Tuesday, February 25, 2014

Search Ads or Display Ads

Let’s say you are a marketing analyst and your director comes over to your desk and says, “We were just approved to increase our budget for online advertising campaigns.  I need to know, should we spend the majority of the budget on search ads or display ads?  Prepare a memo with your analysis and recommendation by Friday morning.” 

How would you respond?


Refresher

Search ads are used to instantly connect a business with customers.[1]  They are also known as paid search ads or sponsored links on a web page, based on the search terms entered in a search engine.  Search ads can be extremely effective by dropping your product/service on a customer’s lap who is ready to purchase.

Display ads appear as banners on the top or sides of web pages.  They are often used to remind customers of previous searches or page views to nudge them to visit their site and lead to conversion.  In the Tech Crunch page to the right, the online advertisers knew that I had been browsing the Sony Flip laptops at Best Buy’s website.  Also, they knew I had recently purchased a new car and had shopped around for insurance rates.



Recent Findings

In an article published by the Harvest Business School, Pavel Kireyev, Koen Pauwels, and Sunil Gupta explained that many firms justify higher online marketing spend by analyzing metrics such as click-through rate (CTR) and cost per acquisition (CPA).  However, they explain that standard online metrics are “plagued with attribution problems and do not account for dynamics.”[2]  Attribution problems occur because, based on limitations, we which ad really leads to conversion – search or display ads.[3]

“When you look at most consumers’ behavior, they do a search on Google when they are ready to make a decision,” says Gupta. “So search ads get all the credit for the sale. But search ads are at the bottom of the [purchase] funnel; display ads are at a higher level. Everybody in the industry intuitively believes that display ads drive people down the funnel, so they should get some credit—but they don’t.”[4]


Results

Based on their research, they concluded that display ad exposure not only increases search conversion, but also increases search clicks, increasing the overall search advertising costs.  Their study of a large commercial bank found that for “each $1 invested in display and search leads to a return of $1.24 for display and $1.75 for search ads, which contrasts sharply with the estimated and returns based on standard metrics.”[5] 


Other Options

While internet users today are being bombarded with more and more banner adds, there are other tools being used to lead to conversion.  Mike Volpe, chief marketing officer at HubSpot, says the level of targeting and personalization that can be done on social media sites is where much of the action can be found. For instance, Facebook offers “Sponsored Stories” and Twitter has “Promoted Tweets” integrated into a site’s content.  Also, sponsored tweets from celebrities can be highly effective and provide another outlet to reach target audiences.  However, the social-video advertising could be the fastest growing ad medium in history, reaching 5.6 billion ads watched in 2011, according to Brian Shin of Visible Measures.[6]


Conclusion

When little information is available, the short answer to the manager probably would be to increase search over display ads.  However, the long answer would include outlining your overall business objective, performing a baseline analysis with A/B testing, a review of the firm’s key performance indicators (KPIs), and a study on the attribution and dynamics of search and display ads.  The firm will be more successful if it is continually monitoring, analyzing, and acting on the lead information gathered from these tests.  In the end, the best answer may be allocating more advertising spend on other tools.


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