Online advertising shows its age - ' Word to the Wise '
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Keyword ads, primarily on the most popular search engines—Google, Yahoo! and Microsoft's MSN—are supposed to be everything that banner ads weren't. In the first place, they are far less expensive. Companies and individuals place confidential bids for the rights to specific words or phrases that a consumer might type into a search engine; winners usually get top billing for their ads, and the keyword price generally works out to $1 to $2 per click. Moreover, keyword ads can't be hidden by anti-pop-up software, and their content is ostensibly linked directly to what a viewer is currently browsing for.
TXU Corp., a Dallas-based energy company, learned this in 2002, when the electric utility industry was deregulated in Texas. To sign up new customers, TXU decided to run a keyword ad on Google and Yahoo! using such phrases as "Texas electricity" and "Texas energy deregulation." Because the odds were high that anyone typing in these terms back then was researching electricity alternatives, and because TXU had few rivals bidding up the price for these terms, its click-thru and customer-acquisition response rates rose to the impressive low double digits.
"The keyword ads delivered new customers at a cost of $1.86 each, and these were people likely to buy electricity from TXU for a long time," says Miki Dzugan, president of Rapport Online Inc., a St. Paul, Minn., online ad agency that developed the TXU campaign. "Our client was giddy about the results. It's still running the ad, and still getting good results."
Plenty of companies are at least breaking even on their keyword ads, but few are enjoying the robust returns of TXU. Why not? The problem is that, although keyword ads are supposed to target consumer preferences, in reality they are only slightly less scattershot than a targeted TV commercial.
Some marketing experts downplay the idea that ads must lead directly to a purchase, either online or offline, to have an impact; they maintain that Web ads are not much more capable of ferreting out customers than advertising in other media. These experts argue that building brand image is just as important as making a sale, and that establishing, and maintaining, that image requires that potential customers be exposed to a company's name, and its products, repeatedly. It's a mistake to calculate returns on investment just by following the progress of each click-thru, while neglecting the online ad's role in the company's broader marketing campaign, says Jim Nail, chief strategy and marketing officer at Cymfony Inc., a media-analysis company in Watertown, Mass.
"As the media mix gets more complicated, marketers are going to have to give up chasing the chimera of 'closed-loop tracking,' " Nail adds. "By its nature, tracking based on 'this ad led to that call which resulted in this sale' ignores the contributions of all the other elements in the mix. In branding, the rule of thumb is that it takes three or four impressions to get the message across. So does that mean that only the last impression was successful? Of course not. But that's what this sort of reasoning implies."
Story Guide:
Online advertising shows its age
Banner Year?
Word to the Wise
Return on Marketing
Return Behaviorism
Sold on Web Ads
Next page: Return on Marketing
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