Worried About Ad Costs? Don’t Waste Your Time (and Money)

Ad Costs

Trevor Testwuide, Expert in Business Strategy and Marketing Measurement

Published 02/08/2023

When your marketing budget is under constant scrutiny, the cost of what you spend it on matters a lot, to a lot of people. It’s likely why there seems to be an industry-wide obsession with tracking, comparing, and analyzing the average cost (CPMs & CPCs) of advertising on the most popular platforms.

Sure, these numbers can provide insight into how certain channels are trending in popularity, they might suggest a low cost of entry into exploring a new channel, and if the cost of a campaign you are running goes down, then the return on ad spend (ROAS) should go up accordingly. But, using CPMs to suggest certain media channels are a “good buy” can lead marketers to make critical investment decisions based on generalized data that isn't relevant to their particular business.

At Measured, we often get requests for the latest ad cost data from reporters and industry experts who are eager to analyze ongoing changes and pontificate on the latest trends. What I find funny about this is that ad cost data is by far the least interesting data we have.

For marketers, the cost per impression or cost per click really doesn't mean much if you can’t translate that cost into something of value, like conversions. Even cheap advertising is expensive if the money is spent on ineffective campaigns.

I imagine most of you are thinking, “We don’t buy media based on costs. We measure ROAS!”

The critical question here is how do you measure ROAS?

If your answer to that question does not involve the word ‘incrementality’ then odds are the ROAS you are measuring is not really ROAS at all.

If it doesn’t map to business results, is it really ROAS?

Have you ever added up all the conversions reported by each ad platform and compared them to the sales tracked in your ecommerce platform? If not, don’t bother. They won’t add up. Last-touch metrics used by platforms to report on their own performance are flawed, often in favor of the platforms. If each platform is claiming more (or in some cases, less) credit than it deserves, how can you land at any reliable calculation of ROAS?

Maybe you have implemented a multi-touch attribution (MTA) solution to get to the bottom of these platform reporting discrepancies. The promise of MTA is that it will assign the appropriate amount of credit to all the marketing touch points leading up to a conversion. The reality of MTA is that it’s nearly impossible to pull off.

Building a path to purchase that properly reflects the buyer’s journey is a fool’s errand for modern marketing. There are too many channels, and too little data. MTA was never ideal for offline, non-addressable, or walled garden channels. Now, Apple’s tracking restrictions, Google’s expiration of cookies, and the pixel’s slow march to the measurement graveyard mean user-data that was once easy to gather is increasingly impossible to come by. If you are being presented with a “comprehensive” user click-path, it is incomplete at best or, at worst, dangerously misleading.

Anyone selling MTA in today’s environment is filling in all the information gaps with unreliable results reported by platforms, modeled data, or synthetic touchpoints - a tactic we’ve seen fail time and time again since the early days of MTA. This equation is not something I’d feel confident going all in on with my marketing dollars. If the results reported by an MTA provider miraculously reconcile with your sales data, I’d be very skeptical about how they arrived there.

Stop forcing attribution and start measuring contribution

Instead of trying to assign a percentage of credit for each conversion to multiple touchpoints in the path to purchase, why not figure out what any one campaign or ad set contributes to resulting conversions? After all, that’s what we are really trying to understand.

  • How many conversions were caused by this channel or campaign?
  • How many more conversions can I get if I spend more?
  • If I take money away and spend it somewhere else, will incremental conversions go down?

These are the questions that incrementality answers.

If every channel, campaign, and tactic is measured using incrementality as the common currency, then comparing results across all of them becomes easy - and performance reports become a trusted resource for key stakeholders across the business. Even channels that tend to feed awareness and contribute to conversions that happen well past the tracking window, like TikTok or Pinterest,  can be measured for incrementality. And, because properly measured incrementality is validated by your actual sales data, the ROAS you reveal will be based in reality, not guesswork.

Given this, why isn’t every brand measuring and optimizing their media for incrementality?!

The only answer I can come up with is that we need to get better at explaining why incrementality should be the gold standard for media optimization and proving that it can easily be measured without the attribution hangovers we have all been nursing for the past two decades.

In the meantime, we’ve got the data that you and reporters shouldbe seeking. We ran thousands of incrementality tests for 100s of brands, on more than 60 channels and tactics in 2022. Below are some of the insights that came to the surface.

2022 ROAS, by channel, informed by incrementality

Want to know how ROAS differs between tactics like prospecting or retargeting on each channel?  Curious about where the numbers land for specific categories like fashion, beauty or home goods? Want to know where your peers are spending their money and the results they are getting? We’ve got that data too.

Contact us and we’ll give you a tour.

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