Efficient Frontier Insights

Managing Events-driven Campaigns

How do you decide what to spend if your business is heavily driven by events? For instance, you may be a concert ticket advertiser planning for a major gig, or perhaps a sporting advertiser planning for the upcoming 6 Nations Championship (a major rugby tournament in Europe). Do you simply try to bid to as high a position as you can on your top keywords and hope that the impressions you gain will bring you sufficient conversions to make the spend worthwhile? But is it really worthwhile? How far will you be from your cost per order (CPO) goal? Will the average order value (AOV) be the same, lower or higher?

The challenge of events-driven campaigns

Events-driven advertising campaigns are challenging because:

(1) you know something is going to happen, but

(2) you are unsure the scale of the impact, therefore

(3) you are uncertain how to prepare for it, hence you implement the “spend and wait and see” strategy.

As a result, you may find your CPO fluctuates wildly indicating your budget had not been allocated in the most efficient manner (assuming constant AOV). The chart below illustrates such a situation. The red circles highlight the instances where events took place and the advertiser bid up to such a level that CPO was much higher than what it was worth. The green circles, on the other hand, highlight the occasions where no event took place and the advertiser pushed down the bids. As a result, the CPO was too low leaving demand to be exploited.




The myth of chasing impressions

The strategy many advertisers employ when managing event-based campaigns may simply be chasing the impression volume. When they can foresee there will be a rise in search interest they plan to spend more, by raising bids, to gain more clicks. However, we will argue that the value of a click is the key factor at play here instead. If the upcoming event only drives impressions but the conversion rate and the average order value (AOV) stay the same, then the revenue per click would remain unchanged and there is no value in raising spend. It is only when an event drives a change in conversion rate and/or AOV, where it is worthwhile to adjust bids to spend more.

So if we know the value of a click is the key, then how do we actually decide the budget on a given event-affected day? The answer is complimenting simulation with analogy adjustments.

As Will Senior, an Account Manager at Efficient Frontier, commented “to ensure you always pay the correct amount for each click, you need to accurately predict how upcoming events will impact click value. The easiest and most reliable method to predict a change in the click value is to use historical data from identical or lookalike events. The click value change could come in many forms, from a conversion rate shift to customer value adjustment.”

Best practice = simulation + analogous data

At Efficient Frontier we are proud of our sophisticated modelling and forecasting algorithms. We build click and revenue models on individual keywords and bid on them at the most efficient levels given the client’s business goal. Our platform’s simulations allow the advertiser to establish the spend level required to achieve the specific CPO or ROI goal based on historical data. When there are forthcoming events, whether a one-day sports event or the week leading up to a major music festival, we will also consider the previous similar (analogous) events and their conversion rates/AOV in relation to the average conversion rate/AOV. The latter ratio will provide us a conversion rate adjustment factor to build into the simulation that is automatically generated by our technology.

This could be illustrated by the graph below. Let us consider only CPO for now and assume constant AOV. The blue line illustrates what the simulation tells us for an average day about the relationship between spend and CPO of a campaign. When an event is to occur and similar past events suggest that there is a higher conversion rate than normal, the curve moves to the right (green line) so that we can increase the spend from just under $3,000 a day to over $4,500 and gain more conversions for the same CPO of $120.

 

This approach of combining simulation with analogous data gives the advertiser control in two ways for managing event-based campaigns.

First, the budget can be determined in advance and the advertiser simply sets the budget for each day of the coming week or month in the bid management platform rather than on the day.

Second, this reduces the daily variation in CPO from the target CPO. For our clients, on average, once this structured approach is implemented (from an intuition-based approach), the variation of CPO from target is reduced by 50%. The more similar historical events there are, the more you can refine your estimate of the adjustment factor used to build into the simulation.

Even if your current bid management platform does not readily provide simulations, using past similar events as reference to your forecasts for the upcoming event would still prepare you better than intuition alone does, as evidenced by academic research (e.g. Green and Armstrong (2007)).

Applying a more structured approach, your “spend and wait and see” strategy can be transformed into “analyze and anticipate”. You’re in control.

Dr Wing Lee, Business Analyst

Efficient Frontier & Context Optional release first joint quarterly State of Digital Marketing Report for Q2 2011

Today marks an important milestone for Efficient Frontier and Context Optional with the release of our first joint quarterly State of Digital Marketing Report for Q2 2011. While Efficient Frontier’s quarterly reports have long been a trusted source of data in the digital marketing industry, we are excited to add even more valuable insights to our social media analysis, using data gleaned from Efficient Frontier’s clients as well as Context Optional’s client index representing more than 15 advertisers and 20 million fans from a multitude of verticals including retail, entertainment, CPG and finance.

Many key findings this quarter indicated how competitive Facebook is becoming in the digital marketing sphere, and show that the longer brands take to engage on Facebook, the more it will cost them in the long run. We also found that advertisers are focusing more on Return on Investment (ROI) than on volume, which resulted in slower growth compared to Q1 of last year. In addition, Bing/Yahoo’s ROI continues to improve, resulting in them gaining a percentage of Google’s coveted spend share. 

Key highlights in the Q2 report include:

• Search spend growth slowed to 8%, down from 17% year on year in Q1 of last year. We believe this is due to advertisers focusing on ROI instead of volume, as well the slower than expected economic recovery.
• Facebook advertising continues to get more competitive, with CPCs increasing 22% from Q1. This means that the longer brands wait to engage consumers on Facebook, the more expensive it will become to acquire fans.
• Brands are increasingly focused on fan acquisition and engagement on Facebook. Between October 2010 and 2011, brands in our index are on track to double their Facebook fans. Consumers on Facebook are also increasing their engagement with brands. Our analysis reveals that one post made by a brand leads to 100 comments from consumers on average.
• Bing/Yahoo! gained 3.4% points of spend share from Google since Q4.

For the 2011 outlook, we predict:

• Facebook CPCs will continue to rise at a double-digit pace, and as a result, brands should not waste any time increasing their understanding and use of the channel, acquiring new fans and exploiting new ad formats such as Sponsored Stories.
• Continued testing and investment in Facebook will see advertisers evaluate and likely increase their spend. Looking ahead, we believe that advertising dollars will shift from offline media to search, Facebook and display. While we believe all online advertising channels will continue to grow, the Facebook channel will show the strongest growth in the months ahead.
• Bing/Yahoo! will benefit if ROI improvements continue.

To get the full story, download our State of Digital Marketing Report for Q2 2011.

Dr Siddharth Shah
Sr. Director, Business Analytics

 

 

May CPCs: Steady numbers across the board

In May, CPCs increased by 3 to 4% in the Automotive and Retail verticals as Finance CPCs declined slightly by 4% MoM. On a YoY basis, however, Finance CPCs are up 40%, indicating the continuing strength in the sector. We will report June CPCs when the second quarter rounds up.

Dr. Siddharth Shah
Sr. Director, Business Analytics

 

April CPCs: Finance continues to grow while automotive and retail remain steady

Finance CPCs continued their upward march in April as CPCs climbed 11.3% MoM and 40% YoY. Automotive and Retail CPCs remained stable as CPCs increased 1.9% and 4.7% MoM respectively.

Note on Travel CPCs: We saw a lot of variance in our travel CPC data and decided not to publish this until we felt the numbers were steady and reflective of the broader market.

Dr. Siddharth Shah
Sr. Director, Business Analytics

New guide to performance marketing for retailers

As we’re working closely with a number of retailers to integrate search, display and Facebook, we thought it would be useful to share some of our best practices in a free guide available to download here.

We recently presented this paper at the Internet Retailing Expo and also at the inaugural Efficient Frontier Performance Institute Breakfast Seminar called “Top Tips for Retailers” at the Covent Garden Hotel in London.

The guide highlights six trends that retailers need to be a part of if they want to maximise the results they can generate via performance marketing. These include: utilising campaigns which link real time stock information to advertising; ensuring that the adverts are not making promises that the retailer can no longer fulfil; and tailoring results to customer intent and making an effort to understand the journey that the customer makes prior to purchase. (The customer may make several generic searches via search engines before they even search for a specific brand name, and by that stage their research may have led them to the same brand at each stage. How many ads had the customer seen before finally clicking on the one that led them to that purchase? What can that information reveal to the retailer?)

It’s also important for retailers to optimise cross-channel campaigns effectively. Our research has shown that TV ad campaigns can have a significant impact on search term performance, for example. Retailers have to abandon a silo mentality. If a customer sees a good deal online, they want to be able to walk into a store and get that deal. Using unique identification numbers on online coupons that the customer can redeem in store can make tracking conversion much simpler for the retailer. It can also encourage customers to make a purchase, especially if they were reluctant to shop online.

Facebook is a really interesting channel to watch. Facebook Credits are being sold offline in stores such as Tesco and Game, encouraging customers who are reluctant to part with their payment details to spend money via Facebook. With such a large number of users providing a rich source of data about themselves there is no doubt that Facebook is becoming a major consideration for retailers undertaking a performance marketing campaign and something that retailers should keep an eye on.

Download the full report here or to request the PowerPoint presented at the two events, please get in touch via @efrontier.

Merinda Peppard
Global Marketing Manager

March 2011 CPCs: A strong month for Finance, but weak for Travel

CPC (cost per click) trends in March were mixed. Increased acquisition activity from financial institutions contributed to a sharp rise in CPCs in March. In contrast, CPCs in travel fell both MoM (month over month) and YoY (year over year), indicating weakness in the sector. Retail CPCs continue to increase as automotive CPCs fell slightly.

Our latest numbers also reveal that spend in both finance and retail have increased substantially YoY. We will report in detail on these trends in our upcoming quarterly report.

Dr. Siddharth Shah
Sr. Director, Business Analytics

 

February 2011 CPCs: Robust YoY increases in most sectors as Financial sector sees increased competition

 

CPCs in February, increased more than 15% YoY in the Finance, Travel and Automotive sectors while they remained relatively flat in retail. We are seeing increased competition in the financial sector which drove up spend by 15% YoY in February, primarily driven by CPC increases. On a MoM basis, Finance saw a 9.1% seasonal decline which was lower than the 16% decline in the same time frame last year.

Dr. Siddharth Shah,
Sr. Director, Business Analytics

What we learned from Valentine’s Day: How retailers can navigate negative effects of “romantic” holidays on Average Order Value (AOV)

At Efficient Frontier, we love to tease out patterns and use data to inform decisions. One pattern we’ve noticed is that the Average Order Value (AOV), or the average dollar amount spent for each customer order, tends to drop for retailers during the peak Christmas shopping season. One theory to explain this unlikely phenomenon is that consumers who purchase gifts for others tend to buy less expensive items than if they were shopping for themselves. We can also surmise that certain people only become customers during certain seasons, so the mix of customers changes.

The graph below shows the AOV trend for two groups of clients. Group A contains retailers that skew toward romantic and sentimental items commonly gifted during Christmas or Valentine’s Day. Group B contains retailers that tend to sell more practical wares that are not typically considered romantic. We can see from the graph that both groups dip in AOV during the Christmas shopping season. However, Group A also dips to mid-December levels beginning around the third week of January. Group B also takes a slight dip beginning on the 1^st of February, just before Valentine’s Day.

That’s not to say that order volume doesn’t play a role. It most certainly does, though the volume trends are not quite the same.

Besides the obvious fact that not all retailers have the same seasonality trends, we can see some similarities that arise across the board. So why does any of this matter?

Whereas Christmas has a well-defined holiday shopping “season” (beginning on Black Friday), other holidays, such as Valentine’s Day, don’t have such clearly defined shopping seasons. A change in AOV can indicate a change in the mix of customers. To capitalize on this, retailers can tailor ad copy towards customers who are seeking to purchase gifts.

Also, since only Group B showed a spike during Thanksgiving when there were a lot of deals, this suggests that retailers should experiment with NOT discounting romantic goods by much.

In addition to ad copy changes, campaigns need to be set up to capture the increase in demand. This means dynamically changing budgets and bids with the appropriate spend mix on high and low AOV campaigns. All of this could help maximize conversions from customers who are planning to buy gifts during the holiday season.

Based on this data, we also recommend that retailers:

• Use historic data to anticipate demand, and pace budgets accordingly
• Experiment with pricing on less time-sensitive but essential retail goods, which show a high degree of elasticity. “Romantic” goods are time-sensitive, and do not usually capture additional demand from low pricing during the high season
• Align your campaigns in a cross-channel fashion. Use Facebook for upper-funnel optimization to generate demand early on in your holiday campaign, and get aggressive on search to capture lower-funnel intent late in the campaign

Ultimately, it all boils down to predictive modeling and proactive account management. In order to maximize your ROI, you need best-of-breed adaptive learning algorithms to place the right bids at the right times. You also need a world-class team to provide human insights and provide the right creative elements.

Joe Romero

Business Analyst

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

CPC - January 2010

On a monthly basis, we will now be publishing our monthly CPCs by category along with some trend analysis. For January we have the following numbers:

The above table shows the CPCs that we saw among our advertisers in 4 verticals. The trends in CPC broadly reflect the seasonality in these marketplaces. Finance dropped slightly as automotive CPCs dropped 10%. A big CPC drop was seen in retail due to the after effects of Christmas. Travel bucked the seasonality trend. Traditionally, travel picks up strongly in January and we see an increase in CPC. However, this year we are seeing a CPC drop indicative of the continuing weakness of this sector.