For years direct response marketing online via paid search, seo, email, affiliate and comparison shopping engines have been very efficient and predictable. But we are currently in a transitional time for online marketing where these modes of advertising are not as efficient or predictable as they used to be. There are two changes that are causing a shift.
First is the attribution problem caused by the increasing amount of sources that a person uses before they purchase which dilutes direct response profits. According to a study by Google, people use more than 10 sources of information to arrive at a purchasing decision. And this trend is only going to increase. What does this mean for direct response mediums online?: the constant feeling that you aren’t getting full credit for your spend, but you’re not quite sure what level of credit you should be taking.
Second, mobile costs and click-throughs continue to grow but the return on investment isn’t growing with it. Customers are using mobile devices in droves but but advertisers are not yet convinced that they are as effective as desktop ads.
From The New York Times: “People click on ads on smartphones more often than they do on desktop computers, 5.1 percent compared with 2.4 percent of the time, according to Marin Software, which makes technology for advertisers to use to buy ads on Google, Bing, Facebook and other sites.
That is because ads take up more space on cellphone screens and are more likely to answer the kinds of immediate questions asked on mobile devices, like “Where is a bar near the ballpark?” said Gagan Kanwar, director of research and partnerships at Marin.
People make purchases after clicking on ads 4 percent of the time on desktops and just 2 percent of the time on phones, so mobile ads are worth less, he said.”
Online marketing budgets are made with specific returns in revenue in mind which is very different from traditional tv, radio and print advertising where the main objective is to build the brand and occupy more mindshare of the customer. When online marketing direct revenues go down, spend goes down with them – if it’s not providing the return than stop spending – a different mentality than traditional advertising. Even though those marketing dollars may still be driving sales, its harder to measure the return because of mobile and attribution problems.
I don’t think this funk we’re in is here to stay however. Technology will catch up to the customer again and allow the kind of tracking necessary to prove results. Once we start using our phones to make purchases, a lot of the attribution problems with mobile will be solved. A purchase with a phone will close the loop on the user who saw an ad on that same phone. Customer Relations Management technology will improve so that unique identifiers will be assigned to a user so all their actions across devices and programs will be identified.