February 25th, 2008

Microsoft Announces Engagement Mapping ROI Black Box, Technology Companies Taking Over Advertising Industry

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Microsoft announced today that they are going after the holy grail of advertising: integrated ROI measurement and tracking. The big problem with online ROI measurement that Microsoft is targeting is the inability to assign quantifiable value to brand advertising, e.g. banner ads, and which results in disproportionate value being assigned to search advertising — the “last click” which typically leads to a measurable actions like a purchase.

This is the holy grail because the biggest bucket of advertising dollars is still in offline brand advertising, e.g. TV commercials, and the big players — Google, Yahoo, Microsoft, et al — are all trying to drag those big brand dollars kicking and screaming online. Although billions of dollars are gleefully poured into offline brand ads with little or no quantifiable ROI measurement — certainly nowhere near what is possible with search advertising (AKA direct marketing) — the expectation is that when those brand advertising dollars shift online, they will suddenly become much more measurable.

The problem is that the “last click” before an online purchase is typically a search or other text ad, which get clicked far more often than banners and other brand ads (including video ads). Even advertising clients who have been die hard believers in the soft ROI of branding suddenly become obsessive click counters when their ads go online.

So Microsoft is trying to solve this problem with an integrated tracking system that ascribes value to the brand ads that a consumer sees before clicking on a text ad.

The end game of course is to convince advertisers to run all of their ads through Microsoft’s growing online advertising infrastructure (which they still hope will include Yahoo), so that they can consolidate all of the available user data — and thus all of the ad dollars.

What’s shaping up is a battle of the titans between Google and Microsoft for control of the big advertiser dollars as they shift online — and brand advertising ROI measurement is key.

Here are two observations on Microsoft’s announcement:

1. It’s a black box

Microsoft’s Engagement Mapping system announcement is VERY short on details — the proverbial “black box,” which has been a scourge of advertising measurement for years, because clients typically don’t trust what they can’t understand.

During the post crash years, I spent some time studying the econometric modeling approach to ROI measurement, sometimes called marketing mix modeling — it’s a form of regression analysis that attempts to establish causal relationships between advertising data and key client metrics. It’s powerful — and expensive — stuff, but most clients are wary because you need a PhD to understand how it works (literally, the people who do this stuff are PhDs).

Here’s what I mean by black box (via CNET):

Say a consumer sees an ad for a product in a video ad one day, and then clicks on a text ad to visit the retailer’s site the next day, and then eventually sees a banner ad that leads to a purchase. All of the monetary credit tends to go to the text link that was clicked on, says John Chandler, principal analyst for Microsoft’s Atlas ad serving division.

“Under our (Engagement Mapping) model, those will share the credit,” for example, with 40 percent each going to the video ad and the text ad and 20 percent going to the banner, he says.

And you arrived at those percentages how? Oh, don’t you worry your pretty little head about it… we just feed all the data into our big black “Engagement Mapping” box, crank this handle right here, and it spits out the answer. Remember, any sufficiently advanced technology is indistinguishable from magic — just tell that to the brand manager writing the eight or nine figure check.

2. It’s Microsoft

If you worked in advertising up until say the Google IP, it probably seems on the face of it totally nuts that companies outside of Madison Avenue should have the lead on seizing the holy grail. I mean, Microsoft is a SOFTWARE company, for crying out loud.

But the problem with advertising has always been that it was more art than science, when it should have been about dollars and cents. Google AdWords was so pioneering because it enabled many companies who couldn’t afford for advertising to be a cost center to turn their advertisng into a profit center.

When you think about it, it makes perfect sense that technology companies should take over the advertising industry. Nobody in Silicon Valley will win a Clio Award, but they will help clients get more than $1 back for every $1 of advertising they spend — and advertisers have always cared more about their bottom lines than Madison Avenue’s ego.

  • Hello Scott,

    I thought you and your readers might be interested in a article I wrote recently on this same subject. Keep your back pocket buttoned.

    George

    ****************************************************

    Advertising’s new world order

    I read somewhere recently that it’s a battle between Google and Microsoft to determine who will be the next great advertising company in this country. Get serious … who is buying this garbage?

    I have been in and around the advertising business for my entire life. In fact, I am a third generation graphic arts designer … only my specialty is digital. My grandfather started making a living in the ad industry in 1918, at the age of 19. His son followed. Both of my brothers and my sister have spent most of their life in advertising as well. My nephew is now attending one of the most prestigious advertising graduate degree programs in the world … and is knocking them dead. Even my 17-year-old daughter has the knack.

    The advertising industry demands perfection … and vision. It tries to strike the perfect balance between super creative people, media experts, business and finance people, and account executives. While it sometimes stretches the norm and produces an ad like the infamous Apple attack on IBM, or the sexy new GoDaddy models trying to host your web site accounts, it always plays within the rules. If it doesn’t, you, the consumers, will let them know. You don’t see laws being violated every single day by these agencies … whether they relate to smoking prohibitions, pornography, blatant racial prejudice, or generally offensive materials of any sort. You make a mistake like Don Imus did and “pow”, you’re taken off the air. Your advertisers dump you. And you certainly don’t steal other people’s work. Words … images … music. The ad industry has for the most part learned how to protect its own.

    Social responsibility, respect for individual creative skills, and copyright protection have become a way of life in the professional advertising industry. And now targeted advertising can be delivered to us on the device of our choice (mobile or static) and exactly when we might want to see, or hear, it. How exciting!

    But it’s not all about the bucks, folks. Advertising requires a degree of class … sophistication … social responsibility … and an understanding of what is visually appealing and what is not. How many flashing, hopping, beeping, or honking pop up ads can someone watch before the viewing device ends up in the bottom of the lake in a fit of rage, anyway?

    What advertisers in their right mind are looking to recruit Michael Vick or O.J. Simpson these days … or better yet, Dog the Bounty hunter or Mike Tyson? Even the slightest hint of cruelty, sexual or racial bias, or lawlessness, can set a concerned advertiser, and its clients, into an uproar. The established rule has always been to avoid controversy at all costs. Let the journalists do their job on that front … not the ad agencies.

    The technology industry is entirely different. It thrives on controversy. Whether it’s Microsoft "borrowing" its ideas for Windows from Apple, or Apple copying its interfaces and designs from HP, they are all roughly the same. It’s always been that way. Try to get away with anything you can until the government authorities threaten to shut you down … or, worst yet, put you behind bars. And if you accumulate enough cash money in the process, you can even fend off the government if you choose.

    I know. I went to work for IBM in the mid-70’s. Almost got disinherited by my “advertising” family in the process, but there I went anyway. White button down shirts and black ties in hand. We weren’t taught creativity much at all back in those days. It was more FUD than anything else. For those of you new to the industry, that’s Fear, Uncertainty, and Doubt. “If you don’t pay three times as much for this IBM system you are likely to lose all of your data … and then your wife … and eventually all of your children.” IBM finally met its match in the 80’s and took a dive from grace. They fell asleep at the wheel. I call it “we’re #1 syndrome”.

    Then Microsoft took over. Predatory business practices ruled the roost. “Bundle this or we’ll squash you. License us your ideas for pennies or we’ll steal them anyway. Antitrust issues be damned. We are much better pitch men then you folks will ever be.” Never had a company made so much money so quickly. “Hey, this controversy stuff isn’t all that bad, now, is it?”

    Then came the 90’s. The decade started off with a strong rumor that a guy named McAfee had invented a cure for the computer virus (Michelangelo) that many thought he invented in the first place. And both the disease and the cure spread like wildfire. When I saw him being interviewed by Bryant Gumbel on the Today Show I knew we were in for big trouble. The technology industry has never been the same. These software engineers are sure smart, but should they really be allowed to operate outside the law of the land? I don’t think so.

    By the end of the 90’s, the Internet had taken hold. And every two-bit pirate wannabe in the world was now an official “publisher”. You could take your company public by selling air, but stealing other people’s property, selling polluted air, and then recruiting an audience to your party, or new community, as they called it, was much more exciting. Business ethics be damned.

    The advertising industry was supposed to attend and sponsor this new Internet feast as well, but few quality firms participated at this early stage. Something just did not smell right. Tell me again why “eyeballs” are more important than “profits”?, a few from the old school would quietly whisper their concerns for fear of being heard and considered to be behind the times. No riches were reserved for dinosaurs in this new world game.

    I found it almost too sad to watch as many of our modern day business “heroes”, like GE Chairman, Jack Welsh, and NBC Chairman and CEO, Bob Wright, got snookered by some of these new young Internet visionaries, and convinced their advertisers to tag along for the ride. They weren’t about to miss out on this new “zero gravity” wave … whatever the heck that meant anyway.

    So now the dust is finally settling and Web 2.0 has brought about a new world order. Power to the people. Controversy brings eyeballs and is sought after now, not avoided. Social networking is hot, buying goods via auctions over the Internet is in vogue, and user supplied content is virtually uncensored … in fact, almost all of our norms are starting to change. And the software engineers and scientists out at Google and Microsoft have finally figured out how to dupe Madison Avenue, not just Wall Street, out of all its money … let alone the poor small business out there on Main Street!

    Google refuses to follow the standards of objective and straightforward journalism, and guess what … journalism has started to die. Google unilaterally decides to digitize practically every single book they can get their hands on around the world without the copyright owners’ permission … and guess what … the book publishing industry turns into a steep downward cycle … if not a tail spin.

    Microsoft says it is coming in to take over Yahoo and gain all of that online display advertising business whether the engineers, executives, and marketeers at Yahoo like it or not. The battle is on folks. The two major titans have entered the arena.

    Newspapers are all selling out, if not giving up. Google pays $1.65 billion for a start up company called YouTube, that, by and large, uses stolen property to attract its customers. Technology companies agree to censor content in China while the Chinese government applauds the fact that its piracy rate is now only slightly above the 80% level. Kids get thrown out of fraternities if they are found actually paying for music or movies they download online … let alone using e-mail. These are no longer socially acceptable practices … or hip.

    Obnoxious and intrusive advertising smears all of our online lives. Who produces these pop-up and banner ads anyway? The whole advertising industry has caved into the “science” of it all … and it’s supposed to strike a delicate balance between both science and art. Always has.

    Hey, I’m not against progress. I love the Internet and these search engines and what they can do. Used fairly, they can really enhance our lives.

    But I don’t want to be exposed to false claims, illegal activities, and stolen property every time I turn around. Are there really 147,645 companies out there giving away original graphic arts content that is part of the “public domain” for FREE as Google and others claim? I don’t think so. I’m aware that I, too, have potential liability even as an innocent user of this digital “stuff” I download online when the property is stolen and its use is unlawful. Shouldn't the big Internet companies be held accountable for their part in these scams?

    I just want to hear the truth. Who owns the content on your website anyway, Google? And is our use of this content legal or illegal? Do you have permission to display and download it? Does it's use violate American laws. Tell us the truth.

    We never had to worry about this sort of thing before. Responsible advertisers would provide us with a shield. They would not promote teenage smoking, offshore gambling, copyright infringement, or child pornography when the regulators, and good common sense, dictated otherwise. Not so, our Internet friends. I don't know about you, but I just like being told when I’m about to get hoodwinked. “Bend over … we realize that there’s no water in the shower, but our engineers are working on that one as well.” Semantic water.

    Go ahead, technology companies. Take all of the money. You might as well before another country like Brazil, Russia, India, or China (the so-called emerging BRICs), who, by and large, could care less about whether anything of U.S. origin on the Internet is original or stolen, starts to dominate the game. This trend has already begun. The economic consequences will be incalculable.

    Shame on you, U.S. based technology companies. Sure, you are making all of the short term money there is to make. But please don’t call yourself an advertising company. You’re a delivery medium. Stick to your knitting. We, as advertisers, have had to solve enough problems over the years … dealing with our own unique blend of green-hairs and greenbacks … all on our own!

    Long live the power of the honest pitch! Wake up advertising companies … we need you!

    George P. Riddick, III
    Chairman/CEO
    Imageline, Inc.

    griddick@imageline2.com

  • These are good points. I have some additional doubts whether this works which you can read on my blog. Overall, as you said, doing this analysis is difficult enough. In addition, just focusing on the online side of things will make quantification very hard.

    Let's see what Microsoft comes up with, maybe the amaze us all with a great product.

  • very interesting and long demanded. Issues I see is that it doesn't appear to offer a measure for the value of content (since they are clearly distinguishing this from advertising) in creating demand. In that respect I'm not convinced it's worthy of the 'engagement' tag. Also not clear it measures interactions with anything more than traditional ads - which ain't exactly a great fit with the networked world.
    Added a few more cents worth on my blog: fasterfuture.blogspot.com

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