Incrementality
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When marketing teams spend money on a paid acquisitions program it is crucial to understand the effect of that ad spend. In this talk, we will outline incrementality as a way to measure the causal impact that ad spend has on acquiring new customers and its advantages over more traditional metrics. We will walk through several ad measurement products available today and give examples of how to apply them to your business.
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Incrementality
- 1. Incrementality A practical guide to ads measurement Jessica Zúñiga jessica.zuniga@stitchfix.com
- 5. My journey into advertising
- 7. CTR = unique clicks impression s
- 9. We want to grow. I have a large sum of money. What should I invest it in and how?
- 10. What do we want to drive? What metric best captures that behavior?
- 12. Pros: Quick to compute Cons: It’s not the right metric • Attribution issues • Inconsistent use • Not causal
- 13. Pros: Quick to compute Cons: Its not the right metric • Attribution issues • Inconsistent use • Not causal
- 16. Pros: Quick to compute Cons: It’s not the right metric • Attribution issues • Inconsistent use • Not causal
- 17. Spike analysis for TV Time in minutes Numberofsignups
- 19. Match back analysisNumberofsignups Time in days
- 20. Pros: Quick to compute Cons: It’s not the right metric • Attribution issues • Inconsistent use • Not causal
- 21. CPA doesn’t imply causality
- 22. Ebay case study Image source: Blake, Nosko, Tadelis
- 23. How many new customers did I acquire because I spent money?
- 24. How many more customers were acquired due to ad spend Users acquired while spending money on ads Users acquired while NOT spending money on ads Incrementality
- 26. Ebay Image source: Blake, Nosko, Tadelis
- 27. So how do I compute iCPA?
- 28. Facebook
- 29. 1 2 3 Users identified across devices 2 incremental users $100 / 2 = $50 iCPA
- 32. 1 2 3 Cannot identify users across devices with full confidence
- 34. Display
- 35. Image source: Google Google Display Network
- 36. Image source: Google Display Partners
- 37. But we don’t want to scale down our advertising efforts…
- 38. ● It’s worth it in the long run ● In order to experiment in a rigorous way we need holdouts ● Experimentation costs might be lower than perceived Organizational alignment
- 39. ● Want to understand iCPA not % lift ● Adverse incentives from platforms can lead you to have a high % holdout ● What is the minimum % holdout I can have? ● You really may only need just a few % points holdout Practically…
- 40. Beyond iCPA Channel level User segment 1 User segment 2 User segment 3
- 41. Final words ● Traditional CPA metrics have problems ● Incrementality: How many more customers were acquired due to ad spend ● Compute iCPA often ● Ask for it from your advertising partners to help make it a standard
Editor's Notes
- Introduce Stitch Fix What is this offering all about?
- Clients fill out style profile Algorithms, merchandising and stylists work together to find you the right clothes Warehousing and operations get it out the door on time! We learn and serve you better
- Leading the Algorithmic Acquisitions team Our mission: help drive our paid client acquisitions program with our vast amounts of internal data How much should we bid for certain users? How should we retarget users? Which types of users should we try to acquire now? What type of mix should we be running? The basis for all these questions is a solid frameworkf for measurement
- Previously worked on recommendation products at LinkedIn and small e-commerce startup. Built data products and recommendations systems to help drive retention, engagement, sales.
- “What metric do I want to drive?” Had to choose the right metric CTR – might be initial guess at metric Cons: can capture bad type of engagement - not what you actually want to drive
- How CTR can go wrong in: Content/news: promote content that is clickbait or polarizing and/or offensive People/connection recommendations: promote people that have nice visuals/images or images that have questionable content Item recommendations: promote items with questionable pictures/content, items that are overall popular Examples of good metrics: Content/news: increased number of sessions/ other downstream metrics People/connections: increased number of messages, accepted connection requests Items: increased number of purchases
- Main problem we are all facing in advertising field
- Given my past experience in creating products to increase sales/connections I began to really think about how we measured success. What does “we want to grow” really mean? What kind of behavior do we want to drive? Volume vs high sales What metric best captures that behavior? Main theme: I want to spend money in the places that will get me the most clients Need to understand which channels are the most effective at bringing in clients with a given amount of spend How many new clients/purchases/revenue did I drive with my spend? But still…. What is the metric that captures this???
- Want to measure the effectiveness of spend CPA - the de facto metric Captures directionality but has failures
- Not causal – This metric does not quantify the effect that our ad spend had on acquiring users.
- Lets focus on the attribution issues associate to CPA Issues first start to become clear when we actually try to define the “acquired users” part of the metric
- What do we mean by acquired user? “A user came to our site/made a purchase after clicking on an ad that they saw”
- What if the user saw ads in more than one channel? To simplify companies will say that they will use some form of attribution. e.g. “last touch” Good: Simple to explain Bad: Attribution problems People usually tend to solve this with multi touch attribution: Basic principal: By analyzing all the impressions and clicks a user had on their path to convergence we will be able to redistribute the credit from last touch to help us understand the impact that channels have to acquiring customers. Con: We do not have all the impressions from all of our channels. Facebook – walled garden Offline channels impossible to tell Impressions/clicks are expensive to obtain. MTA solutions are also expensive. Multi-touch attribution is not causal We may be redistributing weight but do we know that the conversion actually happened due to ads? Even if we had all the impressions and clicks from all of our channels, modern ad platforms target populations by features and criteria that only they know. This creates an unbalanced population between those that are exposed to ads These user features are essentially confounders which explain conversions We will never have those features
- Not all channels compute CPA the same way Inconsistency generally seen in offline channels TV: spike analysis Match back analysis URL links Application of multipliers biases and seasonality
- For TV we can use a spike analysis to measure impact of TV Natural experiment Look a website traffic – spikes usually correspond to a TV ad running Time before and after a spike is users to estimate a baseline – line in orange. Difference between total users in spike and estimated baseline is assumed to be the additional users that TV brought in Limitation Spikes most likely happen during a short time window and are unable to capture long term impact of TV Long term impact is important to understand for top of funnel channels
- Another example where measurement becomes difficult: Direct mail Send a nice piece of mail to your customers and ask them to sign up via a url link Its not going to happen – will most likely see very little conversions coming in via url links Have to figure out another way to estimate the impact of these campaigns
- Use a match back analysis Know the list of customers who received the mailer Look at conversions that happened after the mailer was sent and see if you can identify which of the users who received the mailer ultimately ended up converting Use that number to estimate the acquisitions brought in by the program Problem: What time scale do I use? Look at example of signups after a direct mail campaign Window is very long and our way of choosing the window is arbitrary Summarize: At the end of the day we have CPA numbers for all our channels which we are using to make decisions but CPAs are not computed the same way across channels
- Finally – the main issue with CPA is that it is not causal. It does not capture the effect that spending money on ads had on bringing customers to your business
- Traditional CPA metric may incorrectly estimate the effects of your ads Overestimate High intent users where likely to convert despite your ad Ad still takes credit for those conversions Looks more efficient than it is Underestimate Looking only at converters that clicked through Will not value the effect that an impression of the add had on the user Looks less efficient than it is
- Popular Ebay case study that looked at exactly the effects of ads on their business Wanted to study the effectiveness of their ads, in particular their branded search terms Concerned that these types of adds targeted customers with high intent that would have converted anyway Ran experiments that showed no measurable short-term value in brand keyword advertising First (left) graph: Halted SEM brand keywords on both Yahoo! and Microsoft (MSN) Drop in clicks that came from branded KWs was made up by organic Users found their way to eBay without branded terms Second (right) graph: Halted SEM brand keywords on Google Same findings as on Yahoo! and MSN “Shutting off paid search ads closed one (costly) path to a company’s website but diverted traffic to natural search, which is free to the advertiser”
- CPA has problems: attribution Inconsistency Doesn’t actually measure effectiveness of spend What we really wanted to understand: How many **NEW** people did I bring in due to my add spend?
- AKA lift We can design controlled experiments!! We will walk you through a couple of examples of how to do this for some of the more popular channels
- Incremental CPA should be the baseline metric We can design controlled experiments!! We will walk you through a couple of examples of how to do this for some of the more popular channels
- Lets revisit the Ebay story: CPA would have indicated that spending money on branded keywords was the cheapest way to acquire clients In this case the CPA showed to be very efficient but the iCPA would captured inefficiencies
- Now lets walk through some basic practical examples that will get you started
- Facebook They have a measurement product to detect incrementality called conversion lift Can identify users across devices The way the study and analysis works Allocate all users in the FB universe to test and control Calculate the number of incremental users acquired at the end of the study Example: 2 incremental users Calculate iCPA
- Called a conversion lift Facebook This lift study is an intent to treat Pros: clean test Cons: high variance – looking at conversions among exposed and non exposed users Comparing all users in control in test, not just those that would have been exposed Causes more noise due to the conversions of the people in the bucket that would not have been exposed to adds Getting the test off the ground For one test -- talk to your FB rep For multiple tests -- use the API
- SEM Cannot always identify users across devices Must run a geo based study Pros: Cleaner than using a cookie based test with potential for significant cross-contamination Cons: Can’t use this if you don’t operate in a large geographic area How to do set up the study and do the analysis: Choose randomly which regions are in test and which are in control We could compare treatment regions to test regions BUT Very few regions in each bucket – implies high variance Different from FB were we had many users in each control/test
- SEM We alleviate noise issues by estimating the counterfactual (what is called a synthetic control) for the test regions from the control regions In other words: Estimate what would have happened to in the test regions in the absence of ad spend Understand the lift by looking at the difference between synthetic control and test CausalImpact package in R lets you do just that with just a few lines of code Getting test off the ground: Talk to your Google rep – will have good advice on what to do You will manually have to choose DMAs and turn off your spend in these DMAs You will have to do the analysis yourself
- Display – GDN GDN has a Conversion Lift Study measurement product The way it works: User based study - try to identify users across devices When you have an opportunity to show an add If user is in test – then show them the add and record it If user is in control – substitute the next add in the auction and record that they would have seen the add Look at difference in acquisitions/sales among users that saw your ads and users that would have see your adds The experiment setup is a ghost ads study Pros: Reduced noise: only comparing difference in blue acquisitions above do not look at difference in yellow – this is what would have happened in an intent to treat study Less variance -> shorter to run Cons: Users could clear their cookies so could inadvertently be exposed to both treatments
- Display – Partners Its possible to run lift/incrementality test on other display networks via partners. Must talk to your partner to see if they offer these types of studies In many cases they may offer to run a PSA study The way it works: Cookie based study – not user based Off the bat we may have cross contamination issues Cookies are split into control and test When a user is set up to receive an add (similar to ghost ads): If user is in test – then show them the add and record it If user is in control – serve the user a PSA ad and record it Pros: It’s something Cons: Users could clear their cookies so could inadvertently be exposed to both treatments Users in control are not exposed to competitor ads possibly leading to less conversions in control Need to be careful that targeting capabilities keep test/control buckets constant. Most modern ad platforms will optimize the audience an add is shown to. PSA adds could cause ad platforms to try to target a fundamentally different audience in control creating a bias in the audiences. Need to verify with your partner how they deal with this. Expensive since you may have to foot the bill for the PSA ads as well
- Organizational alignment Companies in a high growth mode can be hesitant about with-holding spend for fear of not hitting numbers Need to ask yourself: How much do I really have to hold out? How do I power my test? (i.e. how much data do I have to have in order to conclusion that is statistically significant?)
- Organizational alignment: It’s important to commit to running tests. You could be measuring the impact of your ads campaigns incorrectly and making non-optimal ad spend decisions The rest of the data science runs experiments with holdouts to understand the impact of recommendations/products/actions Lets bring performance marketing to that standard Having a hold out may not actually be as bad as you might think: Not only get gains from learnings but By looking for the right thing to understand we way be able to get away with a small % holdout
- Remember: iCPA is the metric you want to understand NOT the % lift you saw by spending money on ads % lift is not comparable across channels b/c have different baselines but iCPA is comparable Example: You could run a lift study on a channel and see a 2% lift. Great to know but if that translates to a $100 iCPA and you can only really tolerate paying $10 for a new user then its not really worth it for you to be able to detect such a small lift Adverse incentives from channel platforms – they want you to walk out of the lift study thinking that you had a % lift Will advise you to have large holdouts in order to be able to detect the small lift Work with you data science team to understand what is the minimum % holdout you need to have in order detect a maximum allowable iCPA In some cases you may only need a few % point lift.
- Interesting analysis one can get from incrementality: Most incremental user segments: Check with your channel partners what features you can segments your learnings by Age/geo/other user features CPAs vs incremental CPAs User segment 1 looks best under traditional CPA methods User segment 2 is really the best segment to go after when you make ads May shift the way you Make creative – may now focus on user segment 2 vs user segment 1 Adjust how aggressively you bid