Triple Your Digital Ad Research Budget Now -- Part Two

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In our previous column, we reviewed how the Google/Apple deprecation of identity will reduce marketing effectiveness and proposed that marketers consider tripling their digital ad research budget immediately and continue that investment through mid-2023. Today, we will go through how this calculation was developed, and what key objectives marketers must address.

Obviously, a simple 3X is not the answer for every brand. Further, we are talking about the part of the budget that is devoted to insights, not simple marketing measurement techniques. The CMO survey notes that 12-14% of marketing funds are devoted to two types of research:

  1. Market research and intelligence: 4.5-6.3%
  2. Developing new marketing knowledge and capabilities: 6.6-8.6%. Our experience across dozens of Fortune 500 companies is that this is largely devoted to digital pursuits along with some intermedia efforts inclusive of digital.

It is the second of these where the temporary increase needs to happen -- the insight arena. Marketers need to take the next 18-24 months to prepare for the new reality in four (not sequential) ways:

  1. Ensure that your identity graph, activity graph and marketing operations are fully synced.
  2. Parallel test a variety of identity approaches across a meaningful time period (depending on your seasonality) to benchmark changes in effectiveness.
  3. Understand how and if other elements of your marketing mix can offset declining digital effectiveness and/or help recapture digital ROI. This needs to be incorporated into the design of experiments, thinking bigger than just close-in digital tactics.
  4. Understand how to evolve messaging in this new environment. Message variations and new tools will be a major part of a winning approach.

We estimate that, on average, 20% of marketing funds should be invested now through mid-2023. Shifting ~13% of budget for a defined term will pay off exponentially by reducing lost profit and revenue in the near term and the long run.

Profit and revenue will be lost because the changes weaken the ability to deliver the right message to the right person at the right time at the right price. It will cost business dollars and cents, but it will cost time and heartache, too. How frustrating will it be to lose person-level insights?

  • How much more time will it take to make decisions without the benefits of easy to implement clean digital A/B split tests, and control/exposed advertising measurement?
  • How much more time for discussion will be needed to decide on budgets without the benefit of robust attribution?
  • How hard will it be to reconnect with prospects that got right up to the finish line, but abandoned their shopping carts?
  • Will remarketing go away? How much time will be consumed trying to come up with a viable substitution at scale?
  • What about prospect journeys and other longitudinal analysis? Without this data, what will be the politics of deciding how to orchestrate a dialogue with prospects when you don’t know who’s who?
  • What happens to marketing’s C-Suite credibility if faith in data accuracy is lost?
  • The list goes on….

The more you need new customers, the tougher the transition

Identity won’t disappear but will experience a massive disruption that shrinks the pool of identifiable consumers. The ability to connect with existing customers should remain intact. Retention and loyalty marketing should hold up adequately, and marketers should continue to invest in owned marketing activities and technologies.

The big hit comes to acquisition marketing. Every marketer needs new customers to thrive, but data deprecation will inhibit this enormously.

  • Marketers often invite prospects to download a free app. Unfortunately, Apple’s new App attribution view-through gives only 24 hours of visibility into identity. Then – poof - if the person hasn’t converted, good luck figuring out if or how that effort worked. If the person converts just 48 hours later, there is no line of sight back to the ads that proceeded the download beyond the 24-hour horizon.
  • Acquisition marketing might rely on targeting ads bought with rich appends to digital identity – poof - that pool shrinks to a fraction of today’s scale because Apple is requiring an opt in, which most people won’t do. There goes a big portion of high value digital inventory for acquisition marketing.
  • In might be your Facebook ads which use your customer file to build a look alike profile. Apple’s changes to shut this down is precisely what Facebook is fighting Apple about. Poof. It could go away.
  • It might be a hashed email, as The Trade Desk and others are promoting, to build an identity pool for acquisition marketing. Won’t that be the savior? Maybe not. Google has publicly said such a scheme runs counter to protecting consumers privacy. If Google can throw a wrench into the gears of hashed email matching there goes more identifiable inventory for marketers. You got it…….poof.

In sum, there is a lot of disruption, particularly to acquisition marketing at the person level, and the ability to measure advertising effectiveness. The typical tripling formula may need adjustments up or down based on each marketer's balance of current customer growth and acquisition.

The obscuring of identity is the largest change in digital marketing since there was digital marketing. It is a bigger deal than the arrival of smartphones. And because it diminishes rather than expands opportunity, it means falling behind rather than just gaining less. That makes it the most important time for preparation we have ever seen. Our next column will address how to approach a learning agenda and “find the money” to deliver a win in this unique moment in time.

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