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Eight Critical Features to Consider When Purchasing an Online Advertising Analytics Solution

Jun 24, 2008
As the world of online marketing has grown, so have the number of companies that develop advertising analytics technologies to meet the needs of online marketers. These technologies fall into two camps: those that provide their own tracking code for you to implement on your site, and those who rely solely on pulling data from the API's of various ad sources, and thus, do not require you to put tracking code on your site. Before you get "wowed" by the ease of the implementation of the API based tools, it is important for you to know the limitations these products have.


- What Does This Mean? They cannot correctly attribute profit to all the advertising sources that generated a sale. Purchase Path is also known as attribution management, which is the ability to track all of the ads that were involved in a conversion vs. only crediting the very last ad clicked.

- Why Is This Important? Purchase Path is the next major evolution in the world of online marketing. By giving credit to only the last ad clicked, you severely overvalue the importance of that ad and completely undervalue the impact that the introducing (1st ad clicked) and influencing (not the first or the last ad clicked) ads had on a conversion. By using Purchase Path, you get an accurate view of the impact of your online advertising.

- Why Can't You Do This With An API-Only Tool? API based tools only know about clicks that they generate and they cannot relate clicks between different advertising sources. If your customer clicked on a Yahoo ad, then clicked on a Google ad, Google will not be able to show that the Yahoo ad contributed to the sale (or a banner, or email, or any other advertising source you are using).


- What Does This Mean? They can't tell you which exact keyword phrases are resulting in visitors to your site. You need to be able to see what search term resulted in your keywords being triggered, so you can more effectively purchase keywords targeted to your business.

- Why Is This Important? If you identify a search term that is not the same exact phrasing as your keyword and results in a profitable conversion, that would make a great keyword to add to your campaign. Without having an onsite tracking technology, you will never be able to tie the search terms to keywords to profitable conversions, so you know when you have another great keyword to add to your campaign.

- Why Can't You Do This With An API-Only Tool? Some of the search engine's do provide search term reports that give you a list of search terms that triggered your phrase and broad match keywords, however, they will not tie the search terms to the exact keyword that was trigged, nor can they tell you if that search term produced a conversion (let alone profitable conversion), whereas an onsite tracking technology can provide this.


- What Does This Mean? In order to track the true profit contribution of each online ad, you need to know which items were in the shopping cart if the sale happened online or have the ability to integrate to the back office if the sale occurred offline. This allows you to apply the true margins of each item sold vs. using an average margin, so you can then subtract the Cost of Goods Sold (COGS) from the retail price, and then back out the cost of advertising to get the true profit contribution of each ad.

- Why Is This Important? Profit is the only metric that does not lie. Since the ultimate goal of any marketing endeavor is to directly or indirectly increase profit, you should be measuring your ads in terms of true profit contribution to get the most accurate understanding of an ad's performance. Other commonly used metrics, like CPA, revenue, ROAS, CTR, sales and leads, can all appear to be trending in the proper direction, but that does not mean they are also generating profit, which again is the ultimate goal.

- Why Can't You Do This With An API-Only Tool? Advertising sources have no knowledge of your COGS, they do not know which products were in a cart, nor do they have the ability to link to your back office to track offline conversions. If your goal is to drive profit, you won't be able to do that accurately unless you have an onsite tracking technology.


- What Does This Mean? It's nice to know that you received conversions, but it's more actionable to know exactly what you sold with each conversion.

- Why Is This Important? We've already discussed how knowing the products you sold allows you to calculate true profit, but there are other values as well. A major web analytics provider did a study that says 44.12% of online purchases from online ads are for products unrelated to the ad. Therefore, if you assume that a keyword that's related to a specific product always sells itself, you will be wrong on that assumption 44.12% of the time, according to the study. By being wrong, you will either overvalue or undervalue the performance of that keyword because the assumption going in is flawed.

Another value that comes with tying the actual product sold to the conversion is that it opens up new marketing opportunities. For example, if you find that people that click on ads for peanut butter often buy jelly, you could market to people that bought peanut butter or jelly an offer for the complementary product, or you could recommend on your site that they add a complimentary product.

Many marketers like to use CPA as a metric, but the inherent flaw of CPA is that people assume that a keyword is going to generate x revenue per sale and set their CPA based on the revenue and the assumed margin. Because 44.12% of online purchases from ads are unrelated, your assumption becomes flawed the moment they buy a product that is not what you assumed they would purchase.

- Why Can't You Do This With An API-Only Tool? By not making assumptions about what a product will sell, and allowing an online technology to tell you what exactly that ad sold and exactly how profitable that ad is, you can set a much more accurate CPA that is not based off assumptions.


- What Does This Mean? Sophisticated online tracking technologies often have the ability to track offline orders by being able to track phone orders and tie them to online ads, as well as track orders from your back office (CRM, SFA, ERP, etc.) to online ads.

- Why Is This Important? This is extremely important to companies that are doing lead generation and for companies doing over 10% of their sales over the phone. In order to make accurate decisions about your advertising, you need to account for all of the conversions happening online and offline. If you solely base your optimization decisions on what happens online and ignore the impact of what happens offline, you can't possibly make accurate optimization decisions.

- Why Can't You Do This With An API-Only Tool? Again, API solutions are only as good as the data. No API based solution today tracks phone calls or has the ability to integrate with your back office.


- What Does This Mean? Advertising sources assume that conversions that occur today are a result of ads clicked-on today. The reality is that conversions that occur today could have been from ads clicked days, weeks, or months ago.

- Why Is This Important? To make accurate optimization decisions, you need to give sales credit to the ads that actually did the work, not the ads that were just clicked on the same day as the conversion. If your ultimate goal is to increase profitability by working your "winners" and killing your "losers", and you are not accurately doing this, you could be killing your "winners" and working your "losers."

- Why Can't You Do This With An API-Only Tool? Search engines always give credit to the ads on the day that the conversion takes place.


- What Does This Mean? API based tools only work when an advertising source has an API.

- Why Is This Important? Many advertising sources lack API's, such as comparison shopping engines, email, affiliate programs, banner, etc. Onsite tracking technologies do not require an API to provide the information you need to make optimizations on any online advertising source.

- Why Can't You Do This With An API-Only Tool? The API based tools on the market almost all focus on search because they are the ad sources that offer an API. If your advertising mix involves ad sources outside of search engines, then these types of technologies will not completely address your needs.


- What Does This Mean? Since these tools rely on conversion tracking across multiple search engines, they will record duplicate conversions when a customer has visited your site from more than one advertising source.

- Why Is This Important? To accurately measure the effectiveness of your advertising, you cannot rely on a tool that reports duplicate order counts since it cannot distinguish visits from the same user from different advertising sources.

- Why Can't You Do This With An API-Only Tool? Each advertising source wants to take as much credit as it can for a conversion. An API tool can only report on what each advertising source is telling it and cannot de-duplicate the conversion events, thus over counting them.

When looking at providers of advertising analytics tools, it is important that you understand the limitations of API-only based tools for all of the reasons stated above. In addition, if you use an API-only based tool, you're going to have to implement conversion tracking from each source (when available) to get the most value out of their API, or you may have to implement Google's advanced conversion tracking that can work across ad sources, but you still won't know about the Purchase Path's, which products were sold, your true profitability, etc.
About the Author
Adam is the Chief Revenue Office at ClearSaleing. He is a seasoned sales manager starting insides sales teams at Google and Actuate Software. Adam holds a B.S.B.A. in Marketing from The Ohio State University. ClearSaleing
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