Negative Advertising ROI

Negative advertising is something of a misnomer for marketers who believe that all publicity is good publicity. At very least it is an oxymoron. However, clients of advertising agencies tend to adopt a different position: that negative advertising is bad business. And the hallmark of negative advertising is a poor ROI. Should any form of advertising that suffers from negative ROI be tolerated by marketers and their clients?

One problem is that ROI is not always measurable. Companies may spend millions on television adverts, for example, only to be told after six months that their efforts failed to produce a good return. But how can anyone know for certain?

In 2004, Deutsche Bank published a report that claimed 82 per cent of television advertising campaigns produced a neutral or negative ROI in the short term. Some commentators used the research to question why online merchants appeared to be so obsessed with calculating the ROI of web-based advertising. But the figures were misleading, as further probing revealed that almost half of campaigns generated positive ROI within twelve months. In other words, television advertising takes substantial time to produce results.

Online advertising is somewhat different. Many businesses rely on paid search (PPC) marketing, which is capable of producing measurable results within a matter of hours of a campaign going live. Unlike television adverts, the success of which is almost always estimated, paid search campaigns provide marketers with definitive results.

Google AdWords users can monitor campaigns on a real-time basis to assess performance, which tends to revolve around conversions (i.e., clicks on ads that have led to a purchase or targeted activity). The conversion rate of an ad does not reveal the complete picture on ROI, however, as the average cost-per-acquisition (CPA) must also be considered. When a conversion rate is low and the CPA high, paid search campaigns may be heading towards negative ROI.

Paid search account managers can use a variety of tools to optimise campaigns that are failing to perform as expected. And this should be the starting point for any paid search activity: to fix a campaign, not abandon it. Costs can be reduced and performance improved by lowering the average cost-per-click (CPC); competing for lower ad positions; selecting more specific keywords; creating a list of negative (undesirable) keywords; activating location targeting; optimising ad copy, and publishing separate landing pages for each keyword. Those steps can improve the Quality Score of ads, which has the effect of reducing costs and improving conversions for AdWords users.

Other forms of online marketing are not as measurable, however. And this is where the issue of negative ROI becomes more complicated.

As with television advertising, the benefits of online marketing are not always obvious. Sometimes results are impossible to measure. Business owners are naturally reluctant to invest in advertising techniques that cannot be measured reliably, but that is precisely what they need to do from time to time.

Arguably the main benefit of any form of internet-based advertising is brand exposure; making people aware of a brand is undeniably important, even if results cannot be easily measured. Advertising on social networking sites such as Facebook and YouTube, for example, can enhance brand recognition among users, but may not necessarily translate into measurable results. At least not immediately.

Businesses should not necessarily give up on advertising campaigns that are difficult to measure, because not all campaigns work in the same way. If negative ROI becomes a problem, alternative forms of advertising should be considered, though not necessarily as a replacement for existing campaigns. The secret is to understand what benefits can be derived from specific kinds of online marketing, only some of which produce measurable returns.