Online ad spend does help offline sales

In my previous blog post titled CPC statistics are not a true reflection of performance, I had mentioned that online publishers are held a lot more accountable when it comes to “performance of ads” when compared to print and TV.

Basically people ask online sites (publishers) – “Because of my advertisement on your site how many transactions can I expect?” This question is never asked to a TV channel or print medium because it is simply not measurable. Yet, advertising on TV and newspaper very much works because the advertiser is building a brand and increasing the awareness of his product.  Unfortunately this benefit is never extended to the internet medium.

According to a recent study by Yahoo and a major retail chain, marketers realize that traditional advertising works on the Web. The findings from the study are summarized as follows,

Major Findings:
By combining a controlled experiment with panel data on purchases, we find statistically and economically significant impacts of advertising on sales.

We estimate the total effect on revenues to be more than eleven times the retailer’s expenditure on advertising during the study.
93% of the effect was on offline (in store) sales.

Persistence: The effects of the campaigns were persistent over time, meaning that the sales impact could be tracked for a period of time after the campaign ended.

Demographics: there was no significant correlation or differences w/r/t location (by state) or gender.

But there was a significant difference w/r/t to age: customers over the age of 40 were significantly more responsive to the ads in terms of sales. The largest effect came from senior citizens (65+).

Clicks versus non-Clicks: Though clicks are a standard measure of performance in online-advertising, we find that online advertising has substantial effects on those who merely view but do not click the ads.

We find that 78% of the effect in sales comes from those who view ads but do not click them, while only 22% can be attributed to those who click.

We cannot directly relate these findings to the Indian internet space but surely it is a useful report.

We Indians like to touch and feel products before we buy. At the same time we are very brand+price conscious (we want the best brand at the lowest price!). It is high time the big brands treat the internet medium as a serious brand building medium.

To begin with everyone needs to stop being pessimistic about Internet in India. We got to find solutions to do better with the current internet user base. It is very much doable. Of course the internet penetration needs to increase a lot more, it will happen.

For now all publishers could use a lot of help from online ad agencies who need to push this medium a lot more with advertisers.

Happy Makara Shankaranthi to you all.