As long as digital marketing has a propensity for complexity, Online Advertising Answers will be here to help you keep things simple.
In this issue, I rage against the dying of the digital marketing light, explain CPE advertising in simple (and historical) terms, and go through the ups and downs of display advertising.
You asked, I answered. Simple.
Let’s dig in.
Have a digital marketing question?
This month’s questions are:
- Is Digital Marketing dead?
- What is the equation for calculating CPE?
- What are the benefits and downsides to display advertising?
[Click these links to skip down to the question]
Q: “Is Digital Marketing dead?”
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A: “No, Digital Marketing isn’t dead.
This is something that marketers say (and Tweet) all time as if it’s just occurred to them. But it’s not dead, not even close.
It’s frankly embarrassing how often people say “Digital Marketing is Dead” and think they are being thought leaders.
I can understand why people say that though – it’s simply a dramatic way of saying “in this day and age, all marketers should use digital channels”. While younger marketers might say “well duh” – older marketers (who are often in the most senior of roles) remember a time before the internet.
In the noughties (2000-2009) digital channels were called “new media” – and back then digital marketing was mostly done by IT managers. This was because marketers couldn’t get their heads around the tech, so digital marketing was pushed away as something outside the mainstream.
Marketers didn’t have to deal with the internet side of things, so digital marketing was considered a wholly separate entity back then.
So I agree – that entirely compartmentalized version of digital marketing as something that marketers don’t have to deal with is dead yes.
But digital marketing continues to exist. It is not an alternate form of marketing, it is a group of related specialisms within marketing that takes a specific mindset that is slightly different to ‘traditional marketing’ (eg offline marketing). This difference from ‘traditional marketing’ is why it continues to exist.
The way things are measured (immediately), and run (across multiple very different platforms), the rate of change (such as new platforms, new/changed algorithms etc), and the risks (immediate feedback, being banned etc) are all quite different to offline channels, and so require a specialism.
Marketing is about behaviour change. Whether you are trying to get someone to buy your product, sign up for your newsletter, not change to a competitor, or whatever – you are trying to get people to do something they weren’t going to do.
The existence of digital marketing doesn’t contradict this. When people say they are using digital marketing, they don’t mean they aren’t using marketing – only that they are using a particular kind of marketing.
Marketers ignoring digital channels as part of their marketing mix is dead sure. But Digital Marketing as a specialism is very much thriving. If anything it’s getting harder and more complex so is more needed than ever.
If you don’t believe me, believe this… it’s the relative amount of searches for “Digital Marketing” globally since 2004 (from Google Trends).
This is relative interest over time for the search term “Digital Marketing”.
Digital marketing isn’t dead or dying – it’s still growing.“
[This question was sent by email]
Q: “What is the equation for calculating CPE?”
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A: “CPE stands for Cost Per Engagement. CPE is calculated as follows:
Click to enlargeCPE = Amount Spent / Engagements
[To calculate your own CPE you can use this handy calculator]
An engagement in online marketing can mean any type of interaction with content. This includes useful things like clicking on links, sharing, following, signing up etc. It also can include essentially useless things like pausing or muting a video, expanding a tweet etc.
This is because the idea of CPE marketing is to cut through people’s indifference. Any sort of interaction means that someone has at the very least noticed your ad or content.
Although it may sound ridiculous to pay for such things, as part of a larger set of advertising it can make sense. For example, if you are marketing something which people naturally don’t want to think about (eg toilet paper) your first goal may simply be to get people to notice you. Then the next campaign is focused on clicks and the next one on sales.
If you don’t have a grand plan like this, however, you should probably be wary of CPE campaigns. If you want visits to your website, pay on a CPC basis. If you want sales, pay on a CPA basis.
If you just want attention however then CPE may be for you.
Fun fact: The idea of engagement being a marketing goal started with door-to-door salesmen who were trying to sell new inventions in the early 20th century (like personal vacuum cleaners). Knocking on someone’s door and trying to sell them something they had never even imagined was of course an uphill battle.
So the first goal became to simply engage whoever answered the door long enough for you to be able to tell them about your unbelievable products (without them laughing you off the porch).“
[This question was originally on Quora]
Q: “What are the benefits and downsides to display advertising?”
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A: “Display Advertising is great for branding. You can run visual ads at a relatively low cost that can appear on thousands of websites across the internet.
Branding is the great multiplier of marketing – if you have a strong brand, people are more likely to buy your product, click on your ads, and recommend you to friends. So display advertising being a useful brand advertising tool should not be overlooked. Especially as the other great branding channel online is organic social media – and that takes up an incredible amount of time, whereas display advertising is relatively low effort.
It should also be mentioned that from a website’s point of view, display advertising is a great source of income, and in fact, much of the internet is only free at the point of use because it is funded by display advertising.
Having said all that, display advertising comes with a great deal of downsides – mainly caused by greed from within the industry itself.
Firstly, it should be noted that display advertising objectively performs very badly compared to other digital marketing channels. Here are the average CTRs from a few years ago:
Display advertising gets a CTR of 0.2% on average – that means it gets 2 clicks every time an ad is shown 1,000 times. That is incredibly low. And considering a reasonable conversion rate is about 5%, that means you could expect one conversion per 50,000 ad impressions.
It’s become normalised, but just think about that – one sale every 50,000 times your ad is shown! That clearly is not an effective medium for generating sales.
The problem is that “performance marketing” is a much larger marketplace than “brand marketing” so of course companies that sell display advertising want a piece of the bigger pie. So there are multiple technological attempts to sell display advertising as a good channel for bringing in conversions.
These include:
- Programmatic advertising – letting algorithms work out where to run ads for the best results
- Header Bidding – auctioning ad space exceptionally quickly on each page load
- Post-Impression Conversions – claiming conversions are caused simply by people seeing an ad
And more like this. The first point to make with all of these is that they don’t actually bring in better results – that 0.2% CTR benchmark and 5% Conversion Rate figure I mentioned before are both taking these technological advancements into account. These results are not really any different than before all this technology was added to the mix.
The big problem with all this display ad tech is that to make them work, an infrastructure of tracking people on the internet has been created that has gotten incredibly out of hand. To see if they should serve ads to us, and then to see if those ads have worked a variety of cookies and other tech are deployed to track us. This may be ok-ish if the companies who did the tracking were responsible with the data they collected – but they really really really aren’t.
I don’t want to go too deep into it because laws are changing all the time, but just know that when one site/service collects your data it very likely shares it with others (often broadcasting it blindly), and advertising companies collect more data than anyone. It’s not a stretch to say that the biggest data breach in history is happening because of display advertising – and that it’s ongoing (at the time of writing this) and it’s entirely intentional.
Again though, laws are changing so hopefully this will be fixed soon.
This is not actually the bottom of the barrel for Display Advertising though somehow. There are other major problems too that affect performance, but they are all kind of baked into the 0.2% CTR and 5% conversion rate issue. Some of them are:
- Banner Blindness – most people just tune out advertising online at this point.
- 90/10 problem – it’s estimated that 90% of clicks come from just 10% of people
- Ad Blockers – It’s estimated around 42% of people block ads
- Off-screen ads – some ads load regardless of whether they are on-screen or not so no one ever sees them! This problem is worse for video ads, as streaming services can’t tell if TVs are on or off.
- Ad fraud – which is estimated to have broken $100bn in 2022
All of these are huge problems, but huge problems that can be solved by less greed in the industry. While that seems unlikely, more stringent laws and regulations will help, as will people being better informed about their data. It will take a while to unpick this mess, but I have hope as too much of the internet relies on it for it to just die.
From a display advertiser’s point of view, this means that you just have to keep your eye on the bottom line. If you are running ads for conversions (which I don’t recommend), then measure conversions (not clicks or CTR) – and don’t pay too much attention to post-impression conversions. Use your stats to calculate your ROI relative to other channels (I recommend a time-decay model in Google Analytics).
If you are running display ads for branding – then run some sort of brand uplift survey to see if your campaign has moved the needle.
Display advertising can be a great channel if you run it on your terms.
From a website owner’s point of view, the key is to always keep in mind that more users = more money, so don’t do anything that will annoy them unreasonably. This means not adding too many ads or too much tracking, no matter what your ad platform says.
And whichever side of the equation you are on, don’t sell data.“
[This was originally on Quora]
See you next month,
Justin
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