Three Reasons Advertisers Are Wasting Media Dollars – And What They Can Do About It

February 29, 2016

The more things change, the more they stay the same. John Wanamaker’s old chestnut about wasting half his ad spend (but not knowing which half) pre-dates digital marketing by more than 100 years and yet it remains as true today as ever. Advertisers still waste media dollars, largely because targeting remains imprecise. They regularly retarget customers post-purchase. They send the wrong messages to the wrong people. They serve too many ads or too few. In the process, they not only waste ad spend, but they are missing opportunities to deepen their relationships with their customers.

The identity problem

There are a number of common causes for wasted ad spend, though the primary culprit is technological in nature. Today’s hyper-connected consumer moves between devices and channels throughout the day. They might browse a product on their mobile only to buy it later on their laptop or in a store. Advertisers struggle to recognize customers as they move between devices. A single customer can appear as several people.

Advertisers still predominantly rely on cookies to target and serve ads and, as Marc Kiven recently discussed at length in this space, cookies are increasingly unreliable. They are device specific, they expire, and they are ineffective on many mobile browsers. They don’t work at all on mobile apps.

Google and Facebook with their rich pools of logged-in users do a better job of connecting identity across devices, but they struggle to consistently track cross-device behavior outside of their respective platforms. The proverbial left hand doesn’t know what the right is doing, leaving advertisers to operate with incomplete information.

An inability to map identity across devices is the source of three all-too-common issues leading to wasted media dollars and creating opportunity costs:

  • An inability to accurately measure reach and frequency of advertising
  • Retargeting (and annoying) customers who’ve already purchased
  • Missing opportunities to sell add-ons and encourage customer retention

Let’s take a closer look at each of these problems.

1. An inability to accurately measure reach and frequency

In most cases, advertisers optimize to an average or mean frequency. If the optimal frequency is four, they try to deliver their ad to each person four times. I say try, because the reality is very few will see the optimal number of ads. They’ll deliver the ad to a large number of users one time while another smaller group of users might see it hundreds of times. Advertisers’ inability to identify consumers across devices means they often overstate reach and understate frequency. A single consumer might appear as three people as she moves from her home computer to her mobile to her laptop at work. This results in a failure to meet the optimal frequency for your campaign, either sending too many messages or too few.

2. Retargeting (and annoying) customers who’ve already purchased

The same cross-device problem leading to inaccurate reach and frequency could result in another source of wasted media dollars: ineffective retargeting. A failure to map behavior across devices often leads to retargeting more than is necessary to close the sale or even turning consumers off to your products altogether. I’m sure everyone has experienced getting served a digital ad for something they’ve already purchased. One of the most important elements of any retargeting campaign is being able to effectively carry out exclusion retargeting or suppression, but that’s only possible when you have sufficient knowledge of your targets’ behaviors to know when you’ve either closed the sale or delivered the optimum frequency of ads to close a sale.

Moreover, too few advertisers connect their customers’ online and offline behaviors. As a result, consumers are often served ads for things they’ve already purchased offline. For example, if your customer base’s activity breaks down 20-80 online to offline, you could be wasting as much as four-fifths of your retargeting campaign budget.

But ineffective retargeting isn’t simply a matter of wasted ad spend, it is also a missed opportunity to engage with customers. Which leads us to the final identity-related issue.

3. Missing opportunities to sell add-ons and encourage customer retention

An inability to map activity across devices can mean missing cross-selling opportunities like selling software to someone who just purchased a new laptop, or utensils to someone who just bought a new grill, or outer wear to someone who had just purchased a new coat. This represents an opportunity cost. Money misspent on poor retargeting could be better used to deepen your relationship with customers. And shouldn’t that be a marketer’s ultimate goal? To create repeat customers?

People-based marketing: The new imperative

Advertisers need to rein in wasted ad spend by making a conscious effort to move away from marketing to cookies and start marketing to real people. Emerging technologies are mapping cross-device behaviors using email addresses, a more durable and persistent identifier, to piece together unified customer profiles. This enables more accurate measurement of reach and frequency, the ability to do deterministic matching, more effective retargeting and, perhaps most importantly, it allows you to deliver a better consumer experience, building a deeper, more long-lasting relationship with your customers.

Ask your technology partners how they address cross-device identity issues and what they are doing to minimize wasted ad spend. Forward-looking advertisers who figure out how to mitigate these challenges stand to gain a huge strategic advantage.

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Jon Padilla

Jon is a data-driven marketer who's passionate about using technology to deliver innovative media strategies and create meaningful digital measurement. He the former Director of Product Strategy at Signal.

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