How I’ll waste less money doing digital advertising

Taylor Buley, Chief Technology Officer at McNaughton Newspapers, put on an educational Seminar for Success through The Davis Chamber of Commerce. He shared his insight on “Wasting Less Money on Digital Advertising”. I was there in person and can say that his presentation was fast-paced, exciting and applaudable!

Read his article at The Davis Enterprise website and contact Taylor or myself at The Davis Enterprise when you’re ready to learn more about digital advertising for your business or organization.



From The Davis Enterprise newspaper
By Taylor Buley
October 15, 2016
http://www.davisenterprise.com/special-projects/how-to-waste-less-money-doing-digital-advertising-next-time/

Afforded the opportunity to talk with local business leaders about digital advertising, I didn’t want to squander the opportunity. So what did I do? Waste a bunch of money on purpose.

On Tuesday I presented “How to Waste Less Money Doing Digital Advertising” as part of the Davis Chamber of Commerce’s Seminar for Success series. I paid to be there and it was, essentially, a real-time marketing stunt: I used the seminar itself to generate the ideas I wanted to put forward in the seminar.

The return-based marketing approach that I evangelize is not original, but it’s a simple methodology that instills within us the confidence that we’re maximizing the impact and reach of our digital (and print!) advertising spend per whatever personal, business or philanthropic goal is at hand. I hope to rub off on Northern California my fascination with the economics of digital advertising so we can profit more as a community.

Essentially, wasting less money boils down to keeping an eye on the formula that gives us the return on our advertising spend: the profits generated by advertising divided by the amount of money we spent on it. We derive these numbers from actual results and use the ROI metric to compare campaigns across media. Short term we allow ourselves to strategically lose money in order to learn from our mistakes and shift long term spending into the media that return actual dollars to our business.

In the case study I made of the seminar, what I was selling was my knowledge — for free! — at a given time and place, the Davis Chamber of Commerce. Because space was limited and I was flying blind, I added an RSVP component to the campaign that allowed me to gauge the efficiency of my planned spend. We hit our goal of 12 people within a week and shut down the campaign. The seminar ultimately saw 14 attendees. I’ve published the data in detail as well as the presentation slides.

As the chief technology officer at McNaughton — both a journalist and a data buff — I know that the Davis Enterprise’s website would be a valuable marketing tool. I chose our worst quality inventory, left-over supply called “remnant,” to prove my point. But I wanted to prove that a multimedia marketing approach is really the best way to go, so I spent just as much advertising money elsewhere.

I ran search and display campaigns with Google, remnant and regular campaigns with Facebook and even something with Twitter. For those who visited our lander, I ran retargeting ads that popped up at places like the Drudge Report, eBay and Yahoo Mail. I hit the community on all fronts, and I was shameless in my approach — I even used my ugly mug in one display campaign because I knew it could result in more banner clicks.

The chart below compares marketing dollars across channel. Ultimately my company spent $500.80 on the seminar. Half of that, a measly $250, paid for the Chamber opportunity, conference room and email marketing. I would have liked to have spent more money on search advertising to get a larger sample size, but was limited in the impressions that we’re available for ad-related and Davis Enterprise-related keywords. Ditto, retargeting.

spend_by_type

Why do this seminar and spend money at all when it was free to the public? In short, because digital is becoming increasingly important and I know we can help the community by doing this. More selfishly, should anyone ever need to purchase digital advertising then I want them to know that the Davis Enterprise has their back. We partner with the big dogs and can purchase pretty much any ad on the internet. Ultimately the point is to fund our community journalism.

From which medium did I get my money’s worth?

Looking at “actions” taken as a result of advertising (e.g. the “click through rate” or CTR, which is impressions divided by clicks), McNaughton’s own website performed exactly as expected but the worst among pack. The average CTR for a display ad on a local news site is 0.05% (1 action in 2,000 impressions) — a number we hit on the nose with my davisenterprise.com campaign. Every single other medium beat that number handily — social, for example, was a 0.19% (closer to 1 action in 525 impressions). The highest engagement came from the Chamber’s email marketing blast, a display ad designed by my colleague Aaron Wedra.

ctr

Below charts the same CTR rate as above but visualized in two-dimensions, actions and impressions. Here we can see the trade-offs between reach and impact. (We don’t always optimize for CTR; for example, with branding campaigns.) The further out the point, the more reach relative to impact.

reach_action

Yet the thrust of the seminar was, to mangle the words of a participant, “that nothing matters until a conversion.” And I was fortunate enough to be able to ask those attending the seminar where they heard about it. Taking the advertisement that got them to RSVP then up as a “conversion,” and the mere seeing of a particular advertisement as a “view-through,” I was able to calculate my ROI.

ROI

Note that because this was a no-sales environment, the actual ROI is zero. For the data above I assume a price of $100 with a customer frequency of 3. What this means is that the ROI charted below assumes that the average seminar participant ends up buying enough advertising to profit the Enterprise by $100. For simplicity entirety of the costs of the seminar and these sales are reflected in the marketing spend.

Through the concept of “view throughs” I got a handle on how multimedia contributed to our success. For example, in one case, a participant saw 2 types of ads and the “native” brief in the Enterprise newspaper; each contribute some “view-through” value but ultimately only one gets the participant to RSVP and show up. It was fascinating to see first hand how no one advertising medium can provide the results that a multimedia campaign can deliver when reaching customers on their terms. We know this by instinct, but we can see it in the data as well.

What the ROI chart says is that the return for the social ads was zero. They were a complete waste of money. They generated a lot of “action” but it was at best the wrong group of people, and at worst some type of fraud. This held true for facebook.com and its audience network. Ditto Google search ads, display ads and the Twitter campaign.

The davisenterprise.com remnant ads, on the other hand, return a positive ROI of $3.38, which means every $1 that I invest into this lower-cost ($2-$4 CPM), lower-quality (non-Guaranteed) advertising inventory returns to me $3.38 in profit. The next best return came from the Chamber, with $2.40 ROI, and that cost came with the added benefit of four walls and presentation setup.

If I assume that because we’re learning how to not to waste money, the average participant profits so much on their first advertising spend that they come back twice more, then the customer lifetime ROI can be represented as below.

clvroi

What this says is that over the course of these participants lifetime as customers with McNaughton — on average, earning my business $100 three times — the money I invested into marketing the seminar via davisenterprise.com remnant will return $10.15 in profit for every $1 that I spent. The Chamber email campaign will return $7.20 for every $1 over the customer’s lifetime. The social, search and other display ads continue to return zero, of course.

These results are not indicative of all businesses or products. Anyone looking to use advertising as tool for reach and impact to further personal, business or philanthropic goals should consider all media their customers consume before plowing ahead with any one marketing channel.

Applying a simple spending model — that we should spend on a marketing channel proportionally to the amount of profit that marketing channel brings — our results suggest I should shift all spending into Chamber emails and remnant ads.  These, like everything, are subject to supply constraints. Maybe next year!

actual_vs_model

For me, it turned out that spending with the Chamber and davisenterprise.com was the best strategy I could have taken. For your own campaigns, you should figure out your own ROI — or ask me and our team for help in doing so.

Taylor Buley is the Chief Technology Officer for McNaughton Newspapers, Inc, the Davis Enterprise’s parent company. He lives in Davis. Reach him at cto@mcnaughton.media.