Can an advertising campaign be an asset?
I don’t mean asset as in “Say, Biff, you’re a real asset to Norelco. Another quarterly sales increase, and thanks for taking care of my dog in July!”
I recently stumbled on this idea posed as an accounting question in places like Harvard Business School (with thanks to Philip D. Broughton, What They Teach You at Harvard Business School: My Two Years Inside the Cauldron of Capitalism). Could a medical company list its late-night infomercial campaign on its books as an asset, because it had data about the predictable response attributable to the campaign – based on tailored 800 numbers? You would have to treat regular TV ads as an expense. But in the Harvard Business School case, some interpreters of tax laws believed that “where the revenue from an ad was measurable, you could treat it as an asset and depreciate it over time.”
I have no comment on tax laws or accounting strategies, of course. But as a thought exercise in examining the (even metaphorical) assets a company invests in so that it can get wind under its wings, this is an immensely useful concept.
If an infomercial campaign could be treated as an asset, what about a keyword search campaign where the predicted cost per acquisition and response behavior is spread across thousands of keywords and hundreds of ads, with statistical confidence in the outcomes increasing over time? It’s not a stretch to suggest that the keyword-driven digital ad campaign is not only an asset, but a response engine that is much more versatile and diversified, and often more reliable than a simple infomercial campaign.
Super Crunchers vs. Superstitious Bystanders
There’s nothing particularly new about direct marketing intelligence or “database marketing.” Even the 1.0 version of this has been a carefully guarded secret for companies you may have received a lot of postal mail from over the years. In today’s “Super Crunchers” era, data miners bring increasing levels of sophistication to the task. They use data to hone existing campaigns, but also to put feelers out for emerging or latent customer demands.
And it doesn’t begin and end with searches performed on major search engines like Google. If an online retailer is large enough (think Amazon), imagine what trends you could tap into just by looking at their site search query data.
Marketing intelligence can be laborious if you bring old-school instincts to the task. You can spend years in focus groups, or hanging out in nightclubs trying to assess what style of boots or what kinds of makeup the cool kids are wearing. And yet search marketers understand that a great deal of that information is available to us in seconds in the form of search queries – what John Battelle famously called “the database of intentions.”
Consumers never launched a full-scale revolt against the old market research methods, and they won’t launch one against the new, either. The biggest sin in the marketplace is not asking the questions or digging up the data from people marginally willing to part with it; it’s not asking, not digging, and getting it wrong. Customers hate you most when you flog the wrong stuff to them.
Today, some of the world’s richest businesses are so info-driven that their actual lines of business seem almost secondary to their data optimization approaches. Seth Godin rightly notices that “Zara is an information business that happens to sell clothes.” That resonates powerfully in our world. All search marketing clients are potential Zaras. An information business that happens to sell flowers. An information business that happens to sell travel, banking, candy. You get the idea. And search marketing professionals get to watch, and participate. We understand the power of that data. We build long-lasting, highly granular advertising assets for visionary companies willing to invest in them.
Get a Head Start, or Don’t Win
If you’re into Web analytics, one thing you’ll notice is that aggressive customer acquisition through online direct response gets you a major lift in (free) direct navigation and organic search brand queries. Those benefits don’t start to really kick in until you’ve been investing in this for three to four years. But they do come eventually. One thing is for certain: if you play it too cautiously in the first couple of years, down the road, you won’t enjoy any pleasant upside surprises. You don’t reap what you don’t sow.
Über-riches await those at the top of the information heap, those who survey the whole landscape like they’re living in an Alan Parsons Project song. Godin notes that “what’s now” is companies who have “information about information” – “it’s what Facebook and Google and Bloomberg do for a living.” You can’t be them, but you can care about building your own information asset.
Granular response data offers an incredible head start – Godin again – to those who own it and understand how to use it. Head starts make fortunes. Think about the stock market. It’s illegal to trade on insider information about a takeover or disappointing assay results. You’d get too rich trading on the options with information others didn’t have fair access to. Even the watered-down (legal) version of “an information edge” drives billions of dollars in securities research every year.
A paid search campaign builds statistical confidence over time. If your investment in discovering what works turns up a factoid about the expected return on the search phrase “turnip juice stain,” you can project future returns with some degree of confidence. Spread that knowledge across many other specific data points, get a two-year lead on competitors, and the gap may never close.
If your funnel is highly functional, then the lead compounds into market share dominance and you begin lapping your competitors.
In light of that, what are companies doing to build, nurture, and recognize the asset that is paid search? What should they be doing? Are they doing it?
I’ll examine this in the next column.
This article originally appeared at ClickZ on July 30, 2010. Reprinted by permission.