Staff Writer
Sep 14, 2022

Prove your worth: Justifying marketing ad spend in an economic downturn

In these challenging times, it is harder than ever to argue for ad spend investments. The Trade Desk and other experts dissect changes in media behaviour, analysing the right metrics, and the death of the third-party cookie.

Prove your worth: Justifying marketing ad spend in an economic downturn
PARTNER CONTENT
 
Apart from day-to-day annoyances, the Covid pandemic and Russia–Ukraine conflict have also brought about a period of global economic instability. The Asia-Pacific region is thankfully faring better than the US and UK economies, forecast to account for 62% of global real GDP growth in 2023. While this is good news for APAC brands, the over-reliance on walled gardens as opposed to the open internet, as well as changing consumer behaviours and privacy policies, sees several hurdles for advertisers.
 
Marketers often already find themselves fighting to justify expenditure to CEOs and CFOs who may not fully grasp digital media advertisement. With a global recession potentially around the corner and tightening purse strings further, proving investment successes has never been more challenging.
 
How can marketers convey that their metrics and KPIs translate to tangible results like customer acquisition and sales growth? Keeping in mind recent changes in audience behaviour and the upcoming deprecation of the third-party cookie, Campaign Asia hosted a webinar with The Trade Desk, featuring a panel of industry experts to discuss the biggest challenges in revenue attribution and ad measurement, with tips on how to justify marketing investment for continued growth when the overall trend is to scale back.
 
Industry changes and challenges
 
According to MarketingWeek, the open internet accounts for 66% of time users spend online, as well as 73% of online shopping. However, this portion of the internet also only attracts 40% of ad spend. Marketers have instead been focusing their efforts on walled gardens such as social media platforms in an attempt to increase optimised audience targeting. 
 
The problem with walled gardens is that marketers have to grapple with each platform’s targeting system, data collection, and methodology — it therefore becomes difficult to consolidate insights across channels. With so many brands in walled gardens, ad costs are also on the rise, creating an overall situation where advertising is costly within an oversaturated marketplace, where campaign results are also difficult to analyse cumulatively.

 
Alex Lo, The Trade Desk’s lead senior client
 strategy director, Hong Kong and Taiwan, had noticed a trend of marketers falling into one of two categories: those who focus on traditional KPIs, and those who use a more diversified measurement and attribution model, as opposed to singular KPI metrics across marketing activities. The former group is a product of the “if it’s not broken, don’t fix it” mentality prevalent within companies, but the truth is that we are indeed facing changes in media behaviours, and should adapt accordingly. Leveraging data is the key to brand growth on the open internet, which will in turn bring innovation and advancements to the industry.
 
This leads onto the big shift regarding data privacy and security. Clare Lui, vice president at Nielsen Media Hong Kong, noted how new privacy regulations like cookie-blocking policies and the deprecation of third-party cookies have been at the forefront of clients’ minds, because these are data tools that marketers have traditionally relied upon.
 
Building a marketing strategy involves every step of the customer journey, and though typically more attention is paid to lower-funnel efforts, the importance of setting up good groundwork from the top of the funnel cannot be overstated. Lynn Tan, strategic marketing and demand generation AMEA lead at FedEx Express, explained that in order for both B2B and B2C brands to justify investments, they have to create a structure that enables tracking and measurements throughout the funnel. It is important to recognise that foundational work does not have an immediate ROI, but that is precisely what brands need to put more effort into — building a narrative for management to understand the need for investment that will drive longer-term, sustained ROI strategy.
 
What marketers can agree on is that while total media investment has undeniably taken a hit recently, the digital sphere has rebounded quickly. The Trade Desk reported year-on-year changes in ad spend had dropped in the second quarter of 2020 for digital, TV, print, radio, and out-of-home (OOH) advertising, but the only sector to bounce back to first quarter spending levels by the third quarter, and exceed the previous year’s ad spend by the final quarter, was digital. This shows that digital media provides the visibility and targeting that other channels may not be able to throughout the funnel, Lo explained.
 
Adapting to changing media behaviours
 
According to The Trade Desk, the modern consumer sees over 1,000 digital ads each day, but the average click-through rate (CTR) is below 1%. The digital generation is inundated with ads on a daily basis so unless an ad is exceptional in execution or particularly well-targeted, we are unlikely to interact. Furthermore, research from Salesforce showed that 67% of customers need multiple channels to complete a single transaction. This means that the conversion rate that brands currently measure is actually an aggregation of efforts across all their marketing channels.
 
Lo challenged brands to buck such statistics by looking for fresh solutions, and to reevaluate whether their KPIs actually align with the media landscape and user behaviours. Since ad clicks are on an overall downward trend, is CTR what brands really want to track? What else would brands like their audience to do with their media assets? 
 
While marketers are always interested in new ways of attracting consumers, they are also cautious when it comes to investing into new channels without first knowing how they perform — despite this directly opposing the very test-and-learn nature of marketing. Reassuringly, Nielsen’s 2022 global annual marketing report showed ad spend across digital platforms is on the rise with no signs of slowing down. Lui provided examples of how these channels can be leveraged, such as measuring using simulated exposure, live exposure, or marketing mix modelling. “[These can] produce an ROI that links media investments directly to sales, and allows marketers to compare the impact of new as well as conventional media,” she stated.
 
To challenge marketers who are more concerned with final conversions than the benefits of the upper funnel, Lo highlighted how technology is now connecting new media channels across digital devices, with Connected TV (CTV) linking to laptop and mobile identifiers as a household, for example. While individually these new channels may be challenging to measure, they have the capacity to reach multiple people within a single household, connect brand exposure across multiple channels, and propel consumers towards conversion.
 
Effective measurements: Plotting the entire consumer journey with MTA
 
It is evident that the modern consumer journey is much more fractured than before. Nobody is on only one medium throughout the day and consumers require multiple brand touchpoints across channels before conversion. Full-picture monitoring may not be easy to suddenly establish, but the effort is well worth it. Leona Ho, growth analytics director at Crypto.com, shared how their model is mainly based on last-click attribution, which loses visibility into how upper-funnel investments contribute to end results.
 
Last-click attribution is a major model widely used by marketers, but Lo does not see it as good practice — it paints an incomplete picture as only the final consumer touchpoint is credited for conversions. Brands are ignoring people who do not click on their ads, and neglecting how consumers may have interacted with their ads elsewhere. Multi-touch attribution is the answer, Lo insisted, because mapping out the whole customer journey gives credit to all channels along that journey, and can reveal the best marketing model for brands. This knowledge then can, and should, be customised according to brand goals.
 
With a high level of granularity comes more visibility and data, but Tan was quick to remind marketers that the data must explain the outcomes of or decision-making factors behind campaigns. Rather than collecting data for its own sake, marketers should understand why they are tracking measurements, and the data analysis should reveal what to do next.
 
C-suite management will easily understand lower-funnel metrics. Amount spent to acquire a registered user, to activate a user, and return on ad spend for repeat customers are clear-cut metrics that display ROI for every dollar. However, top-of-funnel awareness should be just as important. Lo recommended clearly demonstrating the links between each stage of the funnel and how they contribute value towards each other. It is not enough to just focus on the digital metrics of ad campaigns — a campaign has to be viewed in its entirety. Tan advises determining business goals and markers of success from the very top of the funnel. She also emphasised the customisation of customer journeys to specific channels, even if all campaigns are driving towards a singular marketing outcome.
 
Since a high number of clicks does not necessarily equate to a high number of pageviews, brands may wonder if it’s even worth maintaining low-quality clicks. Both Lo and Tan agree that all audience engagement has some value, and brands should still allocate a minimal budget for low-quality engagement — even only to test strategies on. With a hypothesis and some budget, it could be well-worth putting pre-marketing qualified leads through nurturing or retargeting. In the best-case scenario, they can be converted to the lower funnel with some effort. 
 
Tan recommends presenting management with brand affinity studies to demonstrate the need for awareness expenditure. It is then up to marketers to define the conversion story and optimise areas of improvement. “It’s not [about] getting more money to spend on each part of the funnel, but knowing where to channel the investments where it’s needed,” she said.
 
Additionally, media owners and marketers should enrich their customer understanding with first-party data partnerships and build campaigns based upon this information. Instead of feedback generated within walled gardens, campaigns can be run across the open internet to the right audience, with budgets allocated to where real-time feedback shows good performance. Equally importantly, ad performance can be compared openly and objectively, without company biases in walled gardens skewing results.
 
Better identity solutions to data privacy changes
 
With Google’s most recent delay of third-party cookie deprecation, brands may be relieved to have until the second half of 2024 to prepare. But Lo warned that the phasing out process has not actually slowed down, and brands still need to keep preparing. 
 
Indeed, this is the time to build ad targeting strategies. “We foresee […] multiple ID solutions on the market, and how brands or technology providers can be interoperable with these ID solutions is the key,” Lo declared. A much better identity solution, as opposed to relying on third-party cookies, lies in Unified ID 2.0 (UID 2.0). Built from hashed and encrypted email addresses, this ubiquitous ID boasts unparalleled consumer privacy and transparency. In line with the web3 characteristics of transparency and safety, UID 2.0 is open-source, interoperable, independently governed, with privacy controls in the hands of the users themselves.
 
This alternative identity solution fits right into the new era for advertisers, publishers, and consumers, which is rooted in the shift towards privacy-first consumer data practices across the open internet, and hinges on brands building a robust first-party data strategy for themselves. With UID 2.0, first-party consumer data can be collated and activated back into brands’ advertising ecosystems in a way that is simultaneously safer for the consumer and more well-rounded for the brand.
 
Advertisers should also make use of the remaining two years to test new marketing models that will work for them in the cookie-less world. The impending loss of granularity means marketers should figure out how they can use the data they have accumulated over the years, and how to use advanced mapping to consolidate consumers holding different identifiers and understand them on a deeper level, Ho says. Tan suggested creating data models to test hypotheses about customer needs against the brand’s journey. Aside from being able to trial strategies before applying them to campaigns, such usage is also independent of third-party data restrictions. 
 
It is critical for the cookie-less future that marketers have a good understanding of data collection, management, and usage. Lo therefore recommended that marketers start forging good relationships with their IT and legal teams, if they have not already done so. Knowledge of laws such as GDPR and how data is collected from customers will affect marketing campaigns. 
 
Similarly, we are starting to see clean room solutions; brands can put their data in a neutral, privacy-compliant area, and have partners work on that data without being privy to personally identifiable information. The industry can look forward to working with more innovative solutions as the time for third-party cookie deprecation draws closer. 
 

 

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