Quantify This: Poor Advertising Research Costs The Industry $2 Billion A Year

This is another in a series of posts from Portlander Peter Levitan, a former ad agency principal and Baby Boomer with a new book out about Boomers “offing themselves” before they go broke.

In the mid-90’s I left the security of Saatchi & Saatchi and joined Advance Publications to create and launch New Jersey Online, one of the first online newspapers. A year later we had site traffic equal to the New York Times’ website and some of the earliest online ad units. It was time for me to begin to contact my New York agency friends to sell some ads. My first visit was to Saatchi’s media department and its leader Allen Banks. After going through our presentation which included a hockey stick graph showing our predictions for Internet growth (imagine that way back when the Internet’s potential was debated) and an animated description of how our traffic, ad views and click through rates could be tracked, I asked Allen for the order. I figured, how could he resist – after all, we could now quantify the effectiveness of advertising.

Allen wasn’t at all interested. He told me that the advertising industry had succeeded for years without truly knowing how, or even if, ads worked. Knowing what worked and didn’t could kill the billion dollar golden goose. Saatchi and other major agencies, it seemed, was better off not knowing.

Today, we have an entire industry devoted to online advertising analytics. We’ve moved well beyond CTR to tracking conversions and precise targeting via real-time bidding. We have a very good sense of the effectiveness of digital marketing but what about traditional advertising?

We have just experienced a barrage of well-studied political TV advertising. Most of it could be best described as wallpaper that provided little differentiation between candidates shouting 30-second platitudes or pointing out their competitor’s heinous positions. But, one factor that made this onslaught unique was that in the national races in particular voter sentiment was closely tracked on a weekly basis. Polling could actually tell us if an individual commercial could move the needle. One TV commercial stood out.

The now famous Obama “Stage” commercial in which Mike Earnest, an Ohio paper plant worker, told the story of how he and his coworkers were asked to build a thirty-foot stage that was used the very next day by Bain executives to announce the closing of the plant. The simple but powerful commercial closes with the Earnest’s emotional line, “Turns out, when we built that stage, it was like building my own coffin, and it just made me sick.”

Obama researchers believe that this single commercial helped win Ohio. According to a New Yorker article, “By mid summer, however, internal research showed that, in areas where S.J.M.’s ads aired (S.J.M. is the political agency that created the ads and interestingly does not have a website I can find), Obama had an eleven-point advantage over Romney in “trustworthiness,” compared with a five-point lead in places where the ads had not run.”

So, does traditional advertising work? Yes — using “Stage” as an example — without question.  And to go a step further, I don’t believe that one digital unit could ever move a large population’s needle as well as this powerful TV commercial. “Stage’s” success is a demonstration of the potential of TV advertising. However, moving beyond the spendy political races, it’s too bad that after decades of technological advances we still don’t have the tracking systems to efficiently understand the effectiveness of traditional advertising.  In this case, our not knowing what works and doesn’t could actually maim the golden goose.

But, don’t take my word for it. Bob Liodice of the Association of National Advertisers recently wrote in AdAge, “We’re dubbing 2013 the “Year of Accountability” in response to the industry-wide realization that we still don’t have adequate measurement tools. Because of this, he believes that over $2 billion in ad spend is being left on the table. That’s a lot of geese, ad jobs and martinis.