Today's column is written by Alan Pearlstein, CEO at Cross Pixel Media.
I believe that retargeting has flaws and any active participant should be aware of them before engaging in the tactic. The key flaw that concerns me is conversion attribution; retargeters are consistently taking credit for sales that should be credited to other marketing tactics and advertisers are not getting an accurate understanding of what advertising is working for them and what is not. In my opinion, aggressive retargeting is undermining our ability to track the effectiveness of online ads.
The problem all stems from the idea that the last ad shown to a user(or clicked on by a user) deserves full credit for a sale or conversion. This concept implies that all ads deserve an equal weighting when measuring effectiveness but I think we all know that this is a ridiculous concept. And in the case of retargeting, a significant portion of the ads that are being credited for a sale deserve no credit at all (or limited credit) because the consumers were going to come back to the site even if a retargeting ad was never shown to them.
I don’t think you have to be an online media pro to easily grasp this concept – most people don’t buy on the first visit to a site. Shoppers will research a product before buying it and visit a site multiple times before making the purchase. Since retargeters start dropping their cookies (view or click-based) the moment after a person visits a site, it is inevitable that a portion of the cookies will be placed on users that were going to come back anyway. When this occurs, the retargeting effort ends up getting credit for a sale that was initiated by another marketing activity, completely screwing up conversion attribution. Does that mean we should not use retargeting? Absolutely not – there are some people that might not have come back to purchase unless they were exposed to a retargeting ad that lured them back. But the question is how many?
Under the current model retargeters take credit for every single person with their cookie that that comes back to the site and makes a purchase. And while the problem is exacerbated by view conversion spamming/cookie stuffing, it is still relevant to click-based cookies – just because I click on the ad it doesn’t mean I wasn’t coming back to the site anyway to make my purchase.
Another concern is that a significant portion of the sales that are generated by retargeting come from repeat customers vs. new customers. Obviously repeat business is critical for a company, but many ad campaigns are focused on new customer acquisition. Is retargeting an acquisition tool or a retention tool, or both? I would highly recommend that advertisers track these conversions separately to understand the types of sales that are generated by retargeting efforts.
One tactic that marketers are using to understand this issue is running PSA ads (public service announcements) alongside their retargeting campaigns to use as a baseline to determine how many people returned and purchased without being retargeted.
Advertisers are measuring the conversion rates that occur from people who saw PSA’s vs. the conversion rates of people who saw a retargeting ad and the results show that the difference between the conversion rates is nowhere near as high as retargeters would lead us to believe – a lot of the shoppers were coming back to the site regardless of whether or not they saw are targeting ad. And when smart marketers identify the number of retargeting conversion that are new customers vs. old customers, retargeting campaigns ROI is further diminished.
It is my opinion that retargeting should be a part of almost every online advertising campaign because it is highly effective. But we need to be realistic about its effectiveness and think we would all benefit if retargeters adjusted their pitch to focus on the incremental customers they deliver and not offer distorted numbers that don’t reflect its true value.