Close the Loop Yahoo!

February 6, 2007 |

In early December, Yahoo! announced the results of a new online marketing study conducted by comScore Networks. The research, branded “Close the Loop,” measured the impact of display advertising on search activity and found that when combined, search and display advertising deliver “better” results than when used independently (yes, better is in quotes on purpose).

Accurately, they tracked a significant lift in site engagement (conversion, registration, etc.) and an increase in online and offline purchases by customers exposed to the integrated campaigns. When banner and search advertising were viewed together, campaigns are far more engaging and effective with an increase in the share of destination site page views relative to competitive sites by 68% and time spent by 66%. More compelling to most of us, purchases of the advertiser’s products and services were almost three and a half times greater online and almost 2x offline.

Compelling results no doubt confirming that you should do more advertising, right?

“This research clearly shows that search and display advertising, which are each very effective on their own, work more effectively in tandem,” said Yahoo! Executive Vice President of Sales, Greg Coleman. “Advertisers who approach their marketing holistically drive greater engagement, generate more purchases both online and offline and steal share from their direct competitors.”

Greg is right, but the results aren’t necessarily better.

Frankly, I hate the name of the study which implies the study covered everything you need to know to make the right decision. What this overlooks is that the cost of search and advertising need to be accounted for to determine the integrated ROI.

comScore also found that exposure to banner ads increased related brand searches (brand, company or product names) an average of 26% during the campaign flight (here’s a problem I’ll get back to later). This shows that interest generated by the ads carries over to customer search activity.

Consider the following simple example

I spend $100 in paid search to get $400 in sales from 100 visits
I’m presented with an option to buy a media placement that costs $300 and sign on the dotted line knowing that it will deliver through search and indirect sales
That $300 media buy sends 60 visits to the site (a $5 CPC), none of whom convert (not good news but typical performance of an online ad)
Luckily! Our customers respond more through search with 26% more searches (yes, now I’m generalizing but bear with me) and ultimately 3.5x in overall online sales.

Where does that leave us?

$100 for paid search + $300 in media costs + $26 in incremental search costs = $426 in costs

$400 original sales x 3.5 = $1400 in sales

ROI with just search? 4 to 1

ROI with search and media? 3.3 to 1 (about)

Don’t make the mistake of misinterpreting my criticism. The study is wonderful insight to average increases in activity as a result of integrated advertising. At the very least, the results should help you sell internally, the benefit of integrating search with other marketing activities. But the loop isn’t closed. Yes, my math is not necessarily reflective of your results, I meant that only as an example of the importance of asking the right questions and reviewing the results with costs included. Be sure to weigh the costs of the media and look at the long term impact on search by monitoring the benefits for 90 days, not just the life of the campaign.

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Tags: yahoo, search, comscore