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| Measuring
Online
Advertising Effectiveness |
| Overview |
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This page has been brought
to you by JoRi,
students from Prof. Richardson’s
MGTD06 class
at the University of Toronto
(UTSC) in the Sept-Dec 2006 term
 |
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| Joanne A. | Rimon Matyas |
| How
this
unit came about... |
Since the development
of the D06 “Marketing in the Information Age” course Prof. Richardson has
been discussing the efficient use of all the E-Commerce tools. These discussions
were included within each of the units, however there was not a specific
section covering the topic of measuring online advertising effectiveness.
During the fall 2006 session of D06 students Joanne A. majoring
in finance and Rimon Matyas majoring in marketing approached Prof.
Richardson about developing a unit dedicated to measuring the effectiveness
of online advertising. The newly formed team named JORI had the
goal of combining the team member’s expertise to research and develop a
unit that will discuss both the marketing and financial implications of
online advertising. This newly formed unit included an intensive discussion
of the different ways to advertise online, the evaluation techniques used
in choosing the most appropriate advertising method and the methods used
in evaluating the effectiveness of the ads. Furthermore the unit compared
these marketing concepts to financial concepts such as costs benefit analysis,
ROI and budget decisions. JORI worked on this unit from September
to December of 2006 and the unit was finally added to Prof. Richardson’s
site on January of 2007.
Unless otherwise quoted, the text in this unit is JORI’s interpretation of their research findings. For additional source information please refer to the Endnotes & Sources section. |
| Traditional
Advertising |
Measuring the effectiveness
of traditional advertising has been done in the 1990's and 1980's through
different processes.
. Some people who are experts in this field use numbers related to
|
| Types
of Online Advertising |
Whenever the word online advertising is mentioned, the first thing that anyone thinks of is banner ads. However, banner ads are not the only form of online advertising by any means. This section will explore the different forms of online advertising and their uses. It is important to note that although there are numerous ways to advertise online, not all of them will suit the needs of all websites. Choosing the right method for your site is dependent on your GOPST analysis, as only a few types will help with your Plans and Strategies. |
| Some
of the more popular means to advertise online are:
1. Pay Per Click/Pay Per
Sale: Advertisers often develop deals with search engines or affiliate
sites where they pay a predetermined amount for each click-through
that is forwarded to them from the third party’s site. This practice is
known as Pay Per Click advertising and it is useful in increasing
traffic for the advertiser’s sites. However, this method does not guarantee
any increases in sales since the potential customers might just click through
and move on.
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| n | 2.
Search Engine Order: Just as mentioned in the Search Engine Order
(SEO) ranking section, Proactive and Paid submission of the advertiser’s
site to the Search engine acts as another
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| 3.
Banner Advertising: horizontal bars placed at the top of a web page
linking to the advertisers site. Banner ads usually have a lot of colour,
graphics, animation and some statistics as they are used to promote, persuade
and remind customers. Banner ads are by far the most popular means of online
advertising, although it has been argued that banner ads are not effective
in increasing sales. Opponents of banner advertising often argue that web
surfers more often than not ignore banner ads and thus reducing their effectiveness.
(For more details visit the Banner
Ads section)
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 |
4.
Sky-Scraper Advertising: a slang term used to refer to vertical spaces
that run on the left or right sides of a page to display ads. Sky-Scrapers
are similar in many aspects of their functionality to banner ads with the
exception that they remain visible even when the visitor scrolls down the
page. For this reason Sky-Scrapers are more expensive for the advertiser
than banner ads.
(To see an example of the costs associated with Banner & Sky-Scraper Advertising visit the nickles.com website) |
 |
5. Sponsorships: a newer form of online advertising that allows the advertiser to sponsor a section or content of a page. Regular Sponsorships allow the advertiser to “rent” a section of the page to display their logo, a message or a promotion. Content Sponsorship allows the advertiser to submit the content they would like to display on the page and after evaluation this content is displayed/advertised. This gives the advertiser slightly less control in the message they want to advertise, but on the other hand it might be more effective in ensuring content integration between the page and the advertiser’s message. An example of Content sponsorships would be “This cool Video is sponsored by ABC.com” |
6.
Pop-ups and Pop-downs: new windows that appear as soon as the user
types a website URL or click on a link from the third parties site. Pop-Ups
open a new smaller window displaying the advertiser’s message and Pop-downs
appear on the bar at the bottom of the screen.  Often
for the user to be able to close these messages, they would need to click
on them making it an annoyance for the user. Today users often have programs
that work to block these messages from appearing, thus making them really
useless. (Some of the disadvantages associated with using Pop-up ads
are highlighted on the AKA
Marketing website) |
7.
Interstitial Advertising: similar to Pop-ups Interstitial ads open
a new window when the user moves between pages on a site.  Although
the users can simply close them and move on, research has shown that they
have higher click-through rates than banner ads as the visitor is forcefully
exposed to them. If done properly interstitial ads can be a good method
of exposing the visitor to the advertiser’s promotions while they are on
the advertiser’s site. On the other hand if done poorly Interstitial Ads
can be irritating and drive away a lot of potential customers. |
8.
Mailing Lists & Newsletters: newsletters or e-flyers that are e-mailed
out to potential customers often after they have submitted their email
address to the advertiser.  In
other instances the potential customers emails are bought from information
mining companies and thus the mailing lists and newsletters may be undesirable
to the potential customers. In this case, the mailing ists and newsletters
are a form of spam and may have a negative effect for the advertisers.
If done properly the mailing list and newsletter methods may be very efficient
as it targets a specific demographic that has already showed interest in
the company by voluntarily submitting their email address. |
9.
Online Coupons: just like traditional coupons, online coupons are a
good way of attracting new customers to the advertiser.  This
method is effective in that it gives the consumers a reason to visit the
advertiser’s site immediately to find out more information about not only
the product but the company itself. These coupons may be distributed using
a variety of the advertising methods mentioned above. |
| 10.
Other Online Advertising Methods
Some of the emerging Online Advertising methods include a) Blogs 
Although these methods are not primarily focused on advertising, they can substantially supplement the online advertising and marketing process. (For more detail on these tools visit the Podcasting section).
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| Reasons
why Companies should Measure Advertising Effectiveness:
1. Avoiding Costly Mistakes:
According to emarketer.com, “Online advertising spending will reach
$16.7 billion in 2006, eMarketer predicts. That's a growth rate of 33.2%,
the highest growth year-over-year expected this decade.” This means that
companies are spending thousands if not millions of dollars each year to
advertise online, but that is not to say that it is being spent wisely.
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|
 2.
Evaluating Alternative Strategies: Not only is it important to evaluate
the effectiveness of the chosen method, but also the opportunity costs
of choosing that method. Often after companies have chosen a method, they
focus their attention exclusively on that method ignoring the potential
profits that would have come about if they went with an ulterior method.
A good evaluation program will be able to analyze the effectiveness and
the opportunity costs of the chosen method. |
 3.
Increasing the Efficiency of Advertising: often after companies choose
a particular method, they become attached to that method and lose sight
of the initial goal they were aiming for. Because the marketers know what
the intended message of that chosen program is, they expect their customers
to know that message as well. A continuous evaluation of the chosen program
will ensure that the message the consumers are receiving from this program
is aligned with the message the marketer intended to send. |
eMarketer's "Measuring Online Advertising Effectiveness" article identifies four key mega marketing and media trends:"1. Increasingly, when it comes to advertising and marketing, the consumer is in control; consumers are rejecting advertising they find objectionale, annoying or just plain boring; but they are seeking out ads they find entertaining or highly informative.2. Companies are placing an increased focus on accountability and measurement of their advertising efforts; CMOs are now being held to the same ROI yardstick as their CFO and CTO counterparts.3. Marketers are placing a greater emphasis on targeting, as a complement to their increasingly difficult-to-achieve mass reach efforts.4. The media world continues to fragment, making it harder and harder for marketers to reach their desired target efficiently and effectively."  As a result, the internet is being used more as an advertising medium. This leads to the importance for companies to learn about advertising effectiveness to attain more consumers and a greater ROI. "Those marketers who aren't interested in online may be out a job - soon - if they don't prepare to engage the empowered consumer." - Richard Tobaccowala, Group EPV, Starcom MediaVest |
| Reasons
for NOT Measuring Advertising Effectiveness |
Although measuring
advertising effectiveness proved to be highly important, not all advertisers
evaluate their marketing techniques.
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| Reasons
why companies often DON'T measure Advertising Effectiveness:
1. Cost: the most
common reason that companies provide for not measuring their advertising
effectiveness is the cost of conducting a measurement program. |
2.
Research problems: As we will see in the sections to come, the evaluation
process can be very complicated, time intensive and confusing for a company
that is trying to start such an effort.  In
addition, it can very difficult to isolate and evaluate the effects of
only one of the companies marketing efforts; as a result managers often
can not justify the costs if they can’t pin point the contribution of each
of their marketing efforts. For example, it might be very difficult to
isolate the contribution of the company’s banner ad program from their
overall marketing effort as a consumer might not necessarily make a purchase
based on what they see in banner ads, but consider a variety of factors
(brand image, pervious experience with the company, or an on TV) whenmaking
a purchase decision. However, although it might be true that we cannot
pin point the dollar contribution of one program, research can be used
to evaluate the communication, reach and other factors associated with
each advertising method. |
3.
Disagreements on what, when and where to test: There are a variety
of methods used when determining what, where and when to measure the effectiveness
of an advertising program.  Choosing
the appropriate measurement method depends largely on the industry the
firm is in, the objectives of the program based on GOPST analysis and the
person that will be analyzing the results. For example, sales managers
may want to measure the contribution of the advertising program on sales,
whereas top executives may be interested in the effects of the program
on the company’s image. These differences often lead to a great deal of
confusion between the mangers and might lead them to abandon the evaluation
program altogether. However, there is no rational reason for this conflict
as we will later see, each of the measurement tools work to achieve a different
objective. |
| What
to Test |
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| Factors
that should be tested during the evaluation process:
1. Testing the Method:
as we have previously highlighted there are a variety of methods to advertise
online, choosing the appropriate method will have a substantial impact
on its success. Therefore, it is important to determine how well the chosen
program is working and to measure its performance against a predetermined
standard. The testing process should consider the following aspects when
choosing which method will be the most effective.
According to Advertising
& Promotion texbook, Vehicle Option Source Effect is “the differential
impact that the advertising exposure will have on the same audience member
if the exposure occurs in one media option rather than another”.(p. 454)
|
| 2.
Testing the Content:
When an advertiser is developing
a new ad or evaluating a current one, he/she must always start with an
intensive analysis of the objective of the ad: its’ intended meaning, its’
desired effect on the consumers, the demographic of these consumers and
it’s desired effect on brand image. Once these factors have been outlined
they will serve as the standards by which the content of the ad will be
evaluated. For example, if the intended objective of an ad is to get consumers
to try a new product that is being launched, the marketers might test the
following:
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|
| 3.
Testing the Budget Decisions:
Finally, the advertisers
often try to examine effects of their budget decisions on the ad’s effectiveness.
Some of the common questions asked here are:
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| Where
to Test |
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| Places
for testing advertising effectiveness:
1. Laboratory Testing:
In a lab testing environment, participants from the target market are brought
in to be asked questions about the ad or to evaluate their reaction towards
it. These questions and reaction measures will be used to evaluate the
ad based on the predetermined criteria mentioned earlier.
|
| 2.
Field Testing: As mentioned earlier, the major drawback of lab testing
is the lack of realism, and field testing bypasses this drawback by testing
the ad in the environment it will be viewed in including all the competition,
distraction and comfort associated with that environment. For example,
in a field test, researchers might go out to the participants’ homes or
offices and observe their reaction to the ad.
. The major disadvantage of field testing is the lack of control. Using this method may not give the researchers enough information as to be able to specifically link the causes of the participant’s evaluation to particular aspects of the ad. In other words, the participants may evaluate the ad based on factors outside the attributes of the ad itself (their mood, feelings towards the company, feelings about the competition, etc.). As a result, field testing may provide biased results as it does not provide the researchers with the control as to be able to isolate external factors from the participants’ true feelings about the ad. Overall, the researchers must ultimately evaluate the trade-off between control and realism when making a decision as to which evaluation method will best meet their needs. . Furthermore, the allocated budget for the evaluation process may play a significant role in determining which method will be used. If the marketer allocates a large budget, he may choose to use both methods as to gain from the benefits of each one. However if the allocated budget is very restrictive, the researchers may opt to use the lab testing method as it is associated with lower costs. Field testing often requires a larger investment of time and money, since it costs more for the researcher to go out on the field and meet with the participants individually rather than evaluating everyone at the same time.
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| When
to test |
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| 1.
Pre-testing: actions taken before the campaign is executed.
"DigitalLink will allow will
allow clients and their agencies to review the effectiveness of their online
advertising creative before they launch a campaign." Source:
http://dynamiclogic.com/na/pressroom/releases/?id=381
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Methods
to test consumer's reaction are:
. Comprehension and reaction tests are designed to assess these responses. Personal interviews, group interviews, and focus groups have all been used for this purpose.
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| 2. Post-testing:occurs after the ad has been in the field. It is designed to determine if the campaign is accomplishing the objectives required and to serve as input of how well its doing. |
More complex methods of measuring effectiveness through inquiries may involve:
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| Quantitative
Methods |
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| Exposure Measures:
. The following measures assess the amount of exposure of the Web content through their interaction.
Hits: The number of times that a specific component of a site is requested.
Page impressions or Page views: the number of times a webpage has been requested by the server
Banner views: the number of times a banner has been viewed. Almost the same as "page views," but some banner server programs don't count the banner view unless the visitor stays on the page long enough for the banner to be fully downloaded from the banner server.
CPM: A metric from
the print days of advertising, meaning "Cost Per Thousand," using the Roman
numeral "M" to stand for one thousand. A price of $15 CPM means, $15 for
every thousand times a banner is displayed.
Creative: "Ad-speak"
for the actual banner graphic.
Click: When a visitor
clicks her mouse on a banner ad, she is transferred to the advertiser's
site. The number of responses to a banner ad is sometimes refereed to as
the number of "clicks".
Click Throughs: Same
as "click," commonly used to count the number of visitors who click on
the banner and are transferred to the advertiser's site.
Click Through Rate (CTR): The percentage of click throughs to banner views. A 1% CTR means that 1% of each 1000 banner views (or 10 visitors) have clicked through.
Conversion Rate: The percentage of shoppers in an online store who actually make a purchase. This is typically 1% to 5% in online stores, but can be lower or higher.
Cookies: Small files
written to your computer when you view a banner ad, visit a website, or
put a product in a shopping cart. This helps the banner server to keep
from showing you the same ad, or perhaps show you ads you might be more
interested in seeing. Cookies are controversial, but are here to
stay; too much of the Web is run by cookies to get rid of them. Cookies
also allow an advertiser to track which banner ad a visitor saw that brought
him to the advertiser's site, and which banner ads resulted in actual sales.
Run of Site (ROS): Refers to displaying a banner ad throughout a website or a banner network with no targeting by keyword or site category. Run of site advertising costs substantially less than more targeted advertising |
Processing and Communication
Effects Measures:
(confirmit.com is an example of a website that implements advertising effectiveness surveys) |
Often
companies believe that the money used for measuring their advertising effectiveness
can better spent on creating more advertisements or improving their product.
Although this might possibly be true, let’s consider the flip side; if
the company does not measure the effectiveness of its current advertising
program, they will not know if this program reaches their desired audience,
sends the desired message or meets its intended goals. Being able to increase
the advertising budget or improve the product will not help the company
if the message is sent to the wrong audience or if the message that is
comprehended by the consumers is different from the message that the company
intended to send. As a result even the slightest evaluation effort can
go a long way in ensuring that the desired message is sent to the appropriate
audience and hence saving the company thousands if not millions of dollars.
Advertisers
have used this to evaluate product and package design as well as to test
ads. Pupil dilation suggests a stronger interest in an ad or implies arousal
or attention-getting capabilities.
Recall
tests: traditional interviews with Web users help determine recall
and whether viewers remember the ads they see, as well as whether there
is a “halo-effect” among ads. Scores are based on percentage of respondents
who can accurately recall the ad, idea communication, and likelihood of
purchase.
Since
perhaps 5 out 6 "hits" are for graphic images, the number of "hits" can
be grossly misleading. Usually people mean by "hits" the number of times
a webpage has been seen, but to be precise, the better term is "page
views" or "page impressions."
Measuring
the Effectiveness of Web Site Advertising