Efficient Frontier Insights

Display Publisher CPM Trends - December 2010

Both direct response and brand-focused advertisers on display are concerned about the performance as well as the type of publishers their ads are appearing on. Whether their ultimate goal is some type of lead/revenue metric or an engagement metric like increased traffic or time on site, the “quality” of the publisher plays a significant role in achieving those targets.

Even when conducting a retargeting campaign where the advertiser is serving ads to those that previously engaged with their site but may not have completed the advertiser’s intended action (i.e. lead form or sale), the type of publisher and ultimately domain itself is still key to success.

Eg. A credit card advertiser retargeting users is likely to show a higher conversion when the retargeted audience is on a site like Yahoo! Finance or Bankrate than when they are on You Tube. This ultimately should play a role in the bidding level for that given impression.

Each publisher domain of course has its own unique characteristics as it relates to CPM, CTR and overall ROI performance for advertisers. This can further vary between the vertical of the advertiser on the publisher domain, the nature of the messaging and other components like seasonality and time of day.

There are some broad level insights we wanted to show across the EF Advertiser set to help people gauge the performance of their campaigns as well the opportunity for marketing spend in display to achieve business goals.

In Figure 1, we classified the various publishers into 8 category types and show a CPM Index for December 2010. These are the top publisher domains by impression and comprise over 80% of the traffic across the advertiser set.

Figure 1: EF US Client Publisher Type CPMs

In Figure 2, here is an overall summary of December 2010 data for the 8 different types including the proportion of domains within that category (i.e. Type %) as well as impression share of that category relative to total impressions in this period.

Figure 2: EF US Client Publisher Type Summary – December 2010

  

One of the more obvious points of note is how much traffic comes from video sites, especially relative to the low amount of publisher domains (4%) within that category. Video publisher CPMs are also extremely expensive relative to the other categories (61% more expensive than the 2^nd most expensive publisher category which was Shopping sites).

It should be noted that the Efficient Frontier platform for any display campaign, allocates bids agnostically to meet the advertiser’s ROI target within given business parameters such as a monthly budget. Therefore, the reason why video inventory may also be that much more expensive that other categories is due to its relative performance for EF advertisers and the platform pushing spend to that type of publisher.

Looking at CPMs for categories over time will be interesting especially with those where seasonality has the potential to play a large part in inventory cost. December is clearly a strong month for retail and thus could be the reason why that was among the most expensive inventory overall. Interestingly, only 3% of the Impressions were on shopping sites. This may be due to the fact that  most publishers with retail content not wanting to send users away from their domain so they can sell to them and thus there was less inventory available on those types of sites.

It was also interesting to see a lot of commercial sites make up the top publishers in December. These were publisher sites which were business corporate sites advertising the company product or service offering. It may be a case of these sites wanting to monetize some of the traffic to their sites (i.e. corporate blog pages) beyond their core offering. The fact that the CTR was the highest for the commercial category may vindicate their decision to go down this route.

There are of course other factors such as (ad size), frequency capping, above the fold, page context, etc. which also determines inventory cost, quality and ultimately performance. With this inventory also being increasingly available for bidding in real-time, it is important that a robust platform is employed to manage an advertiser’s campaign to maximize performance.

Chris Jacob

New Case Study: Downstream Leverages EF as Demand Side Platform

We published a new Display case study this week. Downstream, Australia's leading digital performance agency, licenses our technology platform to manage performance display for their clients. They've seen many client successes, including improving WeightWatchers' CPA results by 71%.

Steve Knowles, CEO and Founder of Downstream states: "Efficient Frontier had long ago established itself as the world’s most advanced Search Marketing technology, bringing advanced predictive models for Search investments based on Modern Portfolio Theory (MTP). In the last few years though, throughsome serious product development, Efficient Frontier has morphed itself from a Search only platform into becoming a cutting edge Demand Side Platform. Efficient Frontier is now capable of simultaneously managing Search, Performance/Biddable Display and Facebook together. This advancement to manage, forecast and execute across multiple digital performance channels is a groundbreaking advancement for ROI focused marketers, enabling us to uniquely understand and attribute value in combination to all channels that lead to a conversion."

To read the full case study click here.

Margarita Golod
Senior Product Marketing Manager

 

(Ad) Size Matters in Display

One of the most common advertiser questions in display relates to ad sizes. While there are many sub factors relating to ad sizes such as frequency capping, above/below the fold, ad format, rich media, etc., at its core, the ad size itself certainly is an important factor in any successful display campaign optimization.

The five most common Display creative sizes are:

-          120 x 600 (narrow vertical tower)

-          160 x 600 (wider vertical tower)

-          300 x 250 (box)

-          468 x 60 (small horizontal banner)

-          728 x 90 (large horizontal banner)

There are many other ad sizes as well, both smaller and larger but we will focus on the inherent performance and delivery differences of the main 5 ad formats.

Figure 1: EF US Client Ad Size Performance 2010

Historically, there has been more display inventory on publishers’ sites in the 300x250 and 728x90 ad sizes due to that format working best with the general layout of publisher web pages. The EF data in 2010 would also support that notion, with 63% of all inventory coming from those 2 ad sizes.

These sizes also represent the ads that have the highest likelihood of being clicked by a browser as well which certainly speaks strongly as a major component of how an advertiser should optimally bid a given ad creative. The 300x250 and 728x90, along with the 120x600 narrow tower, also have the highest CTRs.

Now, this does not account for ROI for a given advertiser to their success metric or the “quality” or vertical of the publisher. The impact of view-throughs (where a consumer completes the advertiser’s conversion goal such as a lead or sale subsequent to being served and viewing a display ad but not actually clicking it) is also not encapsulated in this data.

The fact that 428x60 ads have the lowest amount of inventory and the lowest CTR should be balanced against the fact it is also the cheapest inventory to buy judging by EF’s 2010 data. At $0.39 CPM, it is just a bit over one-fifth of the price of the next cheapest inventory size in 2010 being the 728x90 ads.

For any advertiser wanting to optimize a display campaign successfully, they should not neglect any of the major ad sizes as having more options to display your creative will allow for greater efficiencies. It is important to note that if you have 5 different ad sizes, for each different message/product/special offer/display exchange, etc. that you are promoting, the number of bid/ROI permutations multiples very quickly.

Given this, for best results, as well as the ability to test different messages, a sophisticated algorithmic and cross channel  platform should be utilized so you are bidding optimally each day (and in the case of Real Time Bidding, each second).  Advertisers need to look at results across all your digital channels together, be it SEM, Facebook, etc. as most users are browsing across the Internet and marketing media spend should not be looked at in silos.

Chris Jacob

An Analysis of the Google-ITA controversy

The acquisition of ITA by Google was controversial right from the day the deal closed. Google may now face an antitrust lawsuit by the Department of Justice over the $700 MN acquisition. Amidst all the controversy, we thought it worthwhile to take a step back and analyze the situation from the viewpoints of Google and Bing, the OTAs and the consumer.

What is ITA ?

ITA is a software company that builds travel search and pricing products. Its flagship product, QPX is a global distribution system (GDS) that enables suppliers of air inventory (the airlines) connect with the OTAs (like Hotwire) and other meta search engines (like Kayak). When a consumer searches for an itinerary on these websites, the GDS is used to come up with the best matches for the search.

The Search Engines

Google and Bing are in the midst of a feature war. While Google still has the biggest market share of the search engines, Bing has constantly been innovating and been pushing Google for the past year and a half. In fact, Bing’s new travel features such as flight tracker and fare forecasting enabled them to go from 3.5-4% market share to 9% market share in the travel vertical in the span of 18 months. 

Google’s acquisition of ITA would enable it to integrate with the ITA system and show itineraries on the SERP itself or on a landing page akin to Bing Travel. From Google’s viewpoint this is a better user experience as it cuts one step in a consumer’s search. This would enable Google to compete feature to feature with Bing.

Bing’s concern and opposition is understandable. Bing, which uses the ITA system, fears that Google could cut them off the system in the future or reduce traffic going to Bing. A loss of travel traffic means a loss of search share, the very thing Microsoft has been trying to gain for the past two years.

OTAs and MetaSearch Engines

Consumers are notoriously agnostic to brands in the travel space. AN OTA’s primary brand building vehicle is by making a consumer purchasing experience simple and efficient. By using GDSs (like ITA) they obviate the need for a consumer to search for a travel product at multiple sites. The enhanced experience brings the consumer in again and builds both the brand and website traffic over time.

Google’s ability to show searchers itineraries and redirect them to other travel sites would both reduce the time spent by users on meta search engines as well as OTAs. They risk being perceived as adding less value to the consumer and becoming a mere “conduit at the end of a Google search”.

The Consumer

The feature wars between Bing and Google has been a big plus to the consumer.  Searches have become faster and more efficient enabling us to find what we want when we want. The added functionality that the Google-ITA merger promises can only be considered as a big plus in the short run.

However, if Google starts to prefer certain partners the marketplace would become inefficient. Google would control a substantial part of the sales funnel and could drive up traffic acquisition costs for the travel sites. These costs would be passed down, making for an unhappy consumer who has to pay higher fares.

Conclusion

While Google’s intentions appear to be a better search experience and in turn greater market share, the increased control they have on the traffic is what many fear. After all, it was Milton Friedman who said that “concentrated power is not rendered harmless by the good intentions of those who create it.”

As things stand many travel players are the mercy of Google’s algorithms for much of their inbound traffic. The Google-ITA merger would only increase this dependence.  Consumers who will benefit in the short run, will be at a disadvantage if the market place becomes less transparent.

Still, if Google can adequately demonstrate that they can set up a transparent system of checks and balances preventing monopolistic behavior in the future, this should be a win-win for everyone.

Dr. Siddharth Shah
Director, Business Analytics

Q4 Caps off a Strong Year for Digital Marketing

Today we released our Digital Marketing Performance Report for Q4. Key highlights from Q4 and 2010 include:

• Search engine marketing (SEM) posted solid year on year (YoY) growth of 23% and 18% quarter on quarter (QoQ), signaling an economic turnaround by both advertisers and consumers.
• The demand for display advertising was reinvigorated throughout 2010 with Google AdEx responsible for the majority of exchange-based display media spend.  In Q4, Google AdEx represented about 70% of advertisers' display media spend outlay.
• Google continues to benefit from the Bing-Yahoo! integration with gains of 4.6% market share in spend YoY and 8% click share YoY. The Google gains come at the direct expense of Bing-Yahoo!. Yet, the Bing-Yahoo! transition went smoothly and the combined platform did not lose market share by spend between Q3 and Q4.
• Facebook’s marketplace advertising continues to be strong and early results show that, in addition to being a significant stand-alone marketing channel, Facebook advertising has a positive impact on other digital marketing channels such as search and display.

Our outlook for 2011 is positive:

• Search will continue its growth in 2011 due to continued CPC increases. Our prediction is that search spend will increase by 15-20% YoY in the U.S. in 2011.
• We believe that Bing-Yahoo! market spend share will start to climb back as smaller and medium sized advertisers with increased budgets take advantage of the volume potential and stronger return on investment (ROI) on the new platform.
• 2010 was a strong year for display advertising, especially for Google AdEx.  We predict that it will continue to gain market share.  Additionally, we believe that social media advertising – especially Facebook – will continue to gain momentum. Advertisers that have solved the cross channel marketing puzzle by equipping themselves with the appropriate tools to measure and monetize the cross channel impact will have a leg up in 2011.

Download the full report and analysis here: http://www.efrontier.com/research/search-engine-report/Q4-2010

Margarita Golod
Senior Product Marketing Manager

US 2010 CPM Trends in Display

The display landscape historically has been a publisher's market where the supply side largely dictated the CPM prices that advertisers had to pay. As advertisers were isolated from each other in this model, price savings in the form of lower CPMs as a result of low demand for given inventory was harder to come by.

Enter the display exchanges which are trying to recreate the successful model of bringing an auction based system for display inventory as exists for Search. This is where advertisers compete (now with option in real time for some inventory) via their bids for inventory which is based on their propensity to pay given their respective ROI or Business Goal metrics. Publishers can put their unsold display inventory on the exchange for advertisers to bid in a similar vein that advertisers in Search bid on keywords.

One of the criticisms from the publisher side of the market is that now the new marketplace has put much greater power on the advertiser side and as such CPMs would go down a lot effecting their online revenues and ability to put out quality content.

The Google (formerly DoubleClick) Ad Exchange (AdX) is a good place to see how CPMs for the Display Inventory have trended in 2010. It is a better place to assess a wider market trending than the Right Media Exchange (RMX) due to a large proportion of their inventory coming from Yahoo! owned properties.

In Figure we show on AdX, the EF US client trends for CPMs in 2010. We have not included real-time bidding inventory in this chart due to the fact it hasn’t been available publisher wide through all of 2010 on AdX.

Figure 1: EF US Client CPM Trends - Google AdX

As you can see, since the middle of the summer, CPMs have doubled through November as ever more advertisers are entering the display marketplace. Direct response advertisers who primarily spend their marketing dollars online on search, email and affiliate advertising and brand advertisers who have traditionally spent their money on offline channels like TV and print have entered the display market in 2010 in increasing numbers.

With the increased number of participants of the advertiser side of the Display market and the improvement in optimization technology in display and tracking across channels, the demand for quality content to meet ROI and business goals will continue to grow in. Therefore, the concern on the publisher side for lower CPMs could be offset by the increased demand from evermore market participants looking to take advantage of the new opportunities in the display channel.

Chris Jacob

Image Search Ads – A Case Study with The Carphone Warehouse

Google unveiled Image Search Ads in July 2010 but this space is still under-utilized. Many queries that are oversubscribed on Search have one or no ads above the same keyword on Image Search. Although there is less volume in this channel than traditional search, part of the reason is scalability because the process of adding and editing these ads is still very manual. Implementation is only possible within Adwords (there is no support for API or Adwords Editor) and you have to upload ads one at a time using the display ad builder.

For marketing managers running massive campaigns at scale (or those running smaller campaigns with no time to spare) Image Search Ads can be easily ignored for those reasons.

However, after a recent test with one of the UK’s largest retailers, The Carphone Warehouse, it is clear that Image Search Ads can be a great way to add incremental revenue to an already well developed marketing campaign.

We started with an initial test of 8 high volume handsets. We duplicated the keywords from our ‘Generic’ Adgroups, while taking the messaging from the best performing ad copy for each handset. For Images we used ones already in use on the Client’s Website. This approach allowed us to implement these ads very quickly to compensate for the time it takes to manually upload Image Search ads.

As you can see below, over a 30 day period Image Search ads accounted for 11.69% of clicks, 6.92% of Impressions and only cost 1.7% of the budget.

 
This showed us that CTR was higher, and CPCs were much smaller than Search. Furthermore, despite a relatively small level of Impressions, the high CTR combined with low cost makes this channel an extremely effective source of additional traffic.

These figures make it immediately apparent that this is a massively under-utilized channel which should be explored further.  Additionally, from a Branding perspective this is an alluringly cost-effective way to extend your reach. However, these impressions and clicks may be just people browsing with no intention of even purchasing. The question on ROI-driven Clients minds will be: “how does it convert?”

 
Unfortunately our doubts were justified: Conversion Rates are 68% lower than on Search. This is because, as we expected, a customer searching for Images of Phones is further up the Purchase Funnel (i.e. they are still researching the product) and therefore are less likely to convert.

However, you can see that the other core metrics are far better than on Search. If we combine these competing effects together, we can see that the cheaper CPCs and higher CTRs more than compensate for the lower Conversion Rate. The real indication of success is that despite the lower commercial intent of the Image Search audience, The Carphone Warehouse pays 59% less for each sale generated by Image Search Ads!

We are now planning to roll these ads out across all of the hundreds of handsets The Carphone Warehouse sells because we simply can’t afford to wait for Google to make it easier for us.

These additional sales are likely to be a small piece of the overall pie and it is a pain to manually upload these ads one-by-one, but it may be worth trying given the increased sales lift.  

Gareth Jones, Head of Online,The Carphone Warehouse:

“This is a great example of the incremental revenue available in other channels – we work with Efficient Frontier to test all new opportunities on Google (and elsewhere) to make sure our scope is as wide as possible.”

Michael Taylor,
UK Associate Account Manager

Study finds Current Tools and Practices for Search and Display Fall Short for Large Marketers

Efficient Frontier today released a commissioned study conducted by Forrester Consulting which was designed to illuminate the challenges marketers currently face in managing their search and display advertising campaigns together.

The objective of the study was to understand how marketers are integrating their online campaigns as well as examine the barriers preventing them from optimizing spend across channels.

This study, conducted by Forrester Consulting, provides some useful insights regarding the need for better online attribution and optimization in the marketplace.

REPORT HIGHLIGHTS

• Search and display are the most widely used online marketing channels. More than half of the respondents have more than three years experience with both search and display. More than one-quarter of respondents spend 50% or more of their total marketing budget on these two channels.

• Marketers are using rudimentary techniques for channel integration. Surprisingly, most respondents use spreadsheets to track and integrate their campaigns, demonstrating that even the most sophisticated advertisers are not taking advantage of advanced optimization techniques to improve their campaigns.

• Majority of respondents claimed their present tools for measurement and managing cross-channel processes fell short of expectations. Only five percent of those surveyed were very satisfied with their existing tools for managing display and search advertising campaigns together.

• Marketers cite that the biggest barrier to integration is the difficulty in proper measurement. Marketers do not know how to systematically measure and optimize and see a need for a management platform to help them streamline the campaign measurement process.

You can download the full report here

Merinda Peppard – Global Marketing Manager

The Next Chapter in the Display Wars -- Google vs. Yahoo!

If search was World War I, we are currently in the middle stages of World War II in display and a similar pattern is emerging. Yahoo! was once the market leader in search and today, Yahoo!’s search is powered by Bing.  As a result, Yahoo! has continued to lose search market share through 2010 (see figure 1).

Figure 1: EF Q3 State of the Market Report

In display, where content is king, initially Yahoo! had a clear head start over Google. It owns some of the most trafficked and highly sort after content on the Internet. It has a long history operating in the display marketplace and understanding advertisers’ mindsets as it relates to that channel. It even first acquired a stake in a dedicated display exchange with the Right Media acquisition a few months prior to Google’s acquisition of DoubleClick largely for a similar purpose.

However, despite all these advantages, in 2010, advertiser spend trends are following what happened in search. Google via the DoubleClick Ad Exchange (now largely merged with the Google Content network to form the Google Display Network), has provided advertisers, agencies and vendor partners alike with a far more straightforward advertising platform to attract ever more of the biddable (aka. Tier 2 or Non Premium) display ad dollars.

Google’s platform incorporating many of the successful features of their AdWords platform for search has in particular allowed marketers who have never operated in the display ecosystem to much more easily begin campaigns on the channel. This includes the large spending direct response marketers who previously limited themselves to channels like search, email and affiliate marketing.

In 2010, according to Efficient Frontier client trends in the U.S .(figure 2 below), Google’s AdX has attracted more advertiser dollars as the year has progressed. In Q4 thus far, this has represented about 70% of advertisers’ display media spend outlay. One point that should be noted is that Yahoo, which makes up a large portion of the RMX inventory, put less of their owned and operated properties’ inventory on the Exchange.

Figure 2: EF US Client Display Proportional Spend 2010

Looks like history is beginning to repeat itself.

Chris Jacob

The Yahoo-Bing transition: Insights

As we are finishing up our analysis for our Q4 2010 online marketing report we have noticed trends in the Yahoo-Bing transition that we would like to share with you.

1.       Marketshare:  Our analysis reveals that lower quality traffic was culled during the transition and as a result the impression volume dropped significantly.  However, this has had negligible impact on click share which decreased by 2.5% and on spend share where do not see any tangible impact.

2.       Revenue per Click (RPC): As traffic quality improved, RPCs rose throughout the Yahoo-Bing transition. At the start of the transition RPCs on the combined platform were 20% worse than Google but by the end of December the RPCs on Google and Yahoo-Bing were identical.

 

1.       Cost per Click (CPC): Advertisers responded to the higher quality traffic and higher ROI by increasing their bids resulting in higher CPCs on the combined platform. CPCs on the combined platform caught up with Google CPCs by the end of Q4.

 

Our Outlook

1.       While the Yahoo-Bing transition did result in a small drop in click share and spend share, the loss should be a temporary blip for two reasons. (1) Q4 is strong for retail where Google is over indexed and (2) Smaller advertisers will start allocating greater budgets to Yahoo-Bing as they notice the higher ROI opportunities.

2.       Analysts will be well advised to not use impression share as a bench mark as Bing’s algorithms are stricter about serving ads to higher quality traffic. Click and spend share are better market share benchmarks.

3.       Given that the ROI on Yahoo traffic was 20-25% worse than Google’s and Bing’s ROI was 25% better, the weighted ROI of the combined traffic should have been 5-7% worse than Google. However, it is about the same as Google now. Thus, Bing has done well on this front. However, it remains to be seen if it can expand its click share while keeping its RPCs high.

We look forward to presenting more insights about the transition and other market trends in our upcoming quarterly report.  Stay tuned !

Dr. Siddharth Shah
Director, Business Analytics

Note: I would like to thank Joe Romero for compiling the data.