So what did we learn from 2022 that will guide our plans for 2023?
Each of the twenty years this business has been operating we close the year just a bit more knowledgeable than when we started it. Here are just a few points picked up that will affect our focus in 2023.
Life is getting harder for those owning an online advertising channel.
Recent reports of Meta’s ad revenue have it going the wrong way; that is, backwards. Apparently, this is due to an unfortunate double whammy: a) an economic slump and b) the falling consent from Apple users deciding not to allow Meta to track them outside of their apps.
For a business like Meta, the more user data they can hoover up the greater the range of targeting options they can offer. But that’s not all. Being able to accurately measure the return on ad investment is also affected by the power of your suck. So when people choose to stop you gathering their data, targeting becomes less effective AND, with it, your ability to measure any results your advertising delivers. These are the two real whammys advertisers need to deal with in 2023.
Nevertheless, their shareholders will still demand revenue growth.
While all this is happening, the shareholders of businesses like Google remain hungry for continued revenue growth. They purchased the stock with this factored into the price, so it is expected to arrive.
But are we searching more than we used to? Probably not. We all know about Google now. So where are those extra users coming from? They’re not coming. So where’s the commercial growth going to come from? Increasing click costs. Get used to it.
Today I read that a 1kg block of Tasty Cheese now sells in NZ for more than $15. Ouch. The other day I picked up Google selling a single click for $35. Google thought it would deliver a lead to the business that purchased it, so it factored this into the cost. Unfortunately, it didn’t and the customer paid for Google’s error.
Remember that Google is like any other technology services business. Having to fight to retain its staff with rising salary costs and their price rises flow neatly down to the clicks you buy now and next year.
And as the availability of user data becomes more fractured in 2023, Google could make more mistakes like this – overpricing a click thinking it will convert. A smart advertiser would measure that $35 click all the way through to the closed sale to see if it really was worth every cent.
So are we seeing a gradual erosion of trust in the digital advertising we are all buying?
One of my mantras is “the less you track the less you can measure” For 2023 I will rephrase this as “the less you can track the less you can trust”. The crazy way conversions are now reported highlights this issue.
A “conversion” is an action occurring on your website that makes you smile. Think Quote Request or Contact Us form completed. You can “plumb in” these actions to your advertising software to provide visibility on what part of your advertising created all the goodness. This works well when you have an accurate understanding of how users interact with your media.
But when this type of tracking starts to struggle so do the conversions you can report upon. This in turn can make the ad channel look like its performance is suffering.
(I say “look like”. But note that this may not be the case. Conversions may be occurring without being attributed to advertising – ending up somewhere in the never-measured space of the internet.)
Nevertheless, the appearance may be of a failing advertising investment. And when billions of dollars in ad spend is at stake, this is not good. So owners and investors start using technology to “guess” when the conversion occurred and present this to customers as real. When it may not be.
Enter “modeled conversions”.
I wrote about them earlier on in the year. They are a growing part of the way conversions are being reported across nearly all digital advertising channels. It would not be the best business decision in 2023 to treat these conversions as 100% accurate and base your ad spend upon them.
It may help to retrace our steps to see how we ended up here and help locate the best path ahead.
Remember before the internet?
Back then your options included TV, radio, print, magazines, and directories. For most businesses (as is the case today) TV and radio were too expensive. Because these channels have limited “stock”, they are forced to keep prices up in order to maximise shareholder return.
Directories allowed “snackable” advertising, so they gobbled up a lot of ad spend. Their model allowed you to buy small slices of what was on offer. A single listing perhaps or – if you were super confident – a whole page in your category to tell the story of what made you different.
You had no control over who picked up the directory and you were placed neatly next to all your competitors. It was expensive and you had one shot a year to get into it. But while people still used directories as their primary search tool you remained a loyal Yellow Pages customer.
Then the internet arrived.
Your fingers still did the walking. It was just across a keyboard now, and by visiting Google rather than the Yellow Pages.
Those first Google advertising clicks were sold for cents and you could measure your spending with some accuracy. Your website was OK – probably quite similar to your competitors in most ways. So somehow the sums worked out. A hundred clicks cost $35, say, and out of that, you created 10 leads and 4 sales with enough margin to make the advertising a good investment.
But now there are no 35-cent clicks anymore and the sums don’t work for undifferentiated businesses. In cases like these you may achieve a 5% conversion rate; that is, five out of every 100 clicks become a lead. For $10 clicks with average margin sales, this can get very expensive, very fast.
But let’s say your website converts clicks at 15%. Now things are looking up.
Any future weakness in measurement or targeting is offset by the power of the marketing messages your business can craft. Line this business up against its competition and it can purchase $10 clicks all day and make a profit.
And that, my friends, is the weapon you need to fight your way through the jungle of digital marketing in 2023. A business that stands head and shoulders above the rest. One that can remain in digital marketing and survive while others fall by the wayside.