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Direct Response Marketing

Field Reports - June 2014

1 Jun, 2014 By: Doug McPherson Response

Majority of Marketers’ Budgets Spent on Direct Response

By Doug McPherson

New York — Marketers continue to pour more money into digital advertising and, more specifically, they’re choosing direct response over branding. In fact, direct response is drawing 60 percent of digital ad dollars across nine industries, says a new report from eMarketer.

Digital direct response and brand advertising both grew at more than 16 percent in 2013, but direct response grew faster and gained $4.74 billion against $2.79 billion for branding objectives, leading to an increase in ad spending market share from 58.4 percent to 59.1 percent, according to eMarketer’s report, “2014 Digital Ad Spending Benchmarks by Industry.”

eMarketer says it has tweaked its definitions of branding and direct response. Previously, the categories were defined by ad formats — display ads marked branding; paid search counted toward direct response. Now, eMarketer classifies them according to the advertiser’s primary objective.

The report reflects ad spending nuances across nine industries: automotive, computing products and consumer electronics, consumer package goods (CPG) and consumer products, financial services, healthcare and pharmaceutical, media and entertainment, retail, telecom, and travel.

The travel industry — such as Priceline and Expedia — spends heavily in direct response, specifically search, allotting a larger share of its digital budget to performance advertising than any other industry: 74 percent.

By contrast, the CPG and consumer products industry — where only a tiny percentage of total ad buying is done via digital channels — spends 65 percent of its digital budget on branding.

By industry, the digital split is relatively consistent. Retail leads the pack, with 37 percent of its ad dollars going to mobile, but the remaining industries post similar ratios. In the coming years, eMarketer expects a larger divergence by industry, with certain sectors, such as retail and automotive, exploiting location-based ads.

Ezra Palmer, senior vice president and editorial director at eMarketer, told AdAge, “The growing digital space means that direct response behaviors can be completed far more easily.”

Facebook, Google and Twitter have recently introduced native ad formats and products that analysts say have paved the way for ad dollars to move into direct response tactics such as app-install campaigns. Location technologies, which aim to push consumers into stores using mobile ads, are also luring more marketing spending into direct response.

eMarketer also split its digital spending survey by channel. Mobile will claim 35.4 percent of digital spending with the remainder reserved for desktop. Advertisers are expected to spend $17.7 billion on mobile in 2014. In 2013, eMarketer reported total U.S. media ad spending of $171.3 billion.

The report says, overall, U.S. advertisers will spend $50 billion on digital advertising in 2014 — the fifth consecutive year of growth since the recession in 2009.

Study on Health-and-Fitness Apps Could Spur Privacy Action

By Doug McPherson

WASHINGTON — A recent Federal Trade Commission (FTC) study might spur increased policing of health-and-fitness data.

In the study, the FTC found 12 mobile health-and-fitness apps that sent users’ personal information to 76 third parties.

Jah-Juin Ho, an attorney in the FTC’s mobile technology unit, said these third parties get some technical information about the users’ phones but also metrics and characteristics about their bodies.

All of the third parties received phone information: the device’s screen size, model and language setting. And 18 of the 76 collected exact information: the phone’s unique device identifier, the phone’s media access control address, and its international mobile station equipment identity.

But others culled detailed consumer information: running routes, eating habits, sleeping patterns and even the cadence of how they walk or run; 22 of the 76 third parties gathered data on users’ exercise information, meal and diet information, symptoms, gender, geo-location information and ZIP codes.

Four apps sent data to one specific ad company without anonymizing the information. “It wasn’t uncommon for third parties to identify users by their first name, last initial and then a stream of identifiers,” Ho said.

Ho didn’t name any of the apps, but the study examined two daily activity apps connected to wearables, two exercise apps, two dietary and meal apps and three system checker apps. “We were as permissive as possible, meaning that if an app asked us for permission to access a certain feature or to sync with another app, we always accepted and opted in,” Ho said.

The Commission’s chief technologist, Latanya Sweeney, says the agency is concerned consumers could be penalized based on health data; for instance, a financial institution might adjust credit ratings based on the fact someone has a disease, she suggested.

The FTC doesn’t have any major health data privacy initiatives in the works, according to a spokesman, but the agency is adamant about protecting consumers from having their health, medical and fitness data shared without their knowledge determining things like insurance rates or drug pricing. A U.S. Senate bill introduced earlier this year was prefaced by a December 2013 Senate Commerce Committee report showing how sensitive health and other personal data is compiled by data firms.

“As we accrue this data and collate it and use it, it is going to be harder and harder to draw that line of what’s health data and what isn’t,” said Joy Pritts, chief privacy officer for the Office of the National Coordinator for Health Information Technology at the Department of Health and Human Services. “I think people’s spending patterns, for example, would never occur to you to be health data, yet that model may be used at some point to treat you and then it does become your health information, doesn’t it?”

Joseph Lorenzo Hall, the chief technologist for the Center for Democracy & Technology, said apps could be putting user’s physical safety at risk.

“If you’re talking about running routes and things like that, you may be able to predict where someone is alone and when they’re not at home and that can be extremely sensitive given your own personal context,” Hall said.

Survey: Ad Budgets Moving From TV to Digital

By Doug McPherson

New York — The Interactive Advertising Bureau (IAB) says in a new report that 75 percent of advertisers foresee original digital programming starting to become as important as TV programming within five years.

The industry group surveyed 297 buy-side brand marketers and advertising agency executives just before the 2014 Digital Content NewFronts.

The survey uncovered a prevailing optimism around digital video, with 65 percent of advertisers expecting to spend more on digital video advertising in the next year than they did in 2013. This comes in contrast to TV advertising, with two-thirds of respondents saying that they will help pay for their digital video increases by shifting funds from TV. Nearly half (48 percent) think the increase in their digital video spend will be backed in part by an overall expansion in ad budgets.

Expectations are particularly high for original content. Executives surveyed said they plan to spend 48 percent of their Internet video budget on “made for digital” video programming in 2014, up from 44 percent in 2012. However, advertisers also said digital content providers must support this increased spending by demonstrating digital’s effectiveness in sales and branding while providing digital metrics consistent with TV.

Marketers still view measurement as the industry’s biggest weakness. Nearly 80 percent of respondents said they’re still looking for research that shows digital video advertising works as well or better than TV ads. While 74 percent said they’d be more likely to increase budgets for digital if there were metrics that are consistent with TV.

More than 80 percent said solutions that enable TV and digital buys in one buy are important. More than three-quarters of respondents spend directly with sites and nearly as many (71 percent) buy via ad networks.

Cross platform buys are expected to increase, particularly among agencies, 60 percent of whom increased spending on cross platform buys in 2013.

“This survey provides invaluable insight into advertisers’ evolving attitudes toward digital video programming and shows that NewFronts is playing an integral part in fueling the movement of ad dollars to the medium,” said Sherrill Mane, senior vice president, research, analytics, and measurement at IAB. “The buy-side is not only foreseeing strong spending at the 2014 NewFronts, but is also recognizing the significant effect it has on their perceptions and budget decisions long after the last presentation is over.”

Connected TV Ads Puzzle Media Buyers

By Doug McPherson

SEATTLE — Connected TV viewing continues to rise, but media buyers are struggling to take advantage of the ad opportunities in the space.

And those opportunities are growing. In April, the Interactive Advertising Bureau (IAB) said 48 percent of U.S. digital video viewers used connected TVs to watch original digital video — nearly twice as many as the same month in 2013.

But a new study by video ad company Mixpo says less than half of U.S. digital media buyers considered buying connected TV video ad inventory when planning an online video campaign. The problem? Lack of knowledge — a full 57 percent of respondents said they didn’t know how to go about purchasing inventory.

Among those who were not buying video ad inventory on connected TVs, nearly 100 percent said they believed it was something to consider for the near future. About 25 percent who said they’d consider making connected TV video ad purchases planned to do so “now,” and more than half intended to take action sometime within the next year.

Other research on connected TV is backing up IAB’s findings. Parks Associates research says in first-quarter 2014, U.S. broadband households watched roughly three hours of online video per week on each of three platforms: mobile phone, tablet and connected TV. Connected TV viewing has rapidly climbed from 2.3 hours per week in first-quarter 2013. Mobile phone and tablet video usage have seen more modest rises.

Parks says 81 percent of U.S. broadband households watch video on a TV set, while 60 percent watch content on a computer, 31 percent watch video on a smartphone, and 28 percent watch on a tablet. The PC was the only platform to show any significant decline in video viewing in the past year.

Brett Sappington, director of research, Parks Associates, said, “Ultimately, consumers can more easily access online video options on a television than ever before. In addition to smart TVs, Blu-ray players, and game consoles, consumers are also buying streaming media players and devices, such as Google’s Chromecast. Pay-TV providers are making a strong push to extend TV Everywhere to a variety of devices.”

California AG Offers Guidelines on Privacy and More

By Doug McPherson

SACRAMENTO — California Attorney General Kamala Harris has issued guidelines that advise companies to make their privacy policies jargon free and to offer mobile-friendly formats.

The 28-page document, “Making Your Privacy Practices Public,” is geared to help companies comply with California’s new do-not-track law (AB370) which requires Web companies to state how they respond to do-not-track requests.

The law also requires all website operators to state in their privacy policies whether they allow third parties to collect tracking data — or information about users’ “online activities over time and across different websites.”

One key question that website operators should consider is whether they treat visitors who send a do-not-track signal differently than people who don’t. Harris suggests those who ignore do-not-track signals should describe how they use “personally identifiable information.”

Site operators who don’t want to address do-not-track in their privacy policies can instead comply by offering a “clear and conspicuous” link to a program that gives consumers a choice about online tracking. But the new guidelines urge website operators to describe how they handle requests, because doing so “provides greater transparency to consumers.”

Jason Kint, incoming CEO of the Online Publishers Association (OPA), calls Harris’ guidelines “a nice start towards more transparency.” He adds that the OPA welcomes “anything that simplifies privacy policies and builds trust.”

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About the Author: Doug McPherson

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