Every business leader sets goals and structures incentives against these goals. Incentives are powerful motivators. They can also have unintended consequences.
Marketers care about incremental outcomes—sales and brand metrics. At the campaign level, A/B tests can assess incrementality, but cost and complexity preclude them as a general solution for every campaign. So, advertisers use proxies like click-through rate and last impression served (last touch) to be the measurements of success and create incentive for ad buyer and seller alike.
But our go-to proxies have remained static, even as behavior has shifted and programmatic has changed how we advertise. Their application today sets up a cascade of incentives with unintended, often negative consequences that harm every player in our industry’s supply chain, and if left unresolved will undermine our entire ecosystem.
Click-through: unreliable proxy, engine for fraud. Outside of search, click-through mostly fails as a proxy. It does not reliably measure consumer interest. Since the Internet’s early days, advertising and search have been intertwined. We consume search expecting to click, so the click in this context says ‘this advertising was relevant for me.’ However, applying this yardstick to ads on a publisher’s site conflates two distinct consumer experiences. Consumers visit sites to focus on content—not to redirect by clicking on ads. Moreover, the fact that consumers choose not to click doesn’t mean ads had no effect. In addition, click-through acts as an engine for fraud across the industry.
If marketers valued campaigns on incremental outcomes, there would be an innate counterweight to fraud, as bots don’t buy anything. But as an industry we have incentivized click-through and created the market for fake click traffic: ad buyers goaled on clicks optimize to media partners delivering clicks; media partners, themselves optimizing for clicks, seek out traffic sources offering more clicks. True, at the ground floor fraudsters generate the fake traffic and clicks, but they act in response to the law of demand.
Look closer at last touch. The last touch incentive at least recognizes an ad can effectively influence a customer regardless of click. However, it oversimplifies customer motivation and also disappoints as a metric. Programmatic in general, and real time bidding in particular, took the conceptually easier task of retargeting and made it practically easier.
Retargeting is a much less daunting task when compared with prospecting—i.e., finding net new customers. With close to 300 million online consumers in the U.S., deciding who to target poses a challenge. However, if 150,000 consumers visit your site, that subset is 2,000 times more likely to convert. So, retargeting has always had a better chance at being assigned credit, as there is an implicit—and flawed—assumption that errors in that assignment would be randomly distributed among all impressions.
The advent of Real Time Bidding, however, has dramatically upped the ante. It has made large scale retargeting straightforward–and raised the widespread adoption of the last touch proxy from theoretical problem, to existential challenge. Before RTB, getting reach against a retargeting segment was hard. RTB made it so easy that anyone, and everyone, can do it. With last touch now the ubiquitous standard in every ad server, we mis-attribute credit for net new customers on a grand scale, and waste billions of dollars of ad spend that marketers could better use influencing customers to visit a site in the first place.
Retargeting does contribute value, but our current system dramatically overstates that value. It confuses a correlated relationship with a causal one. After a first site visit, consumers receive retargeting impressions. But that doesn’t mean retargeting causes their eventual conversion. The ad and the customer are simply in the same place in the buying journey, at the same time. Correlation does not equal causation.
Short-term pursuit of credit vs. lasting consumer engagement. Still not convinced we need change? Last touch credit rewards only ad delivery—not quality of engagement—and thereby encourages ad clutter, actively degrading the consumer experience. A content page with ten ad units has a greater chance of receiving last touch credit that a page with two ad units, despite the fact we all intuitively recognize that each ad on the two-unit page is likely to garner more consumer attention than on the ten-unit page. No wonder ad-blocking has become the issue that it is.