Flaws in measuring digital ads put a question mark on spend

By Chris Pash | 5 April 2019

The latest research from Monash University has questioned the effectiveness of measuring advertisements for online shopping.

Professor Peter Danaher, head of the department of marketing at Monash Business School, says the “last touchpoint attribution” method most commonly used is incorrect.  

He also questions the big spend on email and online advertisements, saying this may not be where the market is, compared to print and television. 

Attribution typically assigns a percentage weight to each media a consumer is exposed to before buying. Many in the industry use attribution to allocate media budgets, particularly for digital. 

Burt what if this is being calculated incorrectly? Professor Danaher thinks its is. 

“At the moment, if a consumer buys a new toy online, Google can look at the search patterns that person has had over the past few days, or whether they’ve received any emails from a department store such as Kmart,” says Danaher.

“They use a method called ‘last touchpoint attribution’. So, if the consumer last opened an email about toys, the email gets the credit. It they last did a Google search on toys before making the purchase, Google gets the credit.

“The advertising industry has used this method for the past five years because it’s simple and effective. The problem is, this method ignores how long consumers remember an advertisement.”

The method also ignores previous studies which showed the effectiveness of mail catalogue advertising, he says.

 “This means that businesses are spending up to four times more on email and online advertisements compared to print or television, because they think this is where their market is located. Television and magazine advertisements are far from useless in selling products,” Danaher says.

Danaher has developed a “future media allocation” strategy taking into account advertising costs, budget impacts, and the impressions each ad makes on the actual purchase outcome.

“It also takes into account the carry-over effect, or how long the effectiveness of a particular form of advertising may last,” he says.

“As advertising becomes more dynamic in an effort to capture those no-fuss consumers, it’s critically important for companies to get their marketing strategies right.”

Professor Danaher argues that allocation decisions should be made using formal profit optimisation.

This takes into account the cost of a method of advertising when allocating budget to it and it also links the incremental impact of different types of advertising on the actual purchase outcome.

“Even if there is a zero purchase probability effect of a medium, attribution methods that are based on counting the number of exposures prior to making a purchase will attribute a significant portion of the purchase to that medium,” he says.

It gives skewed information to advertisers and favours emails which have the benefits of being cheap and come out at ten or 12 times the rate of catalogues, a more expensive form of advertising that is mailed perhaps once a month.

It can also imply that television and magazine advertisements are useless, which Professor Danaher says, the research shows this is far from the case.

It also favours Google searches, which works very well for Google which has an incentive to sell the attribution method.

“What we propose is a more econometrically sound method,” says Danaher.

“Everyone in academic circles sees the last touchpoint attribution method as flawed but we argue that the concept itself is wrong.”

His new method takes into account more than one type of advertising that may lead to a purchase and the incremental contribution of each. It also takes into account the carry-over effect, or how long the effectiveness of a particular form of advertising may last.

The research -- Delusion in Attribution: Caveats in Using Attribution for Multimedia Budget Allocation -- is to be published in the Journal of Marketing Research.

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