The "Hidden Return" Of Online Advertising

We all know that online advertising benefits from being measurable and that it’s returns are often better than offline advertising. But the one thing we have not been able to measure is the offline impact of online advertising. I have frequently cited a comscore study from years ago that showed that >80% of transactions initiated with online search were transacted offline.

Now we have a new study from comscore, which is outlined in the Harvard Business Review. It’s even better than that.

A recent study we conducted for a retailer with more than $15
billion in annual revenues—the vast majority of which come from its
physical stores—had notable results. Over a three-month period, U.S.
sales increased by 40% online and by 50% off-line among people exposed
to an online search- and display-ad holiday campaign promoting the
entire company. Because its baseline sales volumes are greater in
physical stores than on the internet, this retailer derived a great
deal more revenue benefit off-line than the percentages suggest. Even
in terms of raw increases, though, online ads had a bigger impact on
off-line than on online sales in a majority of our studies.

So when you buy advertising online that is generating a positive ROI just based on online conversion, you are likely to be getting an even better ROI that you think you are. It would be great to have some kind of closed loop tracking of the offline purchase activity. Maybe with mobile payments, we can get there.

#VC & Technology

Comments (Archived):

  1. Steven Kane

    Its inarguable that, regardless of the medium, “advertising works.”It worked before the web — quick, think of a hamburger restaurant — and it works on the web and other new media.The continuing question for marketing folks and publishers is (and probably will always be), “where’s the best efficiency”? “Where do my dollars yield the best?”Print? TV? Web? Email? Regular mail? Outdoor?I think the answer isn’t clear yet.Certainly shrinking audiences and narrowing demographics doom some media to lessening efficiency, regardless of how efficient the media may have been or even continue to be — traditional newspapers, for example.But beyond that there’s is some very mixed data.For example, here we are, what, 15 years into the digital revolution, yet one of the smartest marketing companies in history — American Express — still spends gargantuan sums on print and direct mail. What do they know/think that makes them act in such a counter-intuitive way?Also, those who parse search traffic all know that a huge — HUGE — percentage of search queries are what are sometimes called “brand searches.”That is, people don’t search as often for “luxury cars” as they do for “BMW” etc. They don’t search for “furniture” as often as they do for “Crate and Barrel” etc.So the path to the actual transaction is a lot more nuanced and complex than we may initially believe.Given the overall composition and demographics of the consumer spending “market”, I’d guess the typical USA consumers behavior in 2008 is probably: off-line marketing or word of mouth leads to online surfing and searching leads to transactions…

  2. Palluxo

    We have noticed that the Microsoft AdCenter has tripled our ROI in comparison with Google AdWords. Just my two cents.Daniel

    1. ventureblogalist

      Did youuuuuuuuuuu

  3. ventureblogalist

    Greg Sterling covers the local business models and coined a great term calling the internet the consideration medium.

  4. Guldi

    This is great validation for what we are doing at Spongecell – building a platform for marketers to engage their audience through online media (fb, myspace, calendars, web/widgets, email, sms, RSS) with the goal of influencing offline behavior.In addition to the ROI measurement mentioned above, a closed loop system can also drive relevant communication. For marketers on our platform (in what is arguably a semi-closed loop), it’s as simple as using information about types of their events that users have interacted with in the past, eg adding a sale on men’s jeans to outlook, an upcoming conference to facebook, or a concert to myspace, to target future communication.The methodology of the study is a little fuzzy – it seems the best control group would be composed of people who searched for similar terms, but did not see search ads or post-search targeted display ads from the retailer in question. Correlation vs. causation and all…Marc

  5. WayneMulligan

    Would be interesting if a company with a large online and offline customer base kicked off a coupon based promotion online and then tracked how many people redeemed it at their retail stores. I’m sure the direct conversions would be higher online but if multiple companies did this (hopefully those with a different ratio of online-to-offline sales) we could get a rough percentage for the effect of an online marketing campaign with respect to the size of a company’s offline presence.Great post Fred.-Wayne

  6. Darren Herman

    Online/offline, traditional/non-traditional, digital/non-digital, etc – are all of the same… we need to stop thinking of them differently. Online can amplify offline and vice versa. The best media plans are when all advertising works together and you can measure the effectiveness both on/offline.A television campaign spikes searches. Research about a product on a website leads to in-store purchases. We’re still in diapers figuring out this ecosystem but it sure is fun.

    1. brett1211

      Fred, what do you think of the opposite issue: the challenge for online companies to acquire customers offline?I agree with this comment. There is definitely an offline/online convergence happening, hastened by the wave of location based services. Offline to online conversion is becoming increasingly relevant as primarily web based companies are looking for a way to differentiate themselves and expand their marketing channels. At least for me there is a serious loss of conversion from the content leads written down in the “to research” section of my notepad to the content that I actually look up and consume…

      1. fredwilson

        I’m not sure online companies should try to acquire customers offline. I’ve never seen it work. Microsoft’s 100mm campaign for Bing seems like a huge waste of money to me

        1. brett1211

          I think Microsoft’s campaign is a huge waste of money because it is a frontal, uphill assault on an entrenched (and revered) market leader. I wonder if they settled on tripling google’s advertising arbitrarily or if they are taking a page out of the New Lanchester Strategy? offline customer acquisition for companies that primarily transact online? You don’t think that Zappos ever has a chance of acquiring customers at the running track or Gilt Groupe should try to market itself on the streets of SoHo (or in the clubs in the meatpacking district?) I think that LBS is going to affect the ONLINE experience in all sorts of ways.

  7. brknpar

    Great Post! This just adds more verification to what we are doing at OnCard Marketing. Not only do we drive traffic to brick and mortar locations via print, web, & mobile media we also have kick-ass technology that ties each conversion to its particular campaign which allows our clients and us to continually optimize the campaigns resulting in more $$$$$ for both.

  8. stone

    These kinds of studies are helpful directionally but can’t ever influence individual companies/media buyers until they can quantify the actual benefits to their business. What makes Google so impressive? Their advertisers think they can manage ROI with absolute precision. The benefit to Google: The advertiser puts a significant portion of the ROI back into expansion of their Google program.

    1. fredwilson

      Totally agree that’s why we need a closed loopFred

  9. Chris

    Agree that advertisers & agencies always want proof on their “own” brands. With a little bit of focus & research $$ we can measure the return in offline sales for almost any brand/product. ComScore is in the business of selling that research to advertisers 🙂

  10. michael

    @fred et alia, i would argue that this is the traditional world discovering LBS. look at companies like 1020 (aka placecast) who have the ability to aggregate location data and serve you ads telling you that X store that is Y distance from you is having a one-day-only sale. connect time and place / location(s) with content and you get a powerful crucible for building & delivering all kinds of services. (buzzd is another good example.)then again, i’m kinda in that world so color me biased. ; )

  11. djc8080

    As many have noted, the general problem is measuring the ROI of brand impact.

  12. qwang

    This “hidden return” may be overlooked because advertisers are so enamored with online advertising’s ability to delivery superior metrics that they forgot about the touchier, feelier world of brand-building. Don’t get me wrong, metrics are wonderful and should be the cornerstone of rational decision making. But I doubt cultural icons such as McDonalds or Coca-Cola are built by marketing philosophies that focus only on short-term conversion rates.I’d love to see more advertisers experiment with brand-building online. Dell’s green campaign on Facebook is a great example of thinking beyond immediate ROI…when the next “For everything else there’s Mastercard” blockbuster happens online, we know online advertising has finally matured =)

  13. Hunter

    DoubleClick tried to tie the two together through the acquisition and failed due to privacy. Online is measured through cookies while offline uses PII (personally identifiable information). The two cannot legally be connected.

  14. Hunter

    one more thing a few of the comments are missing:brand advertising and direct reponse are completely different. consumers appreciate advertising when it is relevant and are irrated when it is pushing them to engage. ROI is difficult to measure even in offline for brands. and for the coupon idea, it has been done by staples and a number of others. it is not successful.