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Can Old Media Enhance New Media?
How Traditional Advertising
Pays off for an Online Social Network
Markus Pfeiffer
mpfeiffer@
vivaldipartners.com
Markus Zinnbauer
mzinnbauer@
vivaldipartners.com

Allocating marketing budgets in the most efficient way remains one of the key
challenges for any marketing executive. Especially in cases of online pure plays such
as social networks, the trade-off between online channels (display advertising and
search engine marketing) versus classic communication (television, radio, print) has
been fervently discussed during the last decade. In practice, online channels are often
being favored for their direct accountability in terms of cost per click. To prove the
actual value of various channels, the authors present a marketing mix modeling case
study examining the business impact of various communication channels and the role
of other external factors that influence usage of the website.

INTRODUCTION AND REVIEW

Insights on how cross-media campaigns are

Advertising spend is experiencing its biggest

using online and offline advertising to create value

decline in history. Online advertising has also

for brands, however, are limited. One recent study

been affected by an expected 5.4 percent year-to-

indicates potential advantages of cross-media

year decrease in revenue in Q3 2009 (Interactive

advertising over single-medium advertising but

Advertising Bureau [IAB], 2009a). Online adver-

focused on a single-medium approach that used

tising budgets, however, are expected to experi-

only one online (banner ads) and one non-Internet

ence major increases in the coming years. Today,

advertising medium (print; Wakolbinger, Denk,

in the United Kingdom (and six months ago in

and Oberecker, 2009).

Denmark), Internet has overtaken television as the

Although these results provide very helpful

biggest advertising sector by market share (IAB,

insights for the single medium, a brand’s success

2009b).

often is driven by many different communica-

In the academic world, the development of

tion channels—online and offline—at the same

Internet advertising has led to a broad stream

time. More specifically, companies using Internet

of studies that focus on the economic perspec-

display advertisements typically also use search-

tive of display advertisements (Evans, 2009) and

engine marketing tools. For example, display-

implementation-oriented questions ranging from

related advertising and search advertising together

recall success factors (Danaher and Mullarkey,

accounted for more than 80 percent of the U.S. Q2

2003) to design and implementation of banner ads

2009 online advertising revenues (IAB, 2009a).

(Spalding, Cole, and Fayer, 2009; Hong, Thong,

on the need for cross-media campaigns combining

research on single-medium effectiveness within

Internet and non-Internet advertising means is

online advertising and comparative studies of the

the type of company (pure-play Internet vs. clas-

effectiveness of online and traditional advertising

sic “brick-and-mortar”). Looking at the specifics

(Manchanda, Dubé, Goh, and Chintagunta, 2006;

of Internet pure-plays from a decade ago, classic

Robinson, Wysocka, and Hand, 2007; Lin and

marketing communication budgets represented

Chen, 2009, Rosenkrans, 2009).

42  JOURNAL

Another factor that seems to have a major impact

and Tam, 2004). Furthermore, there is existing

a major share of the total investments within a

OF ADVERTISING RESEARCH  March 2010

DOI: 10.2501/S0021849910091166
Can Old Media Enhance New Media?

Advertising spend is experiencing its biggest decline

of search engines for online activity, trust,

in history. Online advertising also has been affected

sored search-engine advertising is widely

by an expected 5.4 percent year-to-year decrease in

tising to more targeted advertising. Critics

revenue in Q3 2009.

compared to non-sponsored advertising

and buying decisions of consumers. Sponused, following the shift from mass adverargue that such efforts are less effective
(Sen, 2005). It is widely accepted, however,
that sponsored search-engine advertising

typical business plan of an Internet ven-

in a direct way. With the click-through

has positive long-term effects by increas-

ture. At the time, J. G. Sandon, a director at

rate (CTR) becoming a dominant form

ing a consumer’s exposure and awareness

Ogilvy, postulated that “you can’t build a

of measurement, data tracks the active

of a brand or product, which eventually

brand simply on the Internet. You have to

response to the advertising, clearly indi-

can lead to purchase and adoption (Ghose

go offline” (Freeman, 1999). Typically, the

cating cost-per-conversion (Hollis, 2005)

and Yang, 2009).

early Internet players had been allocating

and, therefore, enabling a much bet-

65 percent to 75 percent of their commu-

ter comparison of campaign efficiency

KEY RESEARCH QUESTIONS AND MODEL

nication budgets to offline media to create

compared to TV ratings and print read-

Tools such as SEM or search-engine opti-

awareness for their brand and drive traffic

ership estimates.

mization (SEO), which ensures a top posi-

to their Web site (Freeman, 1999).

tion placement in native search results, are

In recent years, many new pure-play

However, recent research has shown

primary examples of how the Internet has

ventures have been following the same

that assessing only the click success rate

opened up new opportunities for compa-

approach, balancing their spend between

does not provide a true picture. Banner

nies to raise awareness and relevance with

the different varieties of online marketing

advertising can increase a site’s traffic

target groups and thereby drive sales and

and communication activities and their

even with low direct CTR (Fulgoni and

increase brand equity. The means to reach

classic TV, radio, print, or billboard cam-

Mörn, 2009). This brand-building effect

a relevant target group also have become

paigns. Still, many practitioners believe

has been at the center of many studies,

more sophisticated in the past few years.

that commercial pure-plays need to rely

first and foremost a 2008 Google study.

Although the decision-making process

on classic channels—especially TV—to

Furthermore, CTR as a measure of suc-

for budget allocation has not changed sig-

overcome the limitations of online adver-

cess are biased as users intrinsically avoid

nificantly, the increase in complexity has

tising, such as the limited access to new

online advertising during their Web site

led to confusion about how to best create

target groups to create awareness for the

interactivity (Drèze and Hussherr, 2003).

efficiencies in marketing spending. Hence,

brand and support of their online market-

Following research on Web site effective-

efficient

ing activities (McMains and Morrissey,

ness by Song and Zinkhan (2008), further

budgets to various channels—offline and

2009).

allocation

of

communication

research on online advertising, therefore,

online—remains a key mystery to mar-

Consideration of cross-media effects for

should apply a more multi-dimensional

keters and advertising experts, including

Internet pure plays is significant for two

construct of success. This has been an

most Internet pure-plays.

reasons.

essential imperative for the development
of our dependent construct.

•	 Internet

pure-plays

are

For online brands, the decision to rely
only on digital marketing (SEM, SEO, and

becoming

In addition to classic online advertis-

banner advertising) or to invest in classic

increasingly important, accounting for

ing (display ads), other communication

communication channels (TV, print, out-

almost 60 percent of e-commerce rev-

formats and activities such as affiliate

door, and radio) often is solved by man-

enue opposed to multi-channels (Com-

programs, online sponsorships, coupon-

agement experience and intuition. Online

Score, 2009).

ing, and referrals have become everyday

brand marketers must consider the follow-

•	 Pure-play marketers can measure the

tools for online marketers. And search-

ing tradeoffs:

direct impact of all communication

engine marketing (SEM) has become a

channels on registrations and other met-

major area of investment for driving traffic

•	 How should we balance our invest-

rics along the customer purchase funnel

to Web sites, building on the integral role

ments in traditional media versus online

March 2010  JOURNAL

OF ADVERTISING RESEARCH  43
Can Old Media Enhance New Media?

advertising (knowing that both can

existing data series must be extended to

were either driven by affiliate programs

drive either direct behavior or brand-

provide more detailed insights into these

or acquired through bartering deals, we

equity building)?

efficiencies affecting early stages of the

relied exclusively on externally measured

brand funnel, our conclusion briefly will

gross media volumes (e.g., GRPs for TV or

address the results of this comparison.

estimated gross online marketing spend-

•	 How should we allocate budgets within
the classic non-Internet advertising
(between TV, print, radio, and bill-

Our key objective was to understand

boards) when compared to Internet dis-

effects on business success by using actual

play ads and SEM?

ing based on Nielsen NetRatings data)
rather than using actual investments.

registrations (number of newly signed

The underlying data sources enabled us

•	 What is the absolute impact of each of

users on basic free memberships) and

to analyze not only the impact of the com-

these channels on user behavior on a

actual sales in Euros (number of sold pre-

pany’s spending on their business success

variety of output measures (from first-

mium memberships for a monthly fee) of

but also the spillover effects of competi-

time registrations to repeat sales)?

the social network as dependent variables.

tors spending. Although these effects are

By using this broad spectrum of efficiency

well researched in the classic advertising

These tradeoffs have formed the guiding

metrics, we were able to assess not only the

field (Rust, Lemon, and Zeithaml, 2004;

objectives for a major “marketing-spend

varying impact of different media but also

Roehm and Tybout, 2006), there has been

effectiveness” effort we have developed

how different media impact the success at

no research into the spillover effects in

for a leading international social network.

different stages of the conversion funnel

classical advertising for Internet pure-

Our client wanted to use advanced statis-

(Figure 1). Focusing on registrations is in

plays, wherein brand awareness and dif-

tical measures to investigate actual effi-

line with related research on pure plays

ferentiation typically are extremely low

ciency of their communication activities.

(e.g., Pauwels and Weiss, 2008).

and, therefore, the risk of spillover effects

Beyond the obvious goal to increase over-

From a basic statistical perspective, we

all efficiency, the mix model was expected

aimed to understand how the dynamic

In our case, the underlying data allowed

to deliver concrete insights per communi-

movements of the company’s media spend

us to build a valid advertising-impact time

cation channel.

respectively high.

over time correlated with the business key

series across the relevant players, as exter-

On the basis of commercial data and the

performance indicators shown below.

nal observations and estimations not only

communication spending of an Internet

Because many online advertising activities

reflected the actual impact on the target

social networking site, we have investigated actual business effects of various
communication channels to draw general
Advertising Impact on Sales

conclusions regarding the relevance of
classic channels for pure-plays. This was

DISGUISED

completed on the basis of a communica-

Gross Media Spend 2008
(US$ million)

tion-mix logic, which has been a major
area of research in classical non-Internet
advertising for many years (Naik and

TV

12.4

Print

3.4

Outdoor

2.7

tors, such as building brand awareness

Internet

13.2

or image, or any other relevant purchase

Other

Raman, 2003; Naik, Raman, and Winer,
2005).
In our research, we did not consider any
effects on key brand performance indica-

drivers (Rubinson and Pfeiffer, 2008). Nev-

0.4
31.1

ertheless, we still were able to prove the

Business KPIs 2008

?

Effect of
advertising
spend per
channel on
business
success

Registrations

2,412,337

Activation

1,829,940

First Sales

92,238

Repeat Sales

148,881

Win Back

24,047

potential brand-building success of online
versus offline advertising activities based
on brand-equity data that the company
measures continuously. Although the

44  JOURNAL

Figure 1  Measuring Marketing Effectiveness against Key
Business KPIs

OF ADVERTISING RESEARCH  March 2010
Can Old Media Enhance New Media?

group more accurately but provided a

for general available buying power), or

For monthly data points such as print-

comparable basis across various competi-

even such basic factors as weather condi-

advertising spend, we applied the aver-

tors’ spending.

tions (sunny vs. rainy days) that also influ-

age daily value as a proxy or used linear

To build a holistic and valid framework,

ence the likelihood of time spent in front of

regression to estimate daily development

it also was important to account for all rel-

the PC within an online community. This

from one month to another (e.g., evolu-

evant factors that have a potential moder-

leads to a very broad underlying frame-

tion of unemployment rate). Overall, the

ating influence on actual sales in addition

work encompassing all relevant factors

accessible data provided us with a statisti-

to the advertising activities across the dif-

that would influence our client’s key per-

cally sufficient frequency of data points to

ferent channels. Only then our statistical

formance indicators (KPIs) (Figure 2).

calculate a robust model. As the industry

model would be able to residualize actual

On the basis of historical data for a three-

is known to be quite responsive to com-

effects of communication activities. For

year time span for each of the independent

munication efforts, the significance of the

this case of a social-networking platform,

and dependent variables, we deployed the

estimates for the beta coefficients was fur-

we decided to consider a set of relevant

open-source statistical package GRETL

ther supported by the high variance in key

variables that should have an expected

to estimate an autoregressive time-series

business variables (Figure 3).

impact on the need for meeting people

model. Owing to the nature of the online

online. Specifically, we decided to account

business, all relevant business indicators

IMPACT OF VARIOUS ADVERTISING

for seasonal effects, special events (e.g.,

could be provided as data streams with

CHANNELS

highly relevant sports events drawing

a daily frequency. The same quality was

The models provided a valid overview of

people to their TV sets), holiday seasons,

accessible for Internet marketing spend

the impact of the company’s own com-

unemployment rates (as another indicator

and most external factors (e.g., weather).

munication activities, activities of key

Media Spend/Ext
ernal Factors

Competitors’
Gross Media Spend

TV

Radio

Outdoor

Online/SEM

PR/other

TV

Radio

Print

Outdoor

Online/SEM

PR/other

Weather (temp, sun hrs, rain/mm, wind)
Seasons
External Influence
Factors

Repeat Sales

Print

Holidays (Easter, Pentecost, Christmas)
Specials (Olympic Games, W
orld Cup)
Business Cy
cles (e.g. unem
ployment)

First Sales
Activation
Registrations

Impact on
Business and Brand

Own
Gross Media Spend

KPIs

• Total
• via channel
– Direct URL input
– Search Engine
Marketing
– Cooperations
Brand Strength
Brand Strength
Brand Status
• Awareness
(aided/unaided)
• Recall of ads
(aided/unaided)
• Sympathy, intent to
use, First Choice

Figure 2  Underlying Model
March 2010  JOURNAL

OF ADVERTISING RESEARCH  45
Can Old Media Enhance New Media?

relevant category and, thereby, increase

Revenue and Media Budgets
Revenue

TV
Outdoor

Print
Internet

analyses showed that this effect can be

3

15
2

10

1

5

0

2007

competitors’ sales (see Figure 4). In-depth

DISGUISED

2008

0

2009

reduced significantly when one compa-

Gross Media Spend (US$ million)

Revenues (US$ million)

20

ny’s campaigns are not being aired in parallel with a competitor’s TV commercials.
In contrast, print and poster both show
weak efficiency levels and cannot significantly increase a Web site’s traffic.
Overall, we found that classical advertising with a clear focus on TV clearly pays
off and outperforms pure search-engine
marketing with regards to generating new
registrations. However, this only holds
true until the point where the marginal

Figure 3  Development of Revenues and Gross Media
Spending

utility, which follows an S-curve function, starts to diminish below what searchengine marketing (in our case, mainly

competitors, and their effect on the exter-

activities of the two key competitors.

nal factors from registrations to actual

Both competitive networks are also pure-

Our findings also analyze the quality

first sales or repeat sales. Typical informa-

plays of similar size and provide nearly

of the traffic generated by various chan-

tion criteria—such as AIC, Bayesian, or

exchangeable services (shown in Figure 4

nels—how often leads are being con-

Hannan­ Quinn—were used to identify the
-

as competitor 1 and competitor 2). Addi-

verted into registrations and then, most

most appropriate model. Overall good-

tionally, TV campaigns tend to strongly

important, into EBIT-relevant subscrip-

ness of fit measures indicated the validity

affect the success of all players in the

tions at later stages of the funnel. The

Google adwords) can bring in.

of the model (e.g., adj. R² for modeling the
entry point of the funnel with registrations was 0.93, and down-the-funnel for
repeat sales was 0.67). As expected, pure

Impact of Communication and Other F
actors on Registrations

communication cannot fully explain the

DISGUISED

Impact of Own and Competit rs’
o
Communications Activities

actual behavior in the loyalty phase, as the

Average Registrations per day
(Basis: identical spending per pla
yer/channel)

personal perception and usage experience
also drives behavior to a large degree.

Impact of Select
ed
Influencing Factors
Average Registrations per day

By examining the impact of classic

Christmas/Ne Year
w

Own
Competitor 1

advertising channels on registrations, we
investigated whether TV, radio, print,

Pentecost

Competitor 2

+1,240
+720

Olympics

2.037

investment (ROI), generating relatively
qualified traffic via standard online mar-

321
130

keting channels.
Most noticeably, it became obvious that

345

279
12
24

–232

Unemployment (+0.1%)

1.432

more leads and new sales than purchasing

+127

Hours of sunshine (+1h)

or outdoor showed a positive return on

+75

54
78

–683

TV campaigns have the highest efficiency

TV

Radio

Print

SEM

Billboards

levels when compared with all classic
advertising channels. To account for the
actual market structure, our analyses also
integrated the effects of communication

46  JOURNAL

Figure 4  Impact of Communication Channels on Registrations
(basis: identical spending)

OF ADVERTISING RESEARCH  March 2010
Can Old Media Enhance New Media?

To build a holistic and valid framework, it also was

to special occasions or circumstances, such
as large events.

important to account for all relevant factors that have

To account for long-term brand equity
effects, we further modeled the effects of

potential moderating influence on actual sales.

specific channels on brand strength indicators. These analyses showed that even
though TV lacks efficiency in terms of con-

trade-off calculations have then been

to convey an emotional and a local appeal.

version success toward paying member-

based on the total generated value per

This affected our client’s registration

ships, its broader audience and potential

US$ spent on a specific channel compared

heavily by decreasing average registra-

to convey messages in a very emotional

to the cost per funnel stage when buying

tions leading to 683 fewer new members

manner has a very positive impact on

traffic.

daily during the campaign (accounting for

general brand equity measures. TV adver-

about 10 percent).

tising significantly increases brand percep-

This analysis showed that, though TV
brings in more users onto the site and fills

At the same time, the model showed

tion rated on image attributes; by contrast,

the registration pipeline, conversion is

that the market still is in development,

SEM primarily fills the customer pipeline.

much weaker; the same budget leads to 42

as  shown when a competitor’s advertis-

Although SEM produces a relevant self-

percent more registrations (2,037 vs. 1,432)

ing on shared channels drives a compa-

selected target group owing to the nature

through TV (see Figure 4). We found that

ny’s growth. All players seem to develop

of search mechanics, it showed no meas-

conversion to revenue-affecting stages

the entire market by introducing new

urable or statistically significant positive

down the funnel to first and repeat sales

users to the value of this type of social

effects on the brand on any dimension.

was much weaker in comparison (over-

networks­ (e.g., as shown in Figure 4, a

all 97 vs. 210 new or reinstated subscrip-

sig­ ificant number of the 321 new regn

CONCLUSIONS

tions). Therefore, data proved that SEM

istered users of the own Web platform

The data show that an online pure-play

sends more product-affine users to the

arrive per day when competitor 1 is plac-

can effectively rely on online marketing

platform, which leads to twice the amount

ing its TV commercials). Furthermore, the

once it has gained a reasonable aware-

of cash-affecting memberships. Hence,

model cannot investigate competitor suc-

ness and brand equity. Online advertising

SEM shows approximately three times the

cess without sales data across the market,

seems to drive activity, particularly in the

conversion success from a registration to a

which supports­the hypothesis that a com-

later funnel stages and, thereby, drive pre-

paying membership than TV leads do (in

pany’s own activities drive competitor

mium memberships of our client, which

other words, a conversion rate of 5 percent

volume.

generate actual revenues by a conversion

for TV as compared to 15 percent for SEM).

Another useful insight for marketers

This is in line with findings from the auto-

was provided by the model’s ability also

motive industry, wherein TV advertising

to account for further influencing factors

To build brand strength or to actively

also has proven to be effective especially

beyond the company’s control. One intui-

convey a brand’s positioning relative to

in terms of upper-funnel metrics (Briggs,

tive and now proven example showed that

competitors toward a broad audience,

Krishnan, and Borin, 2005).

rate three times higher than the most efficient ATL-channel TV would.

the amount of registrations and overall

however, classic advertising remains a

Another key finding included the

use of the computer and Internet decrease

necessity. Further, results of a similar mod-

opportunity to outpace general efficiency

when hours of sunshine per day increase.

eling exercise in the apparel industry has

levels and competitors when one brand

User numbers rapidly increase during the

shown that on top of the pure efficiency

can occupy one classic channel, such as

festive season—an effect that can be lever-

of a single channel, brand managers also

radio, exclusively within an industry. By

aged through communication by pulling

have to take potential synergies between

doing so, the advertisement shows a sin-

disproportionate new users to the own

two or more media channels into account

gular positive effect on the advertiser and,

offering. Setting the concrete impact fig-

when coming to their final media mix

moreover, strongly affects registrations

ures of external factors into context with

decision (Naik and Raman, 2003). In the

and sales of other players in the industry

paid advertising provides an invaluable

described work and model, we have not

negatively. In our case, competitor 2 exclu-

insight into the market mechanics, allow-

accounted for such moderating effects

sively used radio for its special potential

ing marketers to fine tune the messaging

of a synchronous application of various

March 2010  JOURNAL

OF ADVERTISING RESEARCH  47
Can Old Media Enhance New Media?

In the context of social networks, word of mouth has a

Drèze, X., and F-X. Hussherr. “Internet Adver-

major impact on driving traffic to the Web site.

tive Marketing 17, 4, (2003): 8–23.

tising: Is Anybody Watching?” Journal of Interac-

Evans, D. “The Online Advertising Industry:

channels. This certainly opens an exciting

different fragments and experiences needs

Economics, Evolution, and Privacy.” Journal of

field for further highly relevant research.

to be the everyday challenge for any mar-

Economic Perspectives 23, 3, (2009): 37–60.

The findings seem to be of general value

keter (Rubinson, 2009). 

and can be translated to other online mar-

Freeman L. “Why Internet Brands Take Offline

kets and categories. For future research,

Dr. Markus Pfeiffer is the managing partner of the

however, an extension or validation of

London and Munich offices and cofounder of the

the existing results into other Internet

European operations of Vivaldi Partners. Recently,

Fulgoni, G. M., and M. P. Mörn. “Whither the

pure play categories beyond social net-

he has led major innovation and growth initiatives

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for consumer brands in the telecommunications and

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relevant) is required. With the existence

technology sector. He is a regularly invited speaker at

and relevance of other mediating vari-

industry conferences and a visiting professor at several

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ables and the role of online-category fit as

European business schools, including TKK Helsinki

sis of Search Engine Advertising: Sponsored

online advertising revenues differ strongly

School of Business and the University of Cologne.

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between categories (IAB, 2009a), we expect
to see some differences in the results.
Moreover, it will be interesting to investigate the effects of another major source
of traffic for social networks—specifically,
the direct referrals on the Web site itself,

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As a director of Vivaldi Partners’ Munich office,
Dr. Markus Zinnbauer advises clients within the

Google. Years of Learning on How Online Adver-

technology and utility sector. He has led quantitative

tising Builds Brands, 2008.

projects focused on brand-equity management,
marketing spend effectiveness, and efficiency of

other communities or through micro-

Hollis, N. “Ten Years of Learning on How

brand architecture options. He has authored articles

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For

example­
,

Hong, W., J. Y. L. Thong, and K. Y. Tam. “Does

word-of-mouth-referrals

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OF ADVERTISING RESEARCH  49

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Can Old Media enhance New Media

  • 1. Can Old Media Enhance New Media? How Traditional Advertising Pays off for an Online Social Network Markus Pfeiffer mpfeiffer@ vivaldipartners.com Markus Zinnbauer mzinnbauer@ vivaldipartners.com Allocating marketing budgets in the most efficient way remains one of the key challenges for any marketing executive. Especially in cases of online pure plays such as social networks, the trade-off between online channels (display advertising and search engine marketing) versus classic communication (television, radio, print) has been fervently discussed during the last decade. In practice, online channels are often being favored for their direct accountability in terms of cost per click. To prove the actual value of various channels, the authors present a marketing mix modeling case study examining the business impact of various communication channels and the role of other external factors that influence usage of the website. INTRODUCTION AND REVIEW Insights on how cross-media campaigns are Advertising spend is experiencing its biggest using online and offline advertising to create value decline in history. Online advertising has also for brands, however, are limited. One recent study been affected by an expected 5.4 percent year-to- indicates potential advantages of cross-media year decrease in revenue in Q3 2009 (Interactive advertising over single-medium advertising but Advertising Bureau [IAB], 2009a). Online adver- focused on a single-medium approach that used tising budgets, however, are expected to experi- only one online (banner ads) and one non-Internet ence major increases in the coming years. Today, advertising medium (print; Wakolbinger, Denk, in the United Kingdom (and six months ago in and Oberecker, 2009). Denmark), Internet has overtaken television as the Although these results provide very helpful biggest advertising sector by market share (IAB, insights for the single medium, a brand’s success 2009b). often is driven by many different communica- In the academic world, the development of tion channels—online and offline—at the same Internet advertising has led to a broad stream time. More specifically, companies using Internet of studies that focus on the economic perspec- display advertisements typically also use search- tive of display advertisements (Evans, 2009) and engine marketing tools. For example, display- implementation-oriented questions ranging from related advertising and search advertising together recall success factors (Danaher and Mullarkey, accounted for more than 80 percent of the U.S. Q2 2003) to design and implementation of banner ads 2009 online advertising revenues (IAB, 2009a). (Spalding, Cole, and Fayer, 2009; Hong, Thong, on the need for cross-media campaigns combining research on single-medium effectiveness within Internet and non-Internet advertising means is online advertising and comparative studies of the the type of company (pure-play Internet vs. clas- effectiveness of online and traditional advertising sic “brick-and-mortar”). Looking at the specifics (Manchanda, Dubé, Goh, and Chintagunta, 2006; of Internet pure-plays from a decade ago, classic Robinson, Wysocka, and Hand, 2007; Lin and marketing communication budgets represented Chen, 2009, Rosenkrans, 2009). 42  JOURNAL Another factor that seems to have a major impact and Tam, 2004). Furthermore, there is existing a major share of the total investments within a OF ADVERTISING RESEARCH  March 2010 DOI: 10.2501/S0021849910091166
  • 2. Can Old Media Enhance New Media? Advertising spend is experiencing its biggest decline of search engines for online activity, trust, in history. Online advertising also has been affected sored search-engine advertising is widely by an expected 5.4 percent year-to-year decrease in tising to more targeted advertising. Critics revenue in Q3 2009. compared to non-sponsored advertising and buying decisions of consumers. Sponused, following the shift from mass adverargue that such efforts are less effective (Sen, 2005). It is widely accepted, however, that sponsored search-engine advertising typical business plan of an Internet ven- in a direct way. With the click-through has positive long-term effects by increas- ture. At the time, J. G. Sandon, a director at rate (CTR) becoming a dominant form ing a consumer’s exposure and awareness Ogilvy, postulated that “you can’t build a of measurement, data tracks the active of a brand or product, which eventually brand simply on the Internet. You have to response to the advertising, clearly indi- can lead to purchase and adoption (Ghose go offline” (Freeman, 1999). Typically, the cating cost-per-conversion (Hollis, 2005) and Yang, 2009). early Internet players had been allocating and, therefore, enabling a much bet- 65 percent to 75 percent of their commu- ter comparison of campaign efficiency KEY RESEARCH QUESTIONS AND MODEL nication budgets to offline media to create compared to TV ratings and print read- Tools such as SEM or search-engine opti- awareness for their brand and drive traffic ership estimates. mization (SEO), which ensures a top posi- to their Web site (Freeman, 1999). tion placement in native search results, are In recent years, many new pure-play However, recent research has shown primary examples of how the Internet has ventures have been following the same that assessing only the click success rate opened up new opportunities for compa- approach, balancing their spend between does not provide a true picture. Banner nies to raise awareness and relevance with the different varieties of online marketing advertising can increase a site’s traffic target groups and thereby drive sales and and communication activities and their even with low direct CTR (Fulgoni and increase brand equity. The means to reach classic TV, radio, print, or billboard cam- Mörn, 2009). This brand-building effect a relevant target group also have become paigns. Still, many practitioners believe has been at the center of many studies, more sophisticated in the past few years. that commercial pure-plays need to rely first and foremost a 2008 Google study. Although the decision-making process on classic channels—especially TV—to Furthermore, CTR as a measure of suc- for budget allocation has not changed sig- overcome the limitations of online adver- cess are biased as users intrinsically avoid nificantly, the increase in complexity has tising, such as the limited access to new online advertising during their Web site led to confusion about how to best create target groups to create awareness for the interactivity (Drèze and Hussherr, 2003). efficiencies in marketing spending. Hence, brand and support of their online market- Following research on Web site effective- efficient ing activities (McMains and Morrissey, ness by Song and Zinkhan (2008), further budgets to various channels—offline and 2009). allocation of communication research on online advertising, therefore, online—remains a key mystery to mar- Consideration of cross-media effects for should apply a more multi-dimensional keters and advertising experts, including Internet pure plays is significant for two construct of success. This has been an most Internet pure-plays. reasons. essential imperative for the development of our dependent construct. • Internet pure-plays are For online brands, the decision to rely only on digital marketing (SEM, SEO, and becoming In addition to classic online advertis- banner advertising) or to invest in classic increasingly important, accounting for ing (display ads), other communication communication channels (TV, print, out- almost 60 percent of e-commerce rev- formats and activities such as affiliate door, and radio) often is solved by man- enue opposed to multi-channels (Com- programs, online sponsorships, coupon- agement experience and intuition. Online Score, 2009). ing, and referrals have become everyday brand marketers must consider the follow- • Pure-play marketers can measure the tools for online marketers. And search- ing tradeoffs: direct impact of all communication engine marketing (SEM) has become a channels on registrations and other met- major area of investment for driving traffic • How should we balance our invest- rics along the customer purchase funnel to Web sites, building on the integral role ments in traditional media versus online March 2010  JOURNAL OF ADVERTISING RESEARCH  43
  • 3. Can Old Media Enhance New Media? advertising (knowing that both can existing data series must be extended to were either driven by affiliate programs drive either direct behavior or brand- provide more detailed insights into these or acquired through bartering deals, we equity building)? efficiencies affecting early stages of the relied exclusively on externally measured brand funnel, our conclusion briefly will gross media volumes (e.g., GRPs for TV or address the results of this comparison. estimated gross online marketing spend- • How should we allocate budgets within the classic non-Internet advertising (between TV, print, radio, and bill- Our key objective was to understand boards) when compared to Internet dis- effects on business success by using actual play ads and SEM? ing based on Nielsen NetRatings data) rather than using actual investments. registrations (number of newly signed The underlying data sources enabled us • What is the absolute impact of each of users on basic free memberships) and to analyze not only the impact of the com- these channels on user behavior on a actual sales in Euros (number of sold pre- pany’s spending on their business success variety of output measures (from first- mium memberships for a monthly fee) of but also the spillover effects of competi- time registrations to repeat sales)? the social network as dependent variables. tors spending. Although these effects are By using this broad spectrum of efficiency well researched in the classic advertising These tradeoffs have formed the guiding metrics, we were able to assess not only the field (Rust, Lemon, and Zeithaml, 2004; objectives for a major “marketing-spend varying impact of different media but also Roehm and Tybout, 2006), there has been effectiveness” effort we have developed how different media impact the success at no research into the spillover effects in for a leading international social network. different stages of the conversion funnel classical advertising for Internet pure- Our client wanted to use advanced statis- (Figure 1). Focusing on registrations is in plays, wherein brand awareness and dif- tical measures to investigate actual effi- line with related research on pure plays ferentiation typically are extremely low ciency of their communication activities. (e.g., Pauwels and Weiss, 2008). and, therefore, the risk of spillover effects Beyond the obvious goal to increase over- From a basic statistical perspective, we all efficiency, the mix model was expected aimed to understand how the dynamic In our case, the underlying data allowed to deliver concrete insights per communi- movements of the company’s media spend us to build a valid advertising-impact time cation channel. respectively high. over time correlated with the business key series across the relevant players, as exter- On the basis of commercial data and the performance indicators shown below. nal observations and estimations not only communication spending of an Internet Because many online advertising activities reflected the actual impact on the target social networking site, we have investigated actual business effects of various communication channels to draw general Advertising Impact on Sales conclusions regarding the relevance of classic channels for pure-plays. This was DISGUISED completed on the basis of a communica- Gross Media Spend 2008 (US$ million) tion-mix logic, which has been a major area of research in classical non-Internet advertising for many years (Naik and TV 12.4 Print 3.4 Outdoor 2.7 tors, such as building brand awareness Internet 13.2 or image, or any other relevant purchase Other Raman, 2003; Naik, Raman, and Winer, 2005). In our research, we did not consider any effects on key brand performance indica- drivers (Rubinson and Pfeiffer, 2008). Nev- 0.4 31.1 ertheless, we still were able to prove the Business KPIs 2008 ? Effect of advertising spend per channel on business success Registrations 2,412,337 Activation 1,829,940 First Sales 92,238 Repeat Sales 148,881 Win Back 24,047 potential brand-building success of online versus offline advertising activities based on brand-equity data that the company measures continuously. Although the 44  JOURNAL Figure 1  Measuring Marketing Effectiveness against Key Business KPIs OF ADVERTISING RESEARCH  March 2010
  • 4. Can Old Media Enhance New Media? group more accurately but provided a for general available buying power), or For monthly data points such as print- comparable basis across various competi- even such basic factors as weather condi- advertising spend, we applied the aver- tors’ spending. tions (sunny vs. rainy days) that also influ- age daily value as a proxy or used linear To build a holistic and valid framework, ence the likelihood of time spent in front of regression to estimate daily development it also was important to account for all rel- the PC within an online community. This from one month to another (e.g., evolu- evant factors that have a potential moder- leads to a very broad underlying frame- tion of unemployment rate). Overall, the ating influence on actual sales in addition work encompassing all relevant factors accessible data provided us with a statisti- to the advertising activities across the dif- that would influence our client’s key per- cally sufficient frequency of data points to ferent channels. Only then our statistical formance indicators (KPIs) (Figure 2). calculate a robust model. As the industry model would be able to residualize actual On the basis of historical data for a three- is known to be quite responsive to com- effects of communication activities. For year time span for each of the independent munication efforts, the significance of the this case of a social-networking platform, and dependent variables, we deployed the estimates for the beta coefficients was fur- we decided to consider a set of relevant open-source statistical package GRETL ther supported by the high variance in key variables that should have an expected to estimate an autoregressive time-series business variables (Figure 3). impact on the need for meeting people model. Owing to the nature of the online online. Specifically, we decided to account business, all relevant business indicators IMPACT OF VARIOUS ADVERTISING for seasonal effects, special events (e.g., could be provided as data streams with CHANNELS highly relevant sports events drawing a daily frequency. The same quality was The models provided a valid overview of people to their TV sets), holiday seasons, accessible for Internet marketing spend the impact of the company’s own com- unemployment rates (as another indicator and most external factors (e.g., weather). munication activities, activities of key Media Spend/Ext ernal Factors Competitors’ Gross Media Spend TV Radio Outdoor Online/SEM PR/other TV Radio Print Outdoor Online/SEM PR/other Weather (temp, sun hrs, rain/mm, wind) Seasons External Influence Factors Repeat Sales Print Holidays (Easter, Pentecost, Christmas) Specials (Olympic Games, W orld Cup) Business Cy cles (e.g. unem ployment) First Sales Activation Registrations Impact on Business and Brand Own Gross Media Spend KPIs • Total • via channel – Direct URL input – Search Engine Marketing – Cooperations Brand Strength Brand Strength Brand Status • Awareness (aided/unaided) • Recall of ads (aided/unaided) • Sympathy, intent to use, First Choice Figure 2  Underlying Model March 2010  JOURNAL OF ADVERTISING RESEARCH  45
  • 5. Can Old Media Enhance New Media? relevant category and, thereby, increase Revenue and Media Budgets Revenue TV Outdoor Print Internet analyses showed that this effect can be 3 15 2 10 1 5 0 2007 competitors’ sales (see Figure 4). In-depth DISGUISED 2008 0 2009 reduced significantly when one compa- Gross Media Spend (US$ million) Revenues (US$ million) 20 ny’s campaigns are not being aired in parallel with a competitor’s TV commercials. In contrast, print and poster both show weak efficiency levels and cannot significantly increase a Web site’s traffic. Overall, we found that classical advertising with a clear focus on TV clearly pays off and outperforms pure search-engine marketing with regards to generating new registrations. However, this only holds true until the point where the marginal Figure 3  Development of Revenues and Gross Media Spending utility, which follows an S-curve function, starts to diminish below what searchengine marketing (in our case, mainly competitors, and their effect on the exter- activities of the two key competitors. nal factors from registrations to actual Both competitive networks are also pure- Our findings also analyze the quality first sales or repeat sales. Typical informa- plays of similar size and provide nearly of the traffic generated by various chan- tion criteria—such as AIC, Bayesian, or exchangeable services (shown in Figure 4 nels—how often leads are being con- Hannan­ Quinn—were used to identify the - as competitor 1 and competitor 2). Addi- verted into registrations and then, most most appropriate model. Overall good- tionally, TV campaigns tend to strongly important, into EBIT-relevant subscrip- ness of fit measures indicated the validity affect the success of all players in the tions at later stages of the funnel. The Google adwords) can bring in. of the model (e.g., adj. R² for modeling the entry point of the funnel with registrations was 0.93, and down-the-funnel for repeat sales was 0.67). As expected, pure Impact of Communication and Other F actors on Registrations communication cannot fully explain the DISGUISED Impact of Own and Competit rs’ o Communications Activities actual behavior in the loyalty phase, as the Average Registrations per day (Basis: identical spending per pla yer/channel) personal perception and usage experience also drives behavior to a large degree. Impact of Select ed Influencing Factors Average Registrations per day By examining the impact of classic Christmas/Ne Year w Own Competitor 1 advertising channels on registrations, we investigated whether TV, radio, print, Pentecost Competitor 2 +1,240 +720 Olympics 2.037 investment (ROI), generating relatively qualified traffic via standard online mar- 321 130 keting channels. Most noticeably, it became obvious that 345 279 12 24 –232 Unemployment (+0.1%) 1.432 more leads and new sales than purchasing +127 Hours of sunshine (+1h) or outdoor showed a positive return on +75 54 78 –683 TV campaigns have the highest efficiency TV Radio Print SEM Billboards levels when compared with all classic advertising channels. To account for the actual market structure, our analyses also integrated the effects of communication 46  JOURNAL Figure 4  Impact of Communication Channels on Registrations (basis: identical spending) OF ADVERTISING RESEARCH  March 2010
  • 6. Can Old Media Enhance New Media? To build a holistic and valid framework, it also was to special occasions or circumstances, such as large events. important to account for all relevant factors that have To account for long-term brand equity effects, we further modeled the effects of potential moderating influence on actual sales. specific channels on brand strength indicators. These analyses showed that even though TV lacks efficiency in terms of con- trade-off calculations have then been to convey an emotional and a local appeal. version success toward paying member- based on the total generated value per This affected our client’s registration ships, its broader audience and potential US$ spent on a specific channel compared heavily by decreasing average registra- to convey messages in a very emotional to the cost per funnel stage when buying tions leading to 683 fewer new members manner has a very positive impact on traffic. daily during the campaign (accounting for general brand equity measures. TV adver- about 10 percent). tising significantly increases brand percep- This analysis showed that, though TV brings in more users onto the site and fills At the same time, the model showed tion rated on image attributes; by contrast, the registration pipeline, conversion is that the market still is in development, SEM primarily fills the customer pipeline. much weaker; the same budget leads to 42 as  shown when a competitor’s advertis- Although SEM produces a relevant self- percent more registrations (2,037 vs. 1,432) ing on shared channels drives a compa- selected target group owing to the nature through TV (see Figure 4). We found that ny’s growth. All players seem to develop of search mechanics, it showed no meas- conversion to revenue-affecting stages the entire market by introducing new urable or statistically significant positive down the funnel to first and repeat sales users to the value of this type of social effects on the brand on any dimension. was much weaker in comparison (over- networks­ (e.g., as shown in Figure 4, a all 97 vs. 210 new or reinstated subscrip- sig­ ificant number of the 321 new regn CONCLUSIONS tions). Therefore, data proved that SEM istered users of the own Web platform The data show that an online pure-play sends more product-affine users to the arrive per day when competitor 1 is plac- can effectively rely on online marketing platform, which leads to twice the amount ing its TV commercials). Furthermore, the once it has gained a reasonable aware- of cash-affecting memberships. Hence, model cannot investigate competitor suc- ness and brand equity. Online advertising SEM shows approximately three times the cess without sales data across the market, seems to drive activity, particularly in the conversion success from a registration to a which supports­the hypothesis that a com- later funnel stages and, thereby, drive pre- paying membership than TV leads do (in pany’s own activities drive competitor mium memberships of our client, which other words, a conversion rate of 5 percent volume. generate actual revenues by a conversion for TV as compared to 15 percent for SEM). Another useful insight for marketers This is in line with findings from the auto- was provided by the model’s ability also motive industry, wherein TV advertising to account for further influencing factors To build brand strength or to actively also has proven to be effective especially beyond the company’s control. One intui- convey a brand’s positioning relative to in terms of upper-funnel metrics (Briggs, tive and now proven example showed that competitors toward a broad audience, Krishnan, and Borin, 2005). rate three times higher than the most efficient ATL-channel TV would. the amount of registrations and overall however, classic advertising remains a Another key finding included the use of the computer and Internet decrease necessity. Further, results of a similar mod- opportunity to outpace general efficiency when hours of sunshine per day increase. eling exercise in the apparel industry has levels and competitors when one brand User numbers rapidly increase during the shown that on top of the pure efficiency can occupy one classic channel, such as festive season—an effect that can be lever- of a single channel, brand managers also radio, exclusively within an industry. By aged through communication by pulling have to take potential synergies between doing so, the advertisement shows a sin- disproportionate new users to the own two or more media channels into account gular positive effect on the advertiser and, offering. Setting the concrete impact fig- when coming to their final media mix moreover, strongly affects registrations ures of external factors into context with decision (Naik and Raman, 2003). In the and sales of other players in the industry paid advertising provides an invaluable described work and model, we have not negatively. In our case, competitor 2 exclu- insight into the market mechanics, allow- accounted for such moderating effects sively used radio for its special potential ing marketers to fine tune the messaging of a synchronous application of various March 2010  JOURNAL OF ADVERTISING RESEARCH  47
  • 7. Can Old Media Enhance New Media? In the context of social networks, word of mouth has a Drèze, X., and F-X. Hussherr. “Internet Adver- major impact on driving traffic to the Web site. tive Marketing 17, 4, (2003): 8–23. tising: Is Anybody Watching?” Journal of Interac- Evans, D. “The Online Advertising Industry: channels. This certainly opens an exciting different fragments and experiences needs Economics, Evolution, and Privacy.” Journal of field for further highly relevant research. to be the everyday challenge for any mar- Economic Perspectives 23, 3, (2009): 37–60. The findings seem to be of general value keter (Rubinson, 2009).  and can be translated to other online mar- Freeman L. “Why Internet Brands Take Offline kets and categories. For future research, Dr. Markus Pfeiffer is the managing partner of the however, an extension or validation of London and Munich offices and cofounder of the the existing results into other Internet European operations of Vivaldi Partners. Recently, Fulgoni, G. M., and M. P. Mörn. “Whither the pure play categories beyond social net- he has led major innovation and growth initiatives Click. How Online Advertising Works.” Journal works (e.g., Internet retailers appear to be for consumer brands in the telecommunications and of Advertising Research 49, 2, (2009): 134–142. Avenues.” Marketing News, July 19, (1999): 4. relevant) is required. With the existence technology sector. He is a regularly invited speaker at and relevance of other mediating vari- industry conferences and a visiting professor at several Ghose, A., and S. Yang. “An Empirical Analy- ables and the role of online-category fit as European business schools, including TKK Helsinki sis of Search Engine Advertising: Sponsored online advertising revenues differ strongly School of Business and the University of Cologne. Search in Electronic Markets.” Management Sci- between categories (IAB, 2009a), we expect to see some differences in the results. Moreover, it will be interesting to investigate the effects of another major source of traffic for social networks—specifically, the direct referrals on the Web site itself, ence 55, 10, (2009): 1605–1622. As a director of Vivaldi Partners’ Munich office, Dr. Markus Zinnbauer advises clients within the Google. Years of Learning on How Online Adver- technology and utility sector. He has led quantitative tising Builds Brands, 2008. projects focused on brand-equity management, marketing spend effectiveness, and efficiency of other communities or through micro- Hollis, N. “Ten Years of Learning on How brand architecture options. He has authored articles blogging systems. In the context of social Online Advertising Builds Brands.” Journal of and studies in several national and international networks, word of mouth has a major Advertising Research 45, 2, (2005): 255–268. journals. impact on driving traffic to the Web site. For example­ , Hong, W., J. Y. L. Thong, and K. Y. Tam. “Does word-of-mouth-referrals for Internet social networking have sub- REFERENCES stantially longer carry-over effects and, therefore, need to be actively managed as Briggs, R., R. Krishnan, and N. Borin. “Inte- a strategic brand-building activity (Trusov, grated Multichannel Communication Strat- Bucklin, and Pauwels, 2009). Animation Attract Online Users’ Attention? The Effects of Flash on Information Search Performance and Perceptions.” Information System egies: Evaluating the Return on Marketing Research 15, 1, (2004): 60–86. Conversely, we believe the marketing Objectives—The Case of the 2004 Ford F-150 Interactive Advertising Bureau. IAB Internet and advertising community will need to Launch.” Journal of Interactive Marketing 19, 3, Advertising Revenue Report. 2009 [URL: www. adapt to a situation wherein measuring (2005): 81–90. iab.net/media/file/IAB-Ad-Revenue-Sixmonth-2009.pdf], (2009a) and comparing the effectiveness of different communication channels are becom- com S core . ing increasingly complex. New channels in Q3 09”, [URL: www.slideshare.net/yanroux/ Internet Advertising Bureau. IAB Online with new KPIs—microblogging systems, com-score-state-of-us-online-retail-economy- Adspend Study-H1 2009. (2009b) the mobile Web, and related applications in-q3-09]. for smartphones—in an “State of US Online Retail Economy “always-on” Lin, Y-L., and Y-W. Chen. “Effects of Ad Types, world will add to that challenge. We are Danaher, P., and G. Mullarkey. “Factors Positions, Animation Lengths, and Exposure just at the very beginning of this funda- Affecting Online Advertising Recall: A Study of Times on the Click-Through Rate of Animated mental change. Within this new market- Students.” Journal of Advertising Research 43, 3, Online Advertisings.” Computers Industrial ing research imperative, learning from the (2003): 252–267. Engineering 57, 2, (2009): 580–591. 48  JOURNAL OF ADVERTISING RESEARCH  March 2010
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