fastest-growing segment of the online advertising market – with over $12 billion in revenues in 2005. It's a direct response medium in which an advertiser pays each time a user clicks on an ad.

Done right, it can be one of the most cost-efficient ways to make a pitch – an advertiser only pays if someone clicks. Compare that with traditional tactics such as direct mail, where there's a cost regardless of whether or not the message reaches the consumer.

Leveraging PPC with business intelligence

But the big payoff is when marketers use business intelligence (BI) to mine their PPC data. BI closes the loop on the whole cycle. People can see what's working and what's not in terms of customer response and interest. This information then cycles back into the process, so messages can be refined very quickly – tested and improved, and re-tested in days or hours rather than weeks and months.

All this allows companies to accelerate their marketing cycle says Brian O'Grady, president of Search Warrant Online Marketing. "Instead of the weeks or months required for designing, distributing, and measuring some traditional mass media programs, you can literally compress that process into days or hours with analytics. Your audience shows you what's working and what isn't very quickly and you can refine your messaging at the same rate."

The benefits of a dimensional view

How does business intelligence create more value? Consider some of the key dimensions: geography, position, and time.

Finding the right intersection of these three is an ideal use case for analysis. Using the time dimension, marketers can see which days of the week have the highest traffic. And they can see which have the best conversions – that is, where the user takes a desired post-click action such as downloading a file or visiting a Web site; here the visitor becomes a lead.

So the highest traffic volume may be on Mondays. But more conversions happen on Tuesdays and Thursdays. On the weekend, there is little traffic but a high rate of conversions.

Post-click analytics can also tell marketers a lot about how people respond to their ad designs. Do more visitors click on the graphics or the text? Do they focus on the top or bottom of the page?

This dimensional data feeds back to people making the decisions. High traffic volume can be great for brand awareness, which may be the end goal for some advertisers. In this case, the idea is to promote a product generally, not to entice customers to take an immediate action.⁷ So running a new series of brand-based ads on Mondays may be the ticket.

But if the goal is higher conversion rates, it's a different set of parameters. In this case, advertisers may want to adjust their budgets by putting a daily cap on Monday traffic or geo-targeting particular regions or running stronger ads on Saturdays.

Refining the message

Post-click analytics can also tell marketers a lot about how people respond to their ad designs. Do more visitors click on the graphics or the text? Do they focus on the top or bottom of the page? If you don't provide a secondary activity that's of value, do you lose them?

Another strategy is to run different versions of the same ad to see which has more clicks versus drop-offs versus conversions. Which ad is more compelling? Which provides a better quality lead? Which keyword costs you the most in clicks but delivers the least in revenue?

With a clear understanding of the data, these questions become much easier to answer and lead to better results. In effect, it gives advertisers the ability to have a quality conversation with each consumer – a huge leap beyond the mass media realm.

"If you can follow sales leads, then marketing ceases to be just a cost-centre. Instead, advertising becomes a variable cost of production that measurably results in making more profit." – The Economist

Better investment decisions

According to the Economist: "If you can track the success of advertising, especially if you can follow sales leads, then marketing ceases to be just a cost-centre. Instead, advertising becomes a variable cost of production that measurably results in making more profit."⁸

Improving marketing tactics means understanding what elements work better than others. What provokes a greater response? And at what cost? In the case of PPC, dimensional analysis presents an opportunity to measure ROI on every activity, and refine the process for more profitable results.