Wednesday, October 04, 2006

Engagement Is a Euphemism For Measuring the ROI of Brand Advertising

Scott Karp at Publishing 2.0 attended the Consumer Engagement conference and offers smart feedback. (Btw, see the Engagement video interview with Scott right here.) He says Engagement is a euphemism for measuring the ROI of brand advertising:
Last week I attended the Consumer Engagement Conference, put on by the Advertising Research Foundation (ARF) and the American Association of Advertising Agencies (AAAA), where I discovered that the word “engagement” — which is being proffered as a new “output” metric for advertising to replace outdated “input” metrics like Gross Rating Points and Impressions — is merely a euphemism for figuring out the return on investment for brand advertising.

Several factors have combined to put pressure on the billions of dollars spend on traditional brand advertising — TV above all — to demonstrate “engagement” (i.e. what’s the ROI of all that money we’re spending?):

1. Mass advertising of mass brands is dying
2. Audiences are fragmenting at an exponential rate
3. The share of media time spend online is rapidly growing
4. Online video has arrived
5. Google has made billions on direct response advertising, finally realizing the promise of the Web to revolutionize advertising ROI measurement

The advertising industry has realized it’s only a matter of time before the pressure to demonstrate the return on invest for TV advertising threatens to collapse the whole system. That’s what drove NBC to negotiate what may be the first pay-for-performance deals in the history of TV advertising (Alan Wurtzel, President of NBC’s Research and Media Development, who spoke at the conference, wouldn’t confirm or deny, but it was pretty clear that’s where they are headed.)

So the problem I have with the working definition of “engagement” — “turning on a prospect to a brand idea enhanced by the surrounding context” — is that it obfuscates the real issue:

How much so companies profit in the short term and/or the long term from the billions they spend on brand advertising?
In other words, show it to me on the P&L statement!

The coming showdown over brand advertising is only going to intensify as Google comes at it from the other end. At the conference, Patrick Keane, Director of Field Marketing & Sales Strategy at Google, presented the results of — get this — an eye tracking study to show that consumers were more likely to look at an ad in a relevant context. Not click on the ad — just look.

Welcome to the wild, wooly, squishy word of brand advertising, Google!

Google is opening a 300,000 square foot New York office where “newer initiatives into print and audio advertising are being done,” but we all know that TV advertising is the real prize.

Between Google, with its algorithms, oceans of data, and direct response measurements (click!), and TV brand advertising, with its outdated input metrics that are useless for measuring real return on investment in dollars and cents, is the “fuzzy middle” where the battle for the future of advertising will be fought.

Whoever figures out how to bridge the chasm between brands and dollars will win the prize.

My response to Scott on his blog was:

Profit in short or long term is key; but so is competitive differentiation and relative performance within a category. But where does loyalty or preference come into play? Those are factors often determined by brand advertising. I guess it is that squishy middle.

Then Scott commented:

Max, competitive differentiation, relative performance within a category, loyalty and preference are all drivers of financial performance. I’m not suggesting these measures are not a necessary stepping stones. But reach and frequency dominated for so many years because advertising was not held accountable for the final destination. If we lose sight of the destination, we won’t be able to connect the dots, and again will confuse a midpoint along the way with the destination.

I suppose so.


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