By Todd Crawford on November 4, 2015
Online advertising spend is expected to top $66 billion in 2016 and will exceed offline advertising for the first time – a year ahead of schedule*. But all this success is not without challenges – ad fraud is growing too. Robots acting as humans generating impressions and clicks resulted in an estimated $6.3 billion in ad spend that did nothing for advertisers in 2014.
Fraud, once discovered, skews advertisers’ ROI metrics. Most CMOs can live with a +/-1% to 2% margin of error but when those numbers jump to 10% or 20% due to ad fraud, something has to change or those dollars are going to be spent somewhere else.
The industry is responding: Google recently announced it will only charge for viewed ads and has also put a lot of effort into minimizing click fraud in AdWords. Others are doing their best to follow suit and appease advertisers suspicious of ad fraud but “makegoods” only go so far.
Performance marketing helps eliminate ad fraud seen in display and paid search by removing the risk, ensuring that every ad is viewed and clicked by a human. How is that? Well, performance marketing only charges for the conversions as a flat cost per action (CPA) or a cost per sales sold (CPS). Is affiliate marketing immune from ad fraud? Of course not, but it does greatly reduce the risks to the advertiser compared to display and paid search.
In the acquisition funnel, impressions are at the top and there are more of them than any other event. Next come clicks, and of course there are fewer clicks than impressions. Last comes conversions. Unfortunately, those are the rarest events that occur in the marketing funnel and they are also the most valuable. Affiliate marketing focuses on those conversions, whether it’s sales, leads, registrations, reservations, calls, app installs, etc. Reducing potential fraudulent activities makes it easier to monitor and mitigate ad fraud.
Performance marketing cannot replace display and search marketing, but it can play a vital role in a diversified marketing portfolio and should be leveraged to it’s maximum.