By Tod Loofbourrow, CEO, ViralGains
Spending on digital advertising hit a record-high last year, according to data from the Interactive Advertising Bureau. Not surprisingly, marketers continued to invest heavily in video, both on mobile and desktop. According to the same IAB report, however, about one third of all dollars spent in digital went to buying impressions, rather than performance.
The value proposition of performance-based advertising isn’t a new story. In fact, performance-based models are what differentiate digital from other mediums. But even as marketers are increasingly asked to deliver business outcomes that impact the bottom line, impressions remain the currency for the majority of video advertisers. Why? More importantly, what can marketers gain by treating digital video as a performance-driven medium?
Real change is slow and difficult, but it rewards calculated risk taking
Long lags between innovation and adoption are common, even if the innovation offers a clear benefit. One reason is that change requires hard work, new behaviors, and calculated risks. Economists, for example, have known for decades that index funds consistently outperform managed investment funds, and yet they only account for 29 percent of today’s market holdings. Along similar lines, it took nearly five decades of skepticism and a crippling labor strike before the public finally began to embrace automatic elevators. By comparison, marketers are relatively quick to embrace innovation.
To buy video on a performance-based model, marketers must do the hard work of overhauling infrastructure, linking disparate databases, and coordinating vendors. But beyond the blocking and tackling, there’s the more difficult challenge of embracing change. As the old saying goes, “Nobody ever got fired for buying IBM.” That’s the logic driving marketers to buy video impressions, despite knowing better.
Breaking that pattern isn’t something you do overnight. Large enterprises don’t turn on a dime, and there’s usually a fairly steep learning curve when implementing any sort of major institutional change. That’s why marketers must take calculated risks to change behavior developed over decades of commodity TV inventory buying—and as they do, they must learn new ways to measure their work against specific business outcomes. If marketers can convince themselves (and those around them) to take those risks, there are two big rewards:
Reward #1: Relevance increases with performance
As marketers, our primary goal is to generate conversations with consumers that drive business impact — not easy given the fact that today’s consumers are increasingly intolerant of irrelevant advertising. But by focusing on impressions, what we’re really doing is measuring the number of consumers we’ve clubbed over the head with a message many don’t even want to hear.
Performance-based models begin with the consumer expressing interest in a brand or product. From there, the conversation can branch off into more relevant, targeted, and personalized ad experiences based on consumer attitudes and behaviors. Increasing relevance spurs higher levels of consumer engagement, improved levels of trust, and better results. Even more, by measuring the conversation quality instead of simply the number of consumers you’ve “reached,” marketers can shift from a model of diminishing returns to one of expanding possibilities. If you commit to engaging consumers in dialogue, they’ll tell you what you need to know.
Reward #2: Synchronicity delivers impact
Digital video is different than television for two fundamental reasons: 1) due to advanced targeting options, you have a much better idea of who you’re talking to, and 2) it’s one of the rare ad formats that allows for simultaneous interaction between brands and consumers. Consequently, video offers a tremendous opportunity to obtain nearly real-time consumer insights, allowing marketers to optimize campaigns quickly to ensure the right message is being delivered to the right people at the right time.
But if the only data you’re gathering is about the number of impressions delivered, the optimizations that can be applied are extremely limited. Marketers who focus on collecting consumer behaviors, actions, and preferences will have the tools they need to truly move the needle; instead of optimizing for audience, they’re optimizing in response to their audience.
That’s critical, as digital video is a medium that’s fundamentally about taking consumers on a journey—a journey in attitude, a journey in perception, and a journey toward purchase. When marketers sync up with the consumer conversation and use the insights gathered to tell better stories to more qualified people, they stand an excellent chance of ending the journey at the right destination.
About the author:
Tod Loofbourrow is the CEO and Chairman of ViralGains. Previously, Tod served as President of iRobot, where he helped grow market capitalization from $300M to over $800M. He founded and served as Chairman and CEO of Authoria (Peoplefluent), a $120M/year software-as-a-service provider of recruiting, performance management, compensation, and talent management software. Previously, Tod co-founded and served as the President of iRobot Healthcare and was CEO of the strategic consulting firm Foundation Technologies, Inc. Since 2011, Loofbourrow has served as Entrepreneur in Residence at the Center for Digital Business at MIT’s Sloan School of Management, and he sits on the board of Jobs for the Future, ViralGains, and Mobee. He taught graduate courses on artificial intelligence at Harvard for seven years. He has also written six books—the first, a 20,000 copy trade bestseller on computer science and robotics written at the age of 16.