Analytics Strategy

This article, written by Neil Mason, was originally published on Clickz.com and is republished here with permission.

I was recently asked to put together a workshop session on “Data driven marketing” for a class of digital marketing students. Part of what I asked to talk about to explain what data driven marketing is and how to go about it. In pulling the material together for the workshop I came to the conclusion that there are four key components for successful data driven marketing, some of which are obvious and some perhaps less so.

The four components are:

• Philosophy
• Processes
• Data
• Technology

Philosophy

This is the most important component I believe. To be successful at data driven marketing, an organisation needs to have the right culture and philosophy. At its hear t, data driven marketing is about continuous optimisation and iterative improvement. It’s the deployment of a “test, learn and adjust” philosophy. However, you can have the best data and technology in the world (see later) but if there is not the desire to act and to change, then the data and technology are only providing interest as opposed to insight. Organisations must have the “desire to act”.

At a Web Analytics Wednesday I attended in Berlin last week a lot of the talk in the networking session was not about metrics and systems but about how do you embed analytics within organisations? The biggest challenge often facing analysts is getting support for the development of their programmes because culturally the organisation doesn’t have a philosophy of measurement and accountability.

Processes

If “philosophy” is about the desire to act, then “processes” is about the ability to act. More specifically it’s about the ability to execute and then to react. These processes involve the management of the technologies and also the management of the decision making. Processes will include building “measurement” into the marketing development process for example, so that there is no question that new campaign won’t be tracked properly or that new content on the website won’t be tagged. It also involves ensuring that a feedback mechanism is in place that enables trends to be identified and changes to be made in the appropriate timescales.

One example I had in the past demonstrated to me where a potential desire to act was inhibited by an inability to execute. We did a piece of segmentation analysis for a retailer to feed into their email marketing programme. In the analysis we identified a number of distinct groups of customer with different purchasing behaviour that could be marketed to in a more customised way. We also identified some key timing mechanisms that could potentially double the customer’s propensity to buy again. Despite this insights the segments were never deployed operationally because the retailer didn’t have the resources and processes in place to develop and deliver more targeted email marketing programmes.

Data

Data is of course a vital ingredient in the mix, but it is the organisational culture and processes that provide the recipe for success. Good quality data is important and attention must be paid to getting the numbers right. People are reluctant to make decisions if they don’t have any faith in the data.

Also data driven marketing needs integrated data rather than data sitting in silos. Often within organisations different types of data sit in databases and different functions may have ownership of different data. For data driven marketing activities to be effective, the different data sources need to relate to each other. To understand and optimise marketing across channels, the data from different channels (PPC search, display ads, email etc) needs to be in the same place, whether that be in a web analytics systems, a campaign management system or both. In addition data needs to be managed across the life cycle of the customer, for example by ensuing that data on how customers are acquired can be analysed with the customers’ long term value or profitability.

Technology

Finally the technology is the enabling component. It is the technology that allows you to execute and react either over the duration of a planning cycle or even in real time. I don’t think that technology can make up for deficiencies in the philosophy and processes, though if you have the right apporach and procedures, you can make progress even if your technology is not the most effective. Good technology enables you to cycle through the processes faster to the point where real time optimisation is possible. Like the data, the technologies should be integrated and allow the loop to be closed between insight and action.

So, the core ingredient of data driven marketing is good quality, integrated data. The technologies are the tools but it is the combination of the organisational philosophy and strong processes that will provide the recipe for success.

This article, written by Neil Mason, was originally published on Clickz.com and is republished here with permission.

A few weeks ago I took stock of the web analytics market, particularly looking at some of the key trends in Europe. This week to get a sense check from the position of someone in the US, I turn to a fellow WAA Board Director and friend Avinash Kaushik. Avinash is also an Author and one of the leading thinkers about web analytics and where it’s heading, having actually “been there and done it” previously at Intuit software.

This is what Avinash had to say.

Avinash, you had a busy year in 2007. What were some of the highlights for you?

It has indeed been a hectic year, becoming an Independent Consultant and Analytics Evangelist role at Google and publishing Web Analytics: An Hour A Day in June. Along they way speaking at conferences and running around the country became normal! Oh then there is the blog, Occam’s Razor, my baby (!), that took more time than I could ever have imagined.

I think the biggest professional highlight has to be the book. In five months sales have vastly exceeded my expectations. Since all of my proceeds go to charity (The Smile Train, Doctors Without Borders) it has meant a nice amount raised for them.

The book is a great primer and reference document for all things “web analytics”. But in this fast moving industry, isn’t it a risk writing a book? Are there some parts of the book that you think you might have to rewrite soon?

The core of the book I think will stand the test of time (and by that I mean five years at most! ). But there are many sections I would update. The book has been out only five months but I would add new things to the SEO section. Ditto for blogging metrics, I have slightly changed two of the six in the book and added a brand new one. I touch on Social Media but when I write the next version of the book I think things will be more settled and I can add more interesting things.

New tools will come with time, as will new sources of data and my book, or and those of others, will accommodate for that. But the biggest goal of Web Analytics: An Hour A Day is to teach you a new way of thinking, that I think will be relevant for quite some time to come.

All that said Willem from Wiley was over the other day asking me to start work on the next version!!

What do you consider to be some of the key industry developments to have been in 2007?

I get the distinct feeling that we will look back at 2007 and remember it as a turning point, a good one, for the industry.

Why is that?

Every site in the world seems to have Google Analytics – a leading indicator that even the most common person with tangential interest in data now has access to a great web analytics application. More interest translates into more mind share.

The industry has consolidated quite a bit. Omniture has built on top of its already impressive growth by acquiring Visual Science (/WebSideStory / HBX), in addition to Instadia (Analytics + Surveys), TouchClarity (Behaviour Targeting) and Offermatica (Multivariate Testing). This year all roads seemed to lead to Salt Lake City!

WebTrends is going through some temporary management turmoil, but with its excellent set of solutions I expect them to come back strong.

There were more web analytics consultancies launched, more than on you can count. Ditto for web analytics conferences. Actually a real interesting trend was how many non-analytics conferences had “web analytics day” or “web analytics pre-intensives” – a real sign of growing demands.

It was also a year of Web Analytics 2.0. An expansion of the core definition of what web analytics is, stretching is beyond just clickstream to include qualitative research, testing, competitive intelligence, multiple dimensions of outcomes etc.

So what are some of the key drivers?

Many, if not all, of the trends above were driven by a singular phenomenon: The web is becoming serious business.

It seems odd to say this in 2008 but in many companies web, and web analytics, have been a silo that someone else is taking care of. Websites are becoming the most important customer touch point and the most important revenue generator even for businesses that are not first of mind.

The consolidation in the industry, the increase in interest (tools or conferences) and expansion of the definition is a reaction to the demands now being placed driven by a desire to move beyond printing reports (to perhaps printing money!).

How would you assess where the web analytics industry is at the moment from the point of view of software vendors?

Full of opportunity.

Money and fame awaits all. Well at least those who are willing to work hard.

The vendors have done well thus far, mostly, but they are still scratching the surface of what is possible. Many big websites still don’t use web analytics. There are many growth opportunities in the Software market (aside from the current favourite child: hosted). We are not even scratching the surface of integration with data from other parts of the company and other tools should we decide that web analytics is not a silo but a part of “Business Analytics”? So there is a lot to do and appropriate financial rewards for companies that help accelerate the move beyond clickstream.

What about the people side, i.e. the end users and consultants?

There is a read dearth of skilled practitioners in our industry. And that has stunted the amount of progress that can be made (because the 10/90 rule still applies – spend $10 on software/services and $90 on people who can actually analyze data and produce insights). If you are a skilled person, you can name your own salary (but make sure you are on the web analytics 2.0 continuum and not 1.0), and if you are someone who wants a great Analytics career then now you know where to find it.

Consultants will thrive in any field where the rule is 10/90, because they can bring their expertise to bear on the $90 part of the equation. Additionally because of increase in the demand you are noticing many more consultancies (mom and pop and grandpa included), and an interest from the “big boys” for mature web analytics consultancies (example: our good friends Zaaz acquired by WPP). To make optimal amounts of money Consultancies, like other companies, are finding that they can’t be a one trick “let me parse your log files” pony. They are being forced to evolve into areas such as multivariate testing, competitive intelligence, usability etc.

What are some of the key trends that you see at moment? Where’s the market going?

The problem with Web Analytics 1.0 is that it is an exercise in data torture and reporting with long lags in taking action (if any). Data torture needs to get automated and expanded, decision making needs to get automated; people need to be left for smart hard things (vs. what happens today!). Smart companies will start to exploit more things like Multivariate Testing, Onsite Behaviour Targeting etc because in each case you are leaving humans to understand customers and create content and you are letting intelligent solutions create the right customer experience based on data. Won’t happen overnight, but are on this train for good.

I also believe that 2008 will see a more serious attempt to get Web Analytics to become a part of “Business Analytics”. We are still a silo in most companies (data and people!). We will see more collaboration and innovation in helping web data become a core part of the company data to truly give end to end visibility (and maybe the holy grail of multi channel analytics / impact). Won’t happen all in 2008, but we might get serious.

I am optimistic that we don’t have untouchable islands of data like we do today. Search Engine Optimization, RSS, Social Media, etc. They are all becoming mainstream yet the current generation of tools mostly stink at tracking them. You can track them, but if you are willing to row your leaky boat all by yourself to that island. I think this will change.

Oh and we are not done with consolidation in the industry.

It’s going to be fun!

I reckon so, thanks Avinash

This article, written by Neil Mason, was originally published on Clickz.com and is republished here with permission.

It’s a new year and with a new year come new resolutions. Other than the usual New Year’s resolutions to eat less and to exercise more, I have been thinking about the consulting work we do with our clients and what resolutions we should be making in that area. I have come up with two that I thought I would share.

Think strategically, Act tactically

This notion has been playing on my mind for a while. A catalyst was listening to Jim Sterne speak at the Emetrics conference in Washington DC in October. Jim was talking about the need to solve people’s most immediate and pressing problems before you can then go on and show them all the amazing opportunities they might have in their online business. In our own work one of the things that we are conscious of is an organisation’s ability to execute from insight. So, if an organisation knows something, can they do anything about it?

We have seen occasions in the past where we have been engaged to work with organisations on developing strategic pieces of insight which the client then struggles to leverage due to functional or organisational constraints. I believe that it’s still necessary for analysts and consultants to “think the big thoughts” but they need to be translated into little actions that are digestible for the business in question. As consultants and analysts this is what we all try to do, my resolution for this year is to make this a core feature of the way to do business.

Segment, Segment, Segment

Segmentation has perhaps been one of the buzz words for 2007 and rightly so. In mature online economies, the ability to segment and target market to sub-groups is increasingly an important way to continue to grow and develop the business. However, not enough businesses are segmenting their online visitors and customers, and are still operating a “one size fits all” policy on their website. Larger and more complex websites will inevitably have a wide array of different visitor segments who are coming to the website for different reasons and who want to do different things.

More tools are available for understanding visitor segments from a behavioural, demographic and attitudinal perspective. In addition marketing technologies have developed to allow organisations to target different visitors with different messages and content using rules-based and automated profiling techniques. So, my second resolution is to continue to encourage businesses to invest and adopt these tools to allow them provide increased relevancy and improved customer experiences. I believe that those that do will stay up with the game, leaving behind those that don’t.

So those are a couple of my resolutions. What are yours?

Best wishes for a successful 2008.

This article, written by Neil Mason, was originally published on Clickz.com and is republished here with permission.

I have just got back from presenting at a seminar on internet marketing which was targeted at small and medium sized businesses. Pulling together the material for the presentation made me think about how you put together an effectiveness digital marketing measurement programme when you don’t have much of a budget. I am a great believer in the quote from Arthur C Nielsen that “the price of light is less than the cost of darkness” but companies have to live within their means and for small businesses that means that often they don’t have huge amounts of money to spend on data collection and analysis.

So what is an effective web measurement strategy for a small company doing business online? Well, it doesn’t look that much different to the strategy that a large organisation might employ just the scale and some of the tools might be different. A small business still needs to have a holistic approach to measuring their online channel and to have the right tools in the toolbox. A small business still needs to have clearly defined online goals and objectives which can be translated into a set of key performance indicators. A small business still needs to have in place the right processes to ensure the integrity of its data. Some of these aspects may in fact be easier for smaller businesses than larger ones. It may be easier to define the business goals and KPIs as there are less people involved in the process. It may be easier for a smaller business to manage their processes to ensure that pages are correctly tagged for example and that campaigns are properly tracked. It may be easier because it might just be one person doing everything.

Where it might be harder for smaller business is to take a holistic view of measuring their online channel by having multiple tools in their toolbox. In my view this holistic approach comprises of four main components:

An effective strategy for measuring and optimising website performance has four key components:

• Good market intelligence
• Sophisticated visitor behaviour analysis
• Excellent user profiling
• Effective site performance tracking

Market intelligence provides the context for the businesses own performance. Whilst the majority of a digital marketer’s time can be spent focussed on the brand and the site, it is important to remember that the neither the brand nor the site operate in a vacuum and that external factors and forces are at play. Larger businesses might buy into 3^rd party data providers such as ComScore, Nielsen NetRatings and Hitwise. These services are often out of the reach of small businesses and may mot even be suitable for sites with lower traffic levels. However, a small business can still uses online resources such as government statistics and sites such as ClickZ to keep a breast of trends in the industry.

Visitor behaviour analysis comes from web analytics tools and you can now get sophisticated reporting packages for free or at low cost. Obviously Google Analytics is free to use and will suit many businesses’ needs for a long time to come. Microsoft are launching their own service soon. For those willing to invest a little bit, there are other tools that are suitable for small businesses. One that I particularly like is Clicktracks for it’s simplicity of use combined with some powerful analysis features.

User profiling is the process of getting to know who is using your site and why. The basic principals of marketing are about understanding your customers and meeting their needs. In our online environment the basics that a business needs to know are:

• Who is visiting my site?
• What are they trying to achieve? What are their goals?
• Were they able to do what they wanted to do? If not, why not?

This sort of data can be collected from surveys and there are plenty of cost-effective web survey services around (such as SurveyMonkey, Zoomerang and so on) that allow you to create online surveys at a reasonably low cost. Just because a survey can be cheap to run, it doesn’t mean that it can be low quality. Attention needs to be paid to the type of information that you are asking for and the way

Finally, site performance measurement looks at the effectiveness of the site from a technical perspective. It concerns aspects of the site such as the speed of page delivery, site availability and the responsiveness of transactional processes. A Forrester report on this subject showed that users think that slow web sites are less interesting, less believable and less trustworthy. If you are small business trying to cut through the noise of the internet, you don’t want to burden yourself with these kinds of perceptions. So measuring and tracking your site’s speed is an important component of the mix. If you can’t afford to buy into continuous services such as Keynote or Gomez, then you can find sites where you test your site speed for free on an ad-hoc basis.

For small businesses the “price of light” may not be the actual price you need to pay for data services but it’s the time you need to spend managing, interpreting and understanding the data that you can get. But in this competitive environment doesn’t it make sense to work smarter?

This article, written by Neil Mason, was originally published on Clickz.com and is republished here with permission.

Wow, that was the week that was. As I write this I have just about recovered from a 3 day intensive immersion in the whole area of online marketing performance measurement and optimisation. I think we used to call it web analytics. Now I’m back in my own time zone I’m beginning to process some of what I saw and learnt at the Emetrics Summit in Washington a couple of weeks ago.

Before I went I was already picking up the vibes that it was going to be bigger and broader than anything I had been to before and that certainly proved the case. I think that there were over 600 people there over the course of the conference. OK, that may not be huge compared to some of the other US internet conferences you might attend but for the ugly duckling of online marketing I think it shows just how far the web analytics industry has come.

One of the challenges at these conferences now is deciding what to see. I probably spent as much time looking at the programme, trying to work out which session to see as I did wondering round the hotel trying to find the actual session. At various times during the conference there were six tracks running simultaneously ranging from topics such as behavioural targeting and testing through to public sector success, from search analytics to email metrics and from web 2.0 measurement to statistical analysis. A very eclectic mix of subject matter!

As I suspected, this industry is not only growing but diversifying. Some of the more interesting conversations I had over in DC were not with web analytics vendors talking about the latest features of their particular software but were with smaller companies tackling a particular problem in a different way. For example, new approaches to gathering and analysing customer feedback data through text mining or a methodology for media planning optimisation using predictive analytics.

Time and space doesn’t allow me to give a blow by blow account of what I saw and learnt at this conference and it’s already been documented in other columns and blogs. What I wanted to do is just share some of the key things I took out from the event. So for me, here are some of my highlights:

• Jim Sterne’s key note speech. I’ve heard Jim speak many times and I’m always impressed. This time round he challenged us to ‘think differently’. Getting us to ‘think’ full stop I think is often enough of a challenge but Jim’s presentation also reminded me that as an analyst you can’t realise strategic value unless you also deliver tactical benefit.
• Ronny Kohavi from Microsoft’s presentation on controlled experiments on the web. Everyone’s getting excited about multi-variate testing but Ronny showed what immense benefit you can get from running simple tests on a continuous basis. Also when evaluating those tests don’t look just at the short term gain but also look to understand the longer term value that you will gain
• Meeting a bunch of people for the first time. You read people’s blogs, you see their posts on the email groups but there’s no substitute for meeting them in flesh and discussing their ideas face to face.

So what next? As you read this I’m probably on my way back from the first Emetrics Summit in Sweden. This is continued sign of the growth and development of this industry, in particular outside of the US. Sure, the size and scope will be different to what I experienced in Washington DC but I expect the enthusiasm, inertest and lobby bar conversations to be very similar!

This post originally appeared on Applied Insights’ blog. Foviance acquired Applied Insights in November 2008, with Neil Mason joining us as Director of Analytical Consulting. As part of this acquisition, we’ve incorporated Applied Insights’ blog into our own.

I’ve been taking a look at internet audience growth in some of the major markets over the past year or so as published by Nielsen NetRatings in ClickZ Stats (http://www.clickz.com/stats). They make interesting reading. The overall home internet audience in this assortment of countries is up by about 6% year on year but some of the larger markets such as the US, the UK and Germany are showing little signs of growth. Naturally there will be changes within these overall figures but there are indications here that overall reach is beginning to plateau off in some markets. The implications are that businesses in these are not going to be able to rely on natural organic growth for much longer and are facing a more competitive environment.

In my last article I outlined my view that ‘web analytics’ is more about what comes out of a web analytics system, it’s much more holistic than that. If you are serious about online business performance analysis then you will require a multitude of different inputs as described last time. Given the increasingly competitive nature of the market in some countries, having good market I and competitive intelligence is going increasingly to be an important part of the mix. Most organisations operate in a competitive environment whether you’re competing for share of wallet, share of mind or share of funding.

Where does this market intelligence come from? There are a number of different data sources where you might get information on what happening in the market and what your competitors are up to. Most of them are provided by specialist third party data providers, some of them you have to pay for and some of them are free. Some of them are global, others are only available in some markets, so you do need to look around and see what’s available in your part of the world. Different data providers use different ways of collecting the data and to ensure that you use the data appropriately; you need to know how the reports have been created.

On the ‘global, paid for’ end of the scale you have services from companies such as Nielsen NetRatings (www.netratings.com), comScore (www.comscore.com) and Hitwise (www.hitwise.com). Whilst the output from these services can look similar to each other, the data collection methods vary. NetRatings and comScore collect data from a panel of internet users and Hitwise mainly collects its data from ISPs. One the main differences in terms of output is that the panel companies will produce volumetric estimates of reach (ie unique visitor metrics) whilst Hitwise produces market share rankings.

At the ‘free’ end of the scale there are a number of services available as well that can provide information on site rankings and traffic volumes. Alexa (www.alexa.com) was probably one of the first on the market, collecting traffic data from people that download and use their toolbar. Other services include Compete (www.competeinc.com) and Quantcast (www.quantcast.com) that uses multiple data sources to produce traffic volumes. There is also Attention Meter (http://www.attentionmeter.com/) that aggregates data from these various free sources. The thing is be aware of about the free sources is that the data quality may not be as high as the paid for services, particularly outside of the US.

However, competitive intelligence is not just about knowing how much traffic your competitors get compared to you, it’s also about how they are performing. Depending on what type of business you are in you may be able to get information from benchmarking organisations. Here in the UK in the financial services industry all the main players pool their data into a benchmarking company that then aggregates it and then supplies it back to all the participants with their competitors data anonymised. There are examples where web analytics companies do something similar in certain industry verticals, so you can compare your conversion ratios against others in your sector.

Another approach may be to carry out your own primary research. Your customers may also be your competitors’ customers and so you can use surveys to understand how your customers, users or visitors feel about the performance of your site or your business compared to other sites that they use within your sector or against reference sites that you may want to benchmark yourself against. Getting these types of insights from your own users can be very powerful.

So as organic growth begins to ebb away, more organisations are going to need to be aware of they stack up in a competitive environment. How do you compare?

This article, written by Neil Mason, was originally published on Clickz.com and is republished here with permission.

A couple of months ago WebAnalyticsDemystified published a report sponsored by the Web Analytics Association on the use of web analytics in organisations and attitudes towards the industry around the world. I was looking at the report again the other day and was struck by one of the results. Over half (56%) percent of the respondents, who were web analytics end users and consultants, thought that web analytics to be ‘somewhat’ or ‘extremely difficult’, only 15% thought it was easy with the rest in the middle. I started wondering whether this was a peculiarity of the industry or not. Do over half the people who work in Search Engine Optimisation consider SEO work to be difficult? What about email marketing, do email marketers consider it difficult? And what is it about web analytics that makes it difficult?

There were a few clues in the WebAnalyticsDemystified report. The majority of organisations are working with technologies that are relatively new to them. Not many of them having been working with the same system for more than 3 years. There are concerns over data quality, worries about data definitions and issues around reporting functionality. Bit for me one of the most interesting and telling statistics in the report was that the use of web analytics in an organisation is primarily driven by the people on the ground with only a few originations claiming to have corporate processes in place to drive out value from the investment in web analytics. And I think that this is why people find web analytics difficult, it’s viewed as a tactical response to a problem rather than a strategic imperative.

One of the challenges still with web analytics today in my opinion is that it’s viewed in terms of the technology as opposed to being viewed in terms of a philosophy. That may seem like an odd thing to say but web analytics reminds me of the Customer Relationship Management (CRM) industry in the late 90s. Organisations would decide that they would ‘do CRM’ and so go out, buy a piece of technology, implement it (eventually) and wait for the promised results. Often they were disappointed. Organisations that were successful realised that they not only had to implement a piece of technology but that they also had to implement changes in the way that they thought about customers and their processes for dealing with customers. They viewed CRM as a corporate philosophy rather than just as a piece of technology.

So should web analytics be a philosophy? I’m biased but I think that organisations that take marketing performance measurement seriously will ultimately be more successful than those that don’t. A piece of research by Jupiter a couple of years ago showed that US retailers who had embraced web analytics had much higher conversion ratios that those who had not. And ‘embracing web analytics’ doesn’t mean implementing a web analytics solution, it means investing in the skills and resources to extract the insight from it, it means changing the marketing decision making processes to include target setting and performance review on a continuous basis, it means building analytics and performance measurement into the heart of the development process, rather than it being an after thought. In short, it means having strategic intent about online business performance measurement that comes from the key decision makers in the organisation.

There is no doubt that implementing a web analytics system can be a bit tricky. There’s a lot that needs to be thought about and for many organisations the concepts and the technologies can be new to them. But these problems are then exacerbated if the organisation doesn’t align itself alongside the new capability and make the additional investments in resources, skills and training. Also, culturally, organisations need to shift so that when decisions about resource allocation are made, web analytics is seen as being as mission critical as transaction processing. This may seem like the tail wagging the dog but what’s the point of building a new checkout process for example if you can’t measures how effective it’s been…

When I run workshops I always start by talking about strategy, goals and objectives and setting Key Performance Indicators. In short, why does your website exists, what are you trying to do and how will you know you’ve done a good job? If the answers to these questions are clear, then I believe that web analytics gets a lot, lot easier. I usually end my workshops by sharing one of my favourite quotes. It comes from Art Nielsen and it’s this ‘The price of light is lower than the cost of darkness’. So, if you’re wondering if you can afford to put web analytics at the core of your online marketing processes, the question really is whether you can afford not to?

This article, written by Neil Mason, was originally published on Clickz.com and is republished here with permission.

When it comes to online campaign tracking there’s a new buzz phrase in town: “attribution management”. In our business you know where’s a trend when you get asked the same question twice in the same week and at the moment the question seems to be: “How do I attribute sales to different marketing channels in a more sophisticated way?” Increasingly advertisers know that the way they are currently tracking campaigns and their return on marketing investment is sub-optimal. They know that the current paradigm of “last click or impression gets the sale” means that they are potentially making poor decisions when it comes to fully evaluating the role of different online media in the marketing mix. There is the classic phrase in marketing: “I know that half my advertising spend is wasted, I just don’t know which half”. In the online era of almost total accountability, it seems that we are still struggling with this fundamental paradox.

The problem is simple. In the majority of cases, online advertisers use their campaign management systems or their web analytic systems to determine how they attribute sales (or other conversion events) to different online marketing channels. The current paradigm is that the channel that delivers the last click or the last impression before the visitor converts gets credited with the sale. If someone sees a banner ad, then does a search, clicks on a sponsored ad and then visits the website and converts, the investment in the sponsored search link gets the full credit for the conversion.

So, on those results you may take the view to reduce the investment in banner advertising and increase the investment in search marketing as that’s the channel that seems to be getting results. That’s all very well and good, but what about the fact that the customer saw a number of banner ads over a period of time which raises their awareness of the brand and prompted them to be more susceptible to clicking on the sponsored link when they carried out a search. The two different media channels are doing a different job; one is raising awareness and consideration, the other is generating a direct response. But only the direct response mechanism is being credited with the “sale”. The danger is that you then turn off the investment in banner and display advertising because it doesn’t seem to be doing anything and the next thing that you notice is that the number of search generated conversions seems to be going down. We live in a multi-channel, multi-media world and we can’t manage these things in silos.

The solution is a touch more problematic. I think the key thing for advertisers to recognise is that the current paradigm is sub-optimal. Whilst they may be focussing their efforts on optimising their marketing investment within a channel through, say sophisticated bid management strategies, they may not be optimising their investment across channels because they do not have complete visibility on the dependencies of one channel on another.

The next question is then how does an advertiser recognise and quantify the indirect effects of some channels? The major challenge here is that many of the common technologies used in campaign tracking and analysis are not up to the task. The default setting for is generally to credit the last click or impression with the conversion event. In some cases it is possible with adserving technologies to look at the “halo” effects of display advertising on search activity but this is not a standard report and requires that the display and search campaigns are managed from the same tool. In some web analytic systems it is possible to define some basic attribution rules other than “last click wins” such as the ability to spread the credit across all channels that a visitor touches before they buy. However, as we’ve discussed before web analytic systems cannot take into account impression effects of display advertising.

According to a recent report by Jupiter on this issue (Next-Generation Response: Effectively Managing Attribution) the solution for an advertisier appears to be to turn to their advertising agencies. Some agencies have developed their own analytic systems that operate off the adserving data. These systems allow for more flexible and sophisticated attribution management but lock the advertiser into a specific approach. An alternative might be to bring the data in-house but that requires the advertiser to handle and manipulate large volumes of data that they may not be very comfortable with. Another possibility is to use a third party to collect, manage and report on the data on your behalf.

They say that recognising a problem is half way to a solution. When it comes to attribution management, the trend is that advertisers are realising that the decisions they are making on the basis of the data they have might be less than perfect. The challenge they face is that the solutions at the moment are somewhat limited. Hopefully we will see the technology providers in the adserving, campaign management and web analytics space working to provide better ways of understanding the complexities of the online marketing mix.