Unravelling the Web

Lord Leverhulme’s observation that only one half of advertising works – it’s just difficult to say which half, may soon require some revision. With online ad spend in the UK set to soar over the next five years, there’s a growing realisation that nobody knows much about the way consumers behave online.

Until now click-through rates (registered when a person clicks on an advertisement) and impressions (recorded each time a viewer downloads an advertisement onto a browser) have been the standard currency for measuring and tracking the response to Internet campaigns. However, almost everyone acknowledges they’re past their sell-by-date. At best they offer no more than snapshots of a much bigger picture and at worst can be very misleading. “They reveal nothing about users’ activity after they’ve clicked,” says Will Griffith, head of new business at Internet solutions specialists, RedEye International. He adds: “Click-throughs may be great for banner beauty contests, but say nothing about the quality or profitability of the customers being attracted.”

Quality vs quantity

But with clients increasingly wanting to see a quantifiable return on their investment in new media marketing, there’s been a surge of companies developing tracking software and bespoke services that can provide more revealing profiles of online customers.

Vito Salvaggio, vice-president of marketing at US software developers, Accrue, says: “People visiting websites will leave huge amounts of information which, although anonymous, can provide invaluable statistics.” Software packages and services such as Accrue’s “Insight” will identify where people are going on the site, how they get there, what they buy and what they reject.

Although the principle behind response tracking may be straightforward (even if the technical execution is complex), the challenge is how to make effective use of this plethora of information. RedEye’s Griffith agrees: “People sometimes miss the point about data. The more you have, the more difficult it is to interpret,” he adds: “It’s a quantity verses quality issue, which is why it’s important for companies to define what they want to measure.”

EasyJet, for example, is an organisation for whom low cost customer acquisition is critical. While the Internet is a perfect platform for this type of business, data generated from click-throughs and banner impressions is inadequate for any meaningful analysis or customer profiling.

Branding effect

However, using RedEye’s proprietary managed service, the company was able to understand the “branding effect” of its advertising and attribute customer spend to individual campaigns – even when the customers didn’t purchase immediately. “The tracking data provided some valuable insights,” explains Griffith. “The most popular click-throughs, for example, did not acquire the most profitable customers. While a successful click-through from a generic banner was 30 per cent more likely to lead to a booking than a similar click-through from a route-specific banner,” he says. The tracking results enabled easyJet to increase the conversion rate from 0.75 per cent of arrivals at the start of the campaign to 1.4 per cent one month later.

Cookies

But cookie-based applications – the basis of many online tracking systems – are far from perfect and are not always appropriate. For one thing, it’s still hard to know exactly who is seeing your ad and not everyone is entirely comfortable with some of the more delicate privacy issues. Better results can be achieved when the user has to register to enter the website or use the service.

“The next thing is to take the basis of direct marketing a step further and target specific groups based on socio-demographic and personal interest information,” says Steve Laitman, chief executive of E-District.net. The company operates an online community, LeisureDistrict, which provides games, shopping facilities and other activities that can be accessed via PC or interactive television. “Users of the service must first register their details,” explains Laitman. “With this information, we’re able to monitor their activity and target ads at them according to their past viewing habits. This lets the company segment very tightly, for example, to males aged between 16 and 24, who are interested in cars and football and according to the specific channel through which they’ve accessed the site.”

Better targeting equates to a better response, with user-identified campaigns reporting a ten-fold improvement in the ROI, compared with less targeted activities. But while an increasing number of companies are looking at user identification, it’s still some way short of the dreamed of one-to-one customer relationship.

Data protection legislation and the growth of spam-filtration software has also meant that companies need to tread carefully, not only when it comes to contacting consumers but in the way personal information is handled. If all this adds up to a groundswell in favour of more transparency, then permission-based electronic marketing will play a major role in the future.

EPM

“The advantage of e-mail permission marketing (EPM) is that customers have opted-in,” explains Martin Kiersnowski, chief operating officer at Emailbureau, a lifestyle database company specialising in EPM on behalf of about 60 partners. “EPM is probably the best way to alleviate spam because the customer has requested the information.”

But that’s just part of it. EPM has been likened to the equivalent of giving the consumer your telephone number and asking them to phone up with information, as opposed to the consumer receiving an unsolicited telesales call. “It’s obvious that the response is going to be better,” says Kiersnowski, “We’ve found that online campaigns are generating responses of about ten per cent,” he says.

Yet if EPM has a cloud, it is that an imminent legal case in the US will consider what constitutes opting in. There are fears that a decision against could jeopardise the practice. However, Kiersnowski is confident that EPM will allow companies to begin to understand their customers and build relationships around their lifestyles. “Increasingly, the argument is not about whether it should be practised, but to what level: opt in or double opt in,” he says. Double opt in is a reference to a confirmation by e-mail that a customer has agreed to opt in is being legally disputed.

But one area that could trigger an explosive growth of EPM is m-commerce (mobile commerce) – which relies much more on the response and initiative of the consumer. Mike Boreham is a co-founder and marketing director of m-commerce company Taskflow. He says: “Users must be invited to profile themselves in order to be provided with a flow of information that is appropriate to their needs.” In other words, real-time communication presents huge opportunities in areas such as impulse shopping, cross-selling and share dealing, where the message can generate an instant response.

eCRM

Although it is still early days, a number of companies including WCL, Mailtrack and Broadbase are developing, or already using, cross-media eCRM systems to track response to opt-in e-mail/SMS marketing messages. However, Phil Stubbs, who is head of business development for WCL, warns, “M-commerce is still under construction, so it has no established standards. It’s crucial that mobile marketers get permission-based marketing right, otherwise they run the risk of destroying a highly lucrative market.”

But for all the promise and potential, many people in the industry remain sceptical that online tracking by itself has all the answers. As a science, understanding online behaviour is still in nappies. It will come of age when the quantitative data is supported by qualitative observations.