Facebook is making a pile of cash from ad revenue, according to its latest financials. But it could be making a whole lot more. It is up to 30% undervalued and marketers are throwing away money because the ad industry has yet to break away from last click attribution.
That's one of the findings of a study by Kenshoo which analysed hundreds of millions of clicks and millions of direct online sales conversions across multiple digital channels in March, April and May.
The problems with attributing much of a conversion or sale to the last click in the process is well known. But the 'last click' attribution model is still widely used. That means that other parts of the marketing process that lead to a person buying a product - or making a booking or filling out a form etc. - don't get their share of the credit for driving the customer there. That also means marketers are wasting money.
The digital marketing industry is trying to move away from last click attribution and Kenshoo's study provides some insight into how to quantify other parts of the chain. The firm ran the numbers on all advertisers in its sample and came up with an aggregate cost per acquisition for those brands. Then it ran various attribution multi-touch attribution models. From those that split the money between those ads/clicks that initiated and closed the acquisition, to those that spread it incrementally across all links in the chain, to those that weight to the first and last click.
It found that, for example, Facebook was undervalued between 12% and 30% using those attribution models.
Naturally, the tech firm has a solution. It does the maths in real-time, not retrospectively, across multiple touches and works out the probability of conversion for any given path and ascribes value. The company claimed that means it can optimise digital media bidding because it can work out the value of that ad or channel in driving conversion and update bids in real time.
“Marketers relying on last ad attribution to optimise their campaigns could be making million-dollar decisions based on flawed data; so they can expect to achieve flawed results,” said Josh Dreller, director of marketing research at Kenshoo. “Multi-touch techniques better reflect the reality of consumer behaviour and enable marketers to improve budget allocation and campaign performance."
But while the study suggests there's still massive budget wastage on a global scale, it appears the market here is buying in: Kenshoo has been motoring in Australia, the firm claimed revenues were up 49% locally for the 12 months to June 2013.
The company has history with Facebook, and was one of the first to get access to the company's APIs.
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