Paid versus Owned Media
Prof. Dr. Koen Pauwels
Prof. Koen Pauwels
Online budget has increased
3
“You cannot build a brand simply on the Internet. You have to
go offline.” J.G Sandom, Co-founder and former director of Ogilvy
Paid search under fire
• Who likes the “Google Tax” ?
• Paid search has 0 effect for eBay
Consumers will find it anyway
Shuts paid down, saves $ millions
• But paid search fantastic for Inofec
Increases profit 14x doubling it
5
Online and Traditional Marketing:
What do we know?
• Online marketing such as search, social media is more effective than
traditional marketing, TV (Manchanda et al. 2006, Wiesel et al. 2011)
• Paid, owned and earned media have different effects (Li and Kannan 2014)
• Online-offline synergy for specific cases (Naik and Peters 2009) withinoffline synergy for others (Schultz, Block & Raman 2011)
• Unknown: When do online paid, earned, owned media work best and have
most synergy with traditional marketing?
TRUSTWORTHINESS VERSUS REACH OF MEDIA
Our view: Consumer involvement & knowledge
• High involvement: customers desire the best information
a) Experience good: need deep, trusted information (Nelson 1974)
b) Search good: fast information by search (Erdem et al 1999)
• Low knowledge increases need for cross-channel media:
a) Internet poor for building brands (Erdem et al 1999, Sandom 2010) unfamiliar brands need both
online and offline media
b) Familiar brands can leverage within-online synergies
Involvement vs knowledge effect conditions
Unfamiliar
Experience goods
Search goods
(services)
(products)
Elasticity: Owned > Paid
Synergy: Cross-channel > Within online
brand
Synergy: Cross > Within-online
Familiar
synergy
Elasticity: Owned > Paid
Elasticity: Paid > Owned
Synergy: Within online > Cross
Synergy: Within online > Cross
brand
Specific actions differ by firm
PAID
OWNED
EARNED
TRADITIONAL
Paid search cost
Display ads
News site ads
Banner ads
Affiliate site ads
Price comparison site ads
Site Traffic
Organic site visits
Organic search
Social media
conversations
Direct mail cost
TV ad cost
Out-of-home cost
Print (Circulars)
Radio
Price
Discounts
Old mix modeling does not work for
integrated online measurement
• Treating online marketing (especially online media) as just another direct driver
of sales leads to misattribution of sales to drivers and ultimately bad mix
decisions
• The following picture simply no longer holds true:
TV
x
PRINT
x
COUPONS
TRADE
X
Online
SALES
A far more complex marketplace exists in which online activity acts as an outcome of offline
marketing, as well as a driver of sales. We analyze these dynamic effects in a systems of equations.
Offline actions invite (online) consumer action + sales
Price
Distribution
TV
Sales
Paid Media
Earned
Media
Owned
Media
Academic Foundations of VAR
• Sims (1980) regressed a vector of variables on their own
past as well as those of fellow influential variables
creating the term "Vector Autoregression" (VAR).
• This groundbreaking work that continues to add value in
the business community (particularly finance) earned
Sims the 2011 Nobel prize for Economics.
Christopher Sims receiving his Nobel prize in
December 2011
Reference: Sims (1980) "Macro-Economics and Reality" in Econometrica.
Findings
Performance Elasticity of Paid Search and Owned Website Visits
Brand A: Paid Media
Brand A: Owned Media
0.15
0.2
Response to shock in Organic Visits
Response to shock in Paid Search
0.15
Revenues Response
Revenues Response
0.1
0.05
0
0.1
0.05
-0.05
0
-0.1
0
5
10
15
Weeks
20
25
0
15
5
10
15
Weeks
20
25
Performance Elasticity of Paid Search and Owned Website Visits
Brand B: Paid Media
Brand B: Owned Media
0.4
0.3
Response to shock in Paid Search
Response to shock in Web Visits
0.25
Revenues Response
Revenues Response
0.3
0.2
0.1
0
-0.1
-0.2
0.2
0.15
0.1
0.05
0
-0.05
0
5
10
15
Weeks
20
-0.1
25
16
0
5
10
15
Weeks
20
25
Summary of Key Findings
• Owned > paid media if high enduring involvement (e.g. fashion, GMAT testing)
but paid > owned if high need only at specific time (e.g. furniture, refrigerator)
• Cross-channel synergy higher than within-online synergy for unfamiliar brands,
within-online synergy highest for familiar brands (e.g. eBay, Kayak.com, Old Navy)
• Earned media has highest elasticity across conditions.
Managerial Implications
Experience (Service)
Search (Product)
Unfamiliar
Owned (and Earned) key to purchase
Owned key to Purchase
brand
Spend on offline media for synergy
Spend on offline media for synergy
Familiar
Owned key to purchase
Paid (and Earned) key to purchase
brand
Spend within online for synergy
Spend within online for synergy
OK, but which paid online actions?
• Content-integrated have highest effect:
Affiliate sites if high enduring involvement (e.g. fashion, cars)
Paid search and price comparison site if high need NOW
(refrigerator, glasses, office desks)
• Retargeting effective if mood of new website matches mood of
your product
19
Proposed Usage: Dashboard input and output
| 20
Comparing profit from saved scenarios
| 21
Want to learn more ?
• It’s not the Size of the Data, it is How You Use It: Smarter Marketing with
Analytics & Dashboards
• Website: www.notsizedata.com for free diagnosis
• Blog: http://analyticdashboards.wordpress.com
• Twitter: @koenhpauwels
• LinkedIn/Twitter: koenhpauwels
• Facebook: http://www.facebook.com/pages/
marketdashboardscom/207532115957700
• Thank you very much for your attention!
Any Questions?
23