Believe the hype: Online ads are finally living up to their effectiveness promise

You’d think that marketing people would be wise to it, given all we know about how to get people to buy stuff. But no, we’re just like everyone else, we get excited by shiny new things. Including shiny new ways of communicating with potential customers.

We beat ourselves up over it. Sitting in conferences getting told off by speakers that point to the mistakes we made and the previous ways of doing things we turned away from even though they worked.

But perhaps we should give ourselves a break. Afterall, excitement for the new is why progress happens.

And the evidence now shows we were right to pile into online advertising. That our enthusiasm for it has brought us to a better place.

Because although effectiveness was in question when online ads were new, there’s now solid evidence that returns are on the up and that it’s online advertising leading the charge.

Innovations ‘trick’ us into bringing them to life

Time after time, human beings invest more into early-stage innovations than is rational given how useful they are.

We spent billions on internet tech in the 1990s, even though, at the time, it was slow, pixelated and useless for commerce. And, in the 2010s, there was a similar splurge on blockchain, even though to this day, it’s largely impractical for many uses.

The Gartner hype cycle pictured below describes why people do it, and what happens next.

In the early days people’s expectations are sky high, they think the new tech is going to be amazing. But the reality is disappointing, and it’s only after time has passed, with experiments, learning and further innovation, that an equilibrium can be reached.

Gartner call the final stage the ‘plateau of productivity’. It’s where expectations match the reality, and the innovation is mature and working well.

We’ve been through it all with online ads over the past 20 years. The enthusiasm, the excitement and huge amounts of investment into the tech. Then the disappointment and worry, and those conference speeches and articles saying things were better before.

If there was a marketing effectiveness ‘crisis’, it’s now over

We stand at the brink of maturity

Two different reliable data sources agree on where we are on in the cycle right now. They show that we’re on the doorstep of the plateau of productivity. Commercial returns to advertising budgets declined during the hype around online media, but since the middle of 2010s they have been rapidly improving.

The charts above and below set out the evidence. Above, in orange, the IPA awards databank via Peter Field shows this pattern in number of large business effects among awards entrants. And below, in pink further down, the ARC database of econometrics results shows the same picture in ROI from everyday campaigns.

The finding is that, on the whole, we’ve paid the upfront costs of evolving online advertising into a very useful part of the toolkit, and we’re now entering a period where we can reap the rewards.

It’s good news, and something that as an industry we should be proud of. The turnaround is the result of our collective efforts in learning and evolving the way we work to successfully incorporate the new tools.

Three ways we’ve been learning

Now is the time to celebrate the beginning of a new and better era. And it’s the time to leave behind negative messages about advertising that are no longer true.

But it’s also a good time to reflect. Because how we got here matters. The learning behaviours that worked in the past to help us evolve are still relevant now and will be in the future.

The first of these, and probably most important, is learning by doing, or as we more often call it, test and learn. Marketers that try different options, drop what’s not working, and keep what is, are everywhere pushing effectiveness forward.

Online media owners should be applauded too, because they do the same thing. This is the process that has delivered evolution in formats and options, and fast adoption wherever they work well.

Learning by measuring, the second way we’ve pushed ahead, has been improving as time goes on. Research work by Les Binet, Google, Meta, my team at Magic Numbers, and others has helped marketers to understand the dangers of using last click attribution for budget allocation.

Les Binet has worked with econometrics agency and ARC contributor D2D to estimate just how big an impact improved measurement can have. The finding is that last click claims more than double the true effect for paid search, and reports only half the true effect of brand TV. That’s a dramatic bias that can be corrected using econometrics/MMM and/or lift testing for better decision-making and a much bigger bang for the advertising buck.

Finally, let us not forget straight up learning by learning. Because availability of resources for learning about what works in marketing have never been in better shape.

There are now a range of easy to consume online training courses from respected teachers. And there are databases that bring together effectiveness studies and leverage them for marketers to learn from.

One important example of the latter is the work by Binet and Field using the IPA databank. It has proven to not only be a perennial discussion point, but also a learning aid that changed behaviour.

The chart above shows the evidence. Planning horizons got shorter during the hype period for online ads. But since The Long and The Short of It was written in 2013, there’s been a turnaround, as marketers have learnt the lesson about the role of brand building in growth and changed tack.

Let’s hype the online-long next

It’s obvious what shiny new thing we need next. It’s innovation that brings learning about the long together with learning about online. We need tech, know-how, and tools that will allow us to build awareness, demand and, ultimately, brands online.

We’re going to have to. There’s no going back. With viewing declining year on year, this task won’t be achievable on TV in the future. Strategist Tom Roach is leading the discussion on the future of brand building, and he’s quite right when he says that nostalgia isn’t going to help.

Ignore the sceptics, brands can be built on digital platforms

What will help is the kinds of processes that brought online ads into our toolkits. That positive story in the wiggly line of Gartner’s model. It’s going to unfold full of excitement, learning and new toys to play with.

My bet is we’ll discover that brand building is going to be different in some ways. Online video will for sure play a role, but it’s possible there’ll also be a role for lots and lots of small low attention exposures. And with each impression coming with a carbon cost, targeting may even become a part of the brand-building toolkit.

That’s the joy of these long-lived processes of invention and learning. You never quite know where they’re going to come out.

But in the meantime, don’t let anyone convince you it’s not going to brilliant. The future of advertising needs your enthusiasm.

Grace Kite and her team at Magic Numbers carry out econometric projects and offer training on how best to manage online ads for long term growth.