YOUR KPIs Are Stacked In THEIR Favor

Gambling addiction is real. Addiction to buying large quantities of low cost digital ads in programmatic channels is also real. You know you will lose money when you gamble because everything from slot machines to card games to roulette is stacked in favor of the house. You know about ad fraud, brand safety issues, and money going to adtech middlemen instead of towards showing ads, but you keep buying it anyway. Why? How has this persisted for so long?

It’s because the KPIs you use to measure the success of your campaigns are “stacked in favor of the house.” The “house” in this case is collectively the ad tech companies, including Google and Facebook. Maciej Zawadzinski, creator of independent analytics platform Piwik, put it this way, “Consider that by far the two most popular (and cheapest) technologies for measuring media performance are Google Analytics and Google Campaign Manager. Again, it is highly bizarre that the main measurement systems for the industry are owned by its biggest seller.”

What KPIs (key performance indicators) am I talking about? Number of impressions, number of clicks and click through rates (CTRs). These are the metrics most often reported by ad exchanges, ad tech companies, media agencies and even the analytics dashboards used by marketers. These are the easiest numbers to report and easiest to understand, so they are universally liked by all. But, consider for a moment, whether they tie to your business outcomes at all. There may be occasional correlations — such as when I bought more impressions I got more sales. But in most cases, those sales actually went up for other reasons, not because the number of digital ads went up. Most marketers don’t track this specific “cause and effect” because it’s “too hard” or they don’t sell online anyway.

Consider, further, the problems of “banner blindness” and ad blocking. “Banner blindness” means users don’t look at ads — e.g. the display ads at the top and right side of webpages. Years of eye tracking studies have shown that users don’t even look at the ads. Just google the words “banner blindness” and see the eye tracking charts for yourself. Ad blocking has also gone up in recent years. Not only are consumers not looking at the ads, they are also using tools like browser extensions to actively block ads, because they are so annoyed at the overwhelming quantity of ads and their irrelevance. So, on the one hand consumers are not looking or are blocking digital ads, but on the other hand marketers are buying more and more digital ads.

There may be two additional psychological factors that contribute to this disconnect between marketers and consumers – the Costco mentality and sports-watching. Costco has conditioned people to buy large quantities at lower unit prices. This is so ingrained in folks’ psyche that it translates into the way they buy digital media as well — buy more at lower unit cost (CPMs). On top of this, people are enamored with watching sports, where higher scores translate into wins. So larger numbers are better in their minds, and seeing larger quantities in spreadsheets and analytics dashboards feel like “winning” — more traffic, more impressions, more clicks, etc. But watching these numbers is literally like watching sports. It doesn’t result in better business outcomes from your digital marketing.

That’s what I meant by the KPIs are stacked in THEIR favor, not yours. These quantity metrics satisfy the desire for bigger numbers while watching sports. The KPI of lower unit costs when buying digital ads satisfies the “Costco mentality.” Both of these make it so addictive for marketers spending budgets on digital media, that this “gambling addiction” persists. And all of it is good for the ad tech companies that make money from selling these exact services. In fact, the primary beneficiaries of these KPIs are the ad tech companies, not the advertisers spending $150 billion in digital ads in the U.S. and $350 billion worldwide, every year. It has certainly made the ad tech companies super rich. Google has a market cap of $1.4 trillion and Facebook has a market cap of $770 billion — all from selling addictive digital advertising and making money from addicts — the advertisers.

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But advertisers like P&G found out that digital ads were not driving business like they assumed. When they turned off $200 million of digital ad spending, sales stayed the same. When Chase reduced the number of sites carrying their ads from 400,000 to 5,000 (a 99% decrease) they saw no change in business outcomes. When eBay paused their paid search ads in the western United States, they saw no change to the traffic coming to the site, or to the sales. When Uber turned off 80% of their mobile app install spend, the installs of the Uber app kept going. These examples should tell you that buying more digital ads does not necessarily drive business.

As budgets continue to remain tight, marketers should have the courage to run experiments to see what is actually driving business outcomes for them. You should consider updating your KPIs from the ones that are stacked in favor of the ad tech companies to KPIs that actually tell you whether your digital ad spending is working — i.e. driving more business for you. Yeah, it’s literally that simple. If you keep using quantity metrics (number of impressions, clicks, traffic, etc.) as your KPIs it will be easy to stay addicted to buying more digital ads that don’t do anything for your business. The only thing your spending will do is make the ad tech companies even richer. And I haven’t even touched on how bots can manipulate those quantity metrics to appear to be really awesome, so you believe it is working well and spend even more on it.

Marketers can do better digital marketing and drive more business for their companies by updating the KPis they use to measure the performance of their campaigns.

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