Four Times Zero Is Still Zero

Recently there has been buzz around the rise of advertising exchanges, which bring media inventory into a liquid, dynamic environment driven by automation and technology. The exchanges come in many flavors, but they all move in the direction of allowing wide swaths of media impressions to be bought in a computerized manner.

Beneath the surface of this move is a far greater shift that will shake up and unsettle marketing as we know it. It is about data -- data in ways we have never before fathomed. The future of advertising is not about social, not about viral videos, not about mobile, not about any new medium or any new ad unit -- but about data. Those who know what to do with this will be the new kingmakers, the new rulers of Madison Avenue -- or the creators of a new Avenue of media.

In the OMMA panel -- which featured Jeff Hirsch, CEO of Audience Sciences; David Zinman, VP and General Manager of Yahoo Display Advertising; and Jim Larrison, Chief Revenue Officer for Adify -- we explored many aspects of the "data in advertising" topic. We covered the growing use of ad exchanges, the role of ad agencies, the potential disintermediation of ad networks, the risk that the original owner of a "cookied" Web site audience will see that audience bought by competitors on the exchanges, and the role of branded sites in the exchanges, among others.

We also touched on the importance of the creative in targeted advertising campaigns, but because of time constraints weren't able to do the topic justice. So I thought I'd add a few personal observations here.

Let me say upfront that I'm all for targeted advertising. It has benefits for publishers and advertisers alike. It increases the efficiency of a media buy by delivering more impressions against the desired target segment. But I cringe when I hear it suggested that the future of advertising will begin and end with the use of targeting data. Excuse me, but isn't the creative message every bit as important as who we say it to? Doesn't the efficacy of any ad campaign depend to a large degree on the copy being used? If we put such importance on targeting data that we forget we are fundamentally communicating with, and are trying to influence the behavior of, human beings, I worry that we'll fail to realize the full potential of the online channel.

It's been shown that online advertising has captured 30% of all direct-response ad dollars spent across all media, but only 5% of the branding dollars. If we're to increase that 5% share, I believe we must think in ways that are consistent with the needs of branding campaigns. And that means focusing much more on the creative.

Research into the impact of TV copy conducted by Comscore's ARS Group has shown that the creative is four times more important in determining sales outcomes than the media spend. That's one of the reasons U.S. marketers spend about $300 million each year researching their TV copy to make sure it's communicating in the desired manner before it's actually used. That dwarfs the pittance that's currently invested in the pre-researching of online creative.

It's no wonder the Internet doesn't get the nod more often for branding campaigns. No longer can we slap a few alternative banners together, run them in a real-world campaign and measure click rates to gauge the branding impact. The click has been shown to be irrelevant in that regard. No, we need to do our homework before the online campaign runs and make sure we have a persuasive branding message. And, as the use of rich media and video increases, we can expect online commercial production costs to increase markedly, making the need for online creative pre-testing even more important.

The importance of creative was vividly brought home to me more than 30 years ago when, as a young researcher, I was analyzing a TV weight test for a leading beverage company. The company wanted to measure what would happen if it increased TV spending behind one of its major brands by a factor of four.

We used the AdTel split cable ad testing system to deliver the higher weight level to one group of panelists, while keeping the weight steady among a balanced control group. We then compared the brand buying behavior of panelists exposed to the higher TV weight with the behavior of the control group of panelists exposed to the normal weight level. To my surprise, after six months and later after a year of testing, we could see no increase in buying of the advertised brand among those panelists exposed to the heavy weight level.

How could that be, I wondered? Four times the normal TV weight level meant that the company was spending huge amounts of ad money behind the brand - well north of $100 million in today's dollars.

The answer came when we looked at the results of copy tests of the particular TV commercials being used. The research showed that the TV ads were doing a particularly poor job of persuasively communicating a value that would succeed in attracting new buyers or even creating a compelling reason for existing brand buyers to buy more. I'll never forget what the client's wise research manager said to me: "Gian, you need to remember that four times zero is still zero!"

So, as we embrace the future of digital advertising amidst an abundance of targeting data, I hope it doesn't blind us to the need to also make sure that we have our message and communication optimized. Because, without a persuasive branding message, all the targeting precision in the world won't increase sales. Mathematical laws aren't about to change on our behalf: four times zero will always be zero.