Does Digital advertising actually work?

Can Digital Advertising Deliver Real Returns for Businesses?

Many businesses and even digital marketers often ask, "Does digital advertising actually work?”. Does digital marketing drive a positive ROI? It's a valid question that has crossed my mind during my many years of industry experience working with start-ups, advertising agencies and major brands with million $ budgets.

The eBay PPC Case Study

Recently, I stumbled upon a Freakonomics podcast episode featuring Stephen Dubner discussing whether digital marketing is effective. While I'm a fan of his work and appreciate the questions they tackle, I found their approach somewhat lacking in comprehensive examples from a digital marketers real platform knowledge and didn’t cover different industry sectors which is a key component. In the podcast ‘Does Advertising Actually Work?’ (Digital), they cited eBay's decision to cut its significant PPC (Pay-Per-Click) spend, resulting in minimal impact on their revenue, as evidence against digital advertising's effectiveness.

The Role of Brand Spend across Paid search

However, before we jump to conclusions, let's consider a crucial factor: the specifics of eBay's advertising account and their media budget allocation. Drawing from my extensive industry experience spending big and small budgets, I've observed that large brands often allocate a significant portion of their budget to brand spend across Paid search, which is bidding on keywords containing their brand name. So this means you’re paying for people who are actively searching  and in-market for your brand. Typically, brand spend accounts for 25-65% of the budget in large accounts. This doesn't necessarily indicate poor efficacy of digital marketing but rather raises questions about how much brand’s are allocating budget to within specific channels. The effectiveness of PPC varies based on the product, individual brand goals, size, industry, and competitive circumstances.

Factors That Define Effective Advertising

When we look beyond Performance marketing to broader reach advertising like YouTube ad, Facebook ads, or  digital TV, it becomes challenging to definitively claim that this form of advertising "works.” To determine whether digital advertising works, we must consider various factors.

• For ads to be considered effective, how long should it take for someone to make a purchase after seeing the ad? 

• Does a purchase take 10, 45, or even 90 days after seeing the ad count as a success?
  Additionally, did the ad truly influence the purchase decision, or was the consumer already inclined to buy from that brand? 

• Did the individual have prior knowledge of the brand, and if so, which touch points (e.g., TV ads, Facebook ads, Google searches, or email newsletters) drove that initial awareness?

All these questions underscores the difficulty in definitively answering whether digital advertising work? But a better question is ‘did it have an impact on the purchase?’ If it does, was it a positive ROI? I've witnessed numerous poorly executed digital and wasted traditional billboard campaigns that I can confidently report did not yield positive result.

The Importance of a Holistic Marketing Approach for success

Across many small and large clients, using a performance marketing and brand-lead approach has helped achieve a brand’s growth and also drive a positive ROI. The success relies on looking at marketing and branding holistically both digitally and offline, understanding your consumers behaviours, audience targeting, and looking at customer’s lifetime value rather than as a one-time purchaser. However, it's crucial to remain vigilant against ineffective digital marketing campaigns that waste money. 

I've shared my perspective; I'd love to hear your thoughts on the matter.