John Ebbert of AdExchanger gave his thoughts on why retargeting is so hot after reading what our CEO,  Josh McFarland, had to say about the importance of customer data in an article he wrote for E-commerce Times and CRM Buyer.  Josh maintains that all online retailers have the opportunity to run efficient, profitable display retargeting programs at scale thanks largely to data-focused technology companies (like TellApart) that can handle the ‘heavy lifting’.  This enables online retailers to run better display campaigns and ultimately allows them to focus on their businesses.  John agreed, adding that effective retargeting tactics are just starting to bud thanks to the new audience-driven marketplaces that allow e-commerce marketers to cherry pick ad impressions efficiently and reach only their most valuable prospects online.

In related news, it looks like e-commerce growth is on fire — and retargeting is fueling the fire.  According to comScore, e-commerce spending grew in Q2 of 2011 at its highest rate (14%) since Q4 of 2007.  Coincidence that retargeting is hot and e-commerce sales are growing at the highest rate in years?  Doubtful.

We hosted a fantastic Shop.org regional dinner last night in San Francisco at Farrallon that included a neat (pun intended!) scotch tasting contest to see who among the crowd could “tell apart” the highest caliber spirits from the rest.  It was a well-attended event with really rich conversations among the retailers, especially around the topic of how to make retargeting work for the bottom line.

In preparation for exactly that discussion, we created a quick guide titled, “Five Tips for Driving Serious Revenue via Retargeting.” We’ve reprinted the tips below because we believe any retailer can use these helpful ideas to align their retargeting metrics with actual bottom line success.

1. Focus Solely on Measuring Click-to-Conversions
   Most ad networks and retargeting vendors will try to sell you campaigns based on CPMs, view-through conversions or clicks.  Yet your objective is to drive more conversions.  Make your vendor commit to a fixed cost-per-click-conversion metric to ensure your interests are aligned.  Ideally, pay only upon conversion.  This will ensure maximum return with minimal risk.
   
   
2. Use Dynamically Personalized Ads
   Showing each user the exact products they were most interested in will improve the click-through rates of your ads by up to 10x.  Ensure your vendor is continuously testing and optimizing new creative units.  This will yield the highest volume of users who return to your site and drive new conversions.
   
   
3. Don’t get Scammed by View-Through Conversions 
   View-through conversions have been used to overcharge retailers since the invention of display advertising.  To correctly measure their value, use a rigorous A:B testing framework to compare the conversion rates of those users who see ads to a control group whose ads are withheld.  This will help you compute your true ROI, which should be used to fund more click-conversions.
   
   
4. Keep 3rd Party Tags from Slowing Down Your Site
   Third party JavaScript tags can slow down your site and hurt your revenue.  Demand to know the number of pixels being dropped by the vendor’s tags, the number of network calls the tags are making and that the tags are asynchronous (i.e. they must load only after your own content is complete.)  This will ensure your site remains a high quality experience for your users.
   
   
5. Respect your Customers
   Retargeting vendors often try to maximize their revenue by serving as many ads as possible, annoying your users and making them feel “stalked.”  Make sure your vendor is showing as few ads as are necessary to drive new sales.  And offer users a simple way to opt-out, ideally within the ad unit itself.  This will help keep your users happy and loyal.

If you’re a member of Shop.org and in the Columbus, OH area, we’d love to see you at the next dinner we’re hosting on April 12, 2011 from 5:30-9:30pm at Rigsby’s Kitchen.

Earlier this week, industry guru John Battelle wrote a compelling piece on how remarketing needs to be a component of the conversation that occurs between a merchant and their prospective customer during the timeframe in which a purchase is being considered.  He suggested a simple feature to facilitate the two-way nature of the conversation:  an [X] icon in the corner of every ad that would allow a user to pause the messaging from that merchant.

Our team took that good idea and ran with it, implementing the feature for one of our largest customers – Diapers.com – in less than 24 hours.  Now each of their TellApart ads incorporates this functionality:

As discussed in our previous post, we believe that display ads can be highly effective while also maintaining utmost respect for the consumer.  Allowing the user to effectively “mute” the ads for products they no longer want is key to supporting this respect.  We intend to build even richer functionality into this flow and discuss more of our thoughts with John here:  That Was Fast: TellApart Implements A Searchblog Suggestion.

The New York Times article published this morning, “Retargeting Ads Follow Surfers to Other Sites“, does a good job of laying out a number of issues that our industry must address.  At TellApart, we believe that we can make ads that are actually useful and that this sort of displeasure can be mitigated by commitment to one idea:  respect for the consumer.

If you read Ms. Matlin’s first quote in the article or the sentiments of the many commenters, a common theme emerges:  they are highly annoyed by the number of Zappos ads they’ve seen and the fact that they continue to see them well after their purchase decisions have been made.

Indeed, it doesn’t matter how well crafted the message is… hounding a consumer will only lead to frustration and contempt.  We firmly believe this would have been a non-issue if Zappos’ vendor would have shown restraint in the number of ads they chose to show per user.

Aside from the obvious & staid options mentioned by the Times’ commenters (opt-out, clear cookies, use Adblock), how do advertisers show respect for their consumers in this new world of display advertising?  TellApart recommends and commits to the following:

1) Don’t hound.
Use frequency management judiciously.  At TellApart, our clients’ users see an average of just two ads per day during the handful of days they are in market for a given product or service.  This is far fewer than the dozens of Zappos ads per day (for weeks on end) with which these users are so annoyed.

2) Focus on truly engaged shoppers.
There are many data points that must be combined to know if a consumer is truly interested in a given product or is just browsing:  number of pageviews, time spent on site, average conversion rate per product considered, whether the user is a new or repeat visitor, etc.  Together, a strong, computer-modeled analysis of this data will help get ads in front of users who care and prevent the irritation of those who don’t.

3) Drive clicks that convert.
Instead of trying to push maximum impressions or even maximum clicks from these ads, advertisers should demand the highest number of conversions for the lowest number of impressions possible.  Only post-click conversions should be counted, and the experience should be optimized to drive one converting click per user.  This keeps a majority of users engaged and happy while minimizing the “noise” that truly disinterested users must endure.

4) Reward the user.
Some of our largest clients have decided to use coupons in their TellApart ads even when they have refrained from offering them elsewhere.  Why?  Because the curated users that we bring back to our merchant sites are of such high quality that the retailer wants to give the user a reason to click.  In doing so, a huge lift in incremental sales can be gained from consumers who would have otherwise not converted.

5) Watch the numbers.
So much of the idea of respect for the consumer comes down to doing the right thing by watching the right metrics.  For example, TellApart drives user click through rates of over 3% for our clients.  Yes — you read that correctly:  three out of every 100 users click and go on to convert at a far better than average rate for our clients.  In total this amounts to hundreds of thousands of satisfied consumers every month… the silent majority who vote with their mouse clicks & pocketbooks.

TellApart is committed to driving a better advertising experience for users across the web.  And we’ll continue to improve by keeping our focus on this one idea:  respect for the consumer.

Josh McFarland
CEO, TellApart

We came across this year-old article from Young-Bean Song (an absolute luminary in the online ad industry who currently heads Microsoft’s Atlas Institute).  Its title is, “The Dirty Little Secret of View-Through Conversions,” and we couldn’t have said it better ourselves:

“The fact is, it’s difficult to justify VBC [View-Based Conversions, aka View-Through Conversions] as a measure of direct response.  VBCs are a measure of targeted reach, not direct response.”

“In an attempt to conduct cleaner experiments, some have conducted “test/control” (a.k.a. “True Lift”) experiments. In almost all cases, both the test and control groups exhibited the same natural tendencies to visit the advertiser’s website and convert. Or in other words, True Lift tests do not support the notion that VBCs are a measure of direct response. This is especially true for advertisers with strong brands.”

It’s time that marketers demand a return to the unit of worth on which the web was built — the click.

One of the most popular questions we field from online retailers is, “Is the revenue from retargeting incremental?”

On the popular industry blog, AdExchanger, TellApart CEO Josh McFarland lays out how TellApart proves the incremental nature of the revenue that we drive for our clients.

To read the full Q&A, click here.

To download the full case study, entitled “Can Retargeting Yield Incremental Revenue?”, click here.

At TellApart, we’re reinventing the customer data platform for e-commerce companies because we believe that knowledge of one’s own customers has the potential to dramatically improve ROI across all online marketing applications.  One of the key applications on this platform is Transactional Retargeting.  

Informed by the past few months of client conversations, it’s clear that many top online retailers have had really poor experiences with their display ad retargeting efforts to date.  But the underlying factors behind that lack of performance are also clear:  old technology, inefficient vendor business models, sub-optimal creative formats, etc.  We call this Retargeting 1.0.

Leveraging customer data on an entirely reinvented display ads infrastructure, we believe we’ve created a product and business model so radically different from the previous generation that it leads the way toward Retargeting 2.0.

Here’s a quick guide to tell apart the two:

1. Business model: 

-       1.0 vendors charge CPMs or on CPAs that are massively overinflated by “view-throughs.”  They have hidden fees, cumbersome I/Os, and generally attempt to constantly take credit for transactions that would have happened anyway.

-       2.0 vendors acknowledge the worth of an ad click, with the best charging only a rev-share on successful post-click conversions.  Because the vendor only makes money when the client does, these campaigns are “always on” and grow each month as predictive models train on your data.

2.  Customer-specific targeting:

-       1.0 retargeters, per their business model above, are incentivized to spread a thin layer of impressions on almost all users, resulting in undifferentiated & wasteful impressions that can over-saturate users… especially those who needed no ad to help them complete their transaction.

-       2.0 platforms use predictive modeling to seek out just those prospective customers who need a “nudge” toward a final transaction.  Their modeling is specific to the user and the exact items in which they have shown the most interest.  This yields maximum incremental revenue to your bottom line.

3.  Real-Time Bidding

-       1.0 vendors place users into rough CPM buckets with hard frequency caps and buy impressions in chunks, creating in a sub-optimal user experience that typically results in either too few or too many ads being shown.

-       2.0 vendors utilize a new technique called real-time bidding (RTB) to bid per-impression, per-user.  Combined with customer-specific modeling, this results in the right number of ads being shown to just those users whose conversion rates can be lifted with retargeted ads.

4. Dynamic creative assets: 

-       1.0 vendors display static banner ads repeatedly, depressing click-thru rates (CTR) and thus, your potential revenue.  Their platforms typically lack A/B testing frameworks to continuously optimize the ad creatives.

-       2.0 vendors use Flash-based, dynamic banners to insert the best information into the creative, automatically optimizing for CTR.  Every element will be tested:  product-images, copy, coupons, button color, animations, etc.

What’s the big picture?  

Retargeting 2.0 is a no-brainer for online retailers, but there is a natural ceiling to its upside (based on the number of visitors to your site).  You should ask, what’s the big vision beyond retargeting that will make this a worthwhile integration, beyond the immediate revenue lift?

While TellApart Transactional Retargeting uses customer data to generate 10x improved ROI over Retargeting 1.0, we believe this data will also unlock gains across every online marketing channel that you have.  And the platform we have built will enable many applications powered by this customer data.  That’s the big picture, and that’s where we’re headed with our clients today.

To find out more about what it’s like to work with a Retargeting 2.0 solution, contact us today.

This article appeared on AdExchanger.com on April 13, 2010

Dear retargeting advertiser –

We all agree online advertising needs a more comprehensive metric than the click.  But the view-through (or post-impression) conversion is not it — especially for your retargeting campaigns.  In fact, if you’re being billed for view-through conversions from your current provider, you are massively overpaying for events which were going to happen anyway.  You’ve likely witnessed this first hand as you’ve tried to de-duplicate vendors’ conversion reports, typically finding the sales were already attributed to another channel altogether.  Or perhaps you’ve had the joy of trying to understand why these view-through volumes outweigh click conversions by 10:1 (or worse!).

Why has the view-through become the default measure of campaign efficacy?  If Gian Fulgoni were to be believed, it’s because the people who click on display ads are young, stupid, poor, out of work gamblers who spend an inordinate amount of time bidding for junk on eBay;  not only are clicks irrelevant, they’re detrimental to the campaign! Dubious studies aside, I believe there’s a more powerful reason the view-through reigns today:  it’s easily used to defraud advertisers.  

As evidence, I invite you to install Firebug for Firefox and watch its display of third-party ad network traffic throughout your day on the internet.  Visit the homepage of CrateandBarrel.com and – bam! – sixteen (16!) ad network pixels are immediately loaded in your browser.  Then, as you navigate publisher sites which are using ad networks, you’ll see how a single ad unit can piggyback tens of additional cookies!  And that doesn’t even include Flash cookies or server-side (aka Pixel-Free) cookies owned by the likes of Acerno/Akamai, which are invisible to the user.

What’s happening here is not new.  The affiliate industry, which went through a similar and painful learning curve years ago, has a term for it — cookie stuffing:  the insidious practice of sprinkling affiliate code-enabled cookies on as many users across the Internet as possible… knowing some fraction of them will organically “convert” before the cookie expires, thus giving credit for events which in no way were affected by the affiliate’s campaigns.  And retargeting campaign view-throughs are like cookie stuffing on steroids because the targeting focuses on users who are infinitely more likely to return naturally!  Unlike the affiliate world, however, these are not smalltime arbitrageurs;  this is cookie stuffing at scale, performed by big retargeting providers and major ad networks.

Now, it would be naive to assert the view-through has no place as a metric.  Indeed, my own company’s rigorous A:B testing of our retargeting campaigns can prove that view-through value does exist.  But this validated view-through lift is complex — massively influenced by all of your other marketing programs and general business performance, rising and falling in volume from week to week.  It’s also hard to measure, requiring large (and costly) control campaigns to be simultaneously run.

And there’s the rub — there is no valid way to enter into a pay-for-view-throughs agreement with a retargeting provider.  Doing so immediately mis-aligns interests and incentivizes the vendor to spam your users with cookies in an attempt to take credit for sales which were going to happen anyway.

This leaves just one conclusion:  retargeting campaigns’ value should be tied to the click, specifically clicks that convert.  You should demand high CTRs from your retargeting efforts and from any campaign that uses your own audience data for targeting.  Sorry, Gian — the click is back — and I believe you’ll see an evolution of display advertising business models that embrace it:  either via click-based CPA or via CPC.

Remember, if you find yourself having to de-dupe your vendors’ conversion reports, you’ve just uncovered the real issue:

You’re being duped.