Performance Marketing in Display: Uncommon, but Possible
by Jordan Ehrlich, on March 14, 2019
The Performance Marketing Association defines Performance Marketing as,
online marketing and advertising programs in which advertisers pay marketing companies (a.k.a. affiliates or publishers) when a specific action is completed; such as a sale, lead, or click.
In other words, it’s a marketing agreement based on outcomes. It creates win-win opportunities for both advertisers and publishers. Advertisers don’t pay for wasted ad impressions. Publishers make money when their site helps someone find products they enjoy.
It differs from traditional advertising models where fees are paid upfront with the hopes of driving performance. It’s made possible by advances in digital marketing technology and the ability to keep better track of performance.
With performance marketing, you’re not paying for effort or agency resources used, you’re paying for results. This is appealing because it’s predictable and equitable. You pay for what you get. No bullshit.
However, this agreement is easier to make on some channels than others. Performance marketing is more common in affiliate marketing, native advertising & sponsored content, search engine marketing, and on social media platforms.
Where you don’t often hear about performance marketing is within programmatic display advertising.
Why is Performance Marketing Difficult in Display?
Within display advertising, what do most marketers pay for? Impressions. This generates the somewhat fluffier outcome of digital marketing: brand awareness.
While awareness is important, and often a key driver of growth, it's more difficult to track and attribute value to. Simply seeing something is not taking action on it.
Relative to other channels, people just don’t click on Display Ads. Display drives way less direct action than the channels where performance marketing is more common. But I’ll speak to the reasons display has such low CTRs later.
Could Display Become a Performance Marketing Channel?
It will once advertisers target their display ads more precisely.
With the other channels, finely tuned targeting makes paying for performance more reasonable. There is an equal exchange of value between parties, even when advertisers only pay for actions taken.
Let’s look again at how the current performance marketing channels conduce performance-based advertising, and how display advertisers could learn from the tactics used in other channels.
In Search Marketing it's Easy to Understand Intent
Within search marketing, you can bid on keywords that signal a person’s intent to buy your products or services. It’s easier to identify individuals who are in-market (as long as you know the right search terms to bid on). Therefore it makes sense for these platforms to only make you pay when action is taken. Search engines will accept that as a reasonable bet, with a high enough probability that they’ll get paid too.
Affiliate Marketing is More Selective and Lower Funnel
Affiliate marketers selectively choose what sites they want to market on, ones that are most likely to drive qualified traffic to their site. Oftentimes, companies will hire Outsourced (Affiliate) Program Managers (OPMs) so they don’t have to worry about sifting through all potential sources of internet traffic.
Affiliate marketing is a great way to convert audiences at the bottom of the funnel, as consumers will check them for discounts when they're ready to buy. Further, you can easily attribute value to an affiliate source because consumers often use a code or arrive at your site via an affiliate’s link.
Social Media Harnesses More Accurate Audiences
Within the walled gardens of social media, you can target more accurately defined audience segments, whose behavior indicates interest in your products, than within programmatic display. Platforms like Facebook, Instagram, and LinkedIn offer the ability to pay for actions such as leads generated and clicks. Social platforms are betting on your ad performance here, as these models mean they don’t get paid unless you see results.
What’s Wrong with Display Advertising?
Within the performance marketing channels mentioned above, marketers have the ability to understand the intentions of their audiences and can selectively place their ads where it makes sense - where performance is more likely.
But search isn't the only channel where consumers' intentions are to buy things. They can have the same intentions while reading blogs and articles about topics related to things you're selling. Display advertisers just haven't met them in the right place because it's hard to identify optimal sites in the infinite sea of domains.
Within programmatic, you could be targeting selected audiences across the entire internet. Most programmatic display ads today target audiences using data sources littered with loosely defined segments, and fail to consider the context of their ad placements. And even when context is considered, advertisers rarely have access to data that shows whether or not the contextually relevant site is frequented along a brand's buyer journey.
But it’s much more difficult to understand which websites and articles promise performance for your display ads using programmatic. Without the right tools, it’s impossible to identify the sites that sit along your buyer’s journey without manually sifting through traffic data or checking for appropriate context. The internet’s contents too quickly update to identify optimal ad placements without dynamic internet data solutions. By the time one good ad placement is found, 100 better sources have been generated.
But with today’s programmatic targeting, irrelevant display ads are the norm. Can you even remember the last time you saw a display ad that was pertinent to what you were reading at the time?
As shown above, here I’m looking for the best running shoes to buy, reading a Strategist article - and Mack Weldon is telling me to buy underwear.
Will I buy ‘em? Probably not. I’m not at all interested in looking at underwear at this moment.
This is the digital marketing equivalent of me heading to the Runner’s Forum for new shoes and some stranger interrupting with, “Hey! Check out those underwears are Kohl’s, eh?”
No thanks, guy.
But back to digital marketing.
Does this ad placement constitute performance-based ad targeting? No. This ad is just trying to land an impression, regardless of the current mindset of the buyer.
We think advertisers could do better, as long as they’re equipped with the right resources.
Display Ad Clicks are Unlikely
With these haphazardly placed advertisements, the average click-through rate for display ads in 2018 was just 0.05%. No publisher would reasonably accept payment only 0.05% of the time. That’s not nearly enough clicks to create an equal exchange of value between publishers and advertisers, unless advertisers started thinking about display as a performance marketing channel.
Audience Targeting is Inaccurate
This low click-through rate is caused by the loose targeting methods used in programmatic display advertising. The audience data powering most display targeting is inconceivably inaccurate, as evidenced in Deloitte’s 2017 publication Predictably Inaccurate.
Here, Deloitte asked consumers to judge the accuracy of their cookie data. When shown the information collected on them by third-parties, 71% of individuals expressed at least half of it was incorrect.
I’ve used these screenshots before, but this is the data third-parties have from my browsing history.
It somehow lumps me into four different age ranges, while also suggesting I have children ages 6-10 - which is simply not true. I am a 23-year-old man with no kids.
So yeah, we're in agreement Deloitte.
Now, I'm not suggesting marketers avoid audience targeting entirely. It does vet out the completely irrelevant audiences. But it must be paired with more selective targeting parameters to be truly performance-oriented.
Display Advertisers are Not Equipped with the Right Data
Ponder this. Would you rather target 5,000 cookies that are attached to loosely classified consumers based off assumptions from their browsing history? Does it really make sense to show up on sites all over the internet?
Or would you rather combine audience with internet traffic data to target the sites driving qualified, frequently-converting audiences to your website (and that of your competitors)?
I'd argue that the latter constitutes more of a performance-based mindset.
But this framework for display advertising is not yet mainstream, mainly because marketers haven't adopted the right tools. Display has everything needed to be the most scalable performance marketing channel in your digital marketing arsenal. Equipped with the right data and insights, display advertisers can, and should harness the full value of programmatic display and flip the script on this currently sad excuse for a marketing channel.
There are few platforms that show which websites are most influential to your buyer’s journey, where consumers visit a few steps before converting on your or your competitor’s products.
When display advertisers instead look at this data to guide programmatic display, we will see exponentially better results. Marketers will use display advertising as a pure performance marketing channel. We’ll boost those pathetic CTRs and likely start paying for clicks, leads, and even conversions more often - instead of simply impressions.
DemandJump is a performance marketing solution that helps advertisers uncover their customer’s buyer journey to better inform digital marketing decisions. DemandJump’s platform shows which efforts are working, which aren’t, and uses AI to surface new growth opportunities - doubling revenue across digital marketing channels in the process.