Do Digital Ads Work? Who Knows.

Free Book Preview Ultimate Guide to SOCIAL MEDIA

This book takes readers through a 360-degree perspective of social media in businesses.

It is time to rethink how we gauge the effectiveness of digital ads.

Digital ad spending continues (unsurprisingly) to grow faster as a share of the full total ad market than other categories. Research firm eMarketer says budgets for digital ads will hit $42.5 billion in 2013 and jump to $60.4 billion in 2017.

You’ll think, with the data available and all that money being shelled out, it might be easy to understand whether digital promotional initiatives work. In the end, you have click-through rates, page traffic and online sales to use to construct a matrix of numbers to choose whether it was worthwhile to get a display ad, or something of this ilk.

But, actually, we may be looking at the incorrect numbers, or, at least, looking at the proper numbers wrongly.

An operating paper from three researchers who once worked together crunching numbers at Yahoo suggests we have to reset how exactly we view tradition metrics used to guage effectiveness.

Listed below are the three issues with our current approach, based on the authors, Randall Lewis and David Reiley, now at Google, and Justin Rao, now at Microsoft:

1. Because people don’t click doesn’t mean they don’t really buy. If you are searching at click-through rates of ads, and matching that to sales, you are missing a big audience: The clients who see your ad, consider it, and buy later, often in a physical retail location. Leaving out these customers often underestimates the potency of your ad campaign. Trouble is, they are a bit tougher to fully capture, however the authors note there, with the incorporation of some third-party measurements, it really is getting better to figure how a number of these buyers are out there.

Related: IF YOU WOULD LIKE Millennials to Love You, Skip Them and Market with their Mothers

2. Because they click doesn’t mean they bought something due to the ad. When you look at click-through rates, you generally shout “Huzzah” when you’re able to directly tie a go through the ad right to a purchase. The ad agency pops a cork, saying it had been clearly their creative that did the secret. The marketer assumes it’s the quality of the merchandise. The host site pats itself on the trunk for having such wonderful associated content, it just makes readers want to invest. All could be fooling themselves. Sometimes people just need it stuff. So they seek out stuff. And they happen upon your ad and see and easy way to accomplish it. These were buying anyway. You have lucky.

3. Because you have data doesn’t mean they don’t really suck. Well, the authors didn’t quite put it that way. Instead, they said, “(M)ore sophisticated models that do compare subjected to unexposed users to determine a baseline purchase rate typically depend on natural, endogenous advertising exposure and will easily generate biased estimates because of unobserved heterogeneity.” While at Yahoo, the authors discovered that studies of buyers vs. non-buyers were come up with wrong, with a whole lot of bad data and noise.

So, exactly what is a marketer to accomplish? Well, many ways, click-through rates already are being discounted in lots of ad buys. This past year, researchers from Hewlett-Packard, utilizing their own digital display ads for printers, discovered that click-through rates were too random to be utilized as a metric for effectiveness. Instead, they only used them to compare whether one group of creative did much better than another – and even they admitted they didn’t entirely trust the numbers.

That leaves other approaches, like gauging reach, engagement, brand awareness, traffic to your internet site, and things like that. They are often more challenging, and more costly, to monitor, compared to the cheap-and-easy click-through, however they have an edge: The info actually could be useful.

Related: Why COMPANIES and Advertisers Can’t Afford to Ignore YouTube (Motiongraphic)