MEASURING THE VALUE OF USERS WHO CLICK ON ONLINE DISPLAY ADS

Patrick WyattHead of Business Intelligence, CriteoJune 2012

RESEARCH PAPER # 1

ABSTRACTA common belief persists among marketers: very few people click on online display ads, and those who do are not the kind of people worth advertising to anyway. This leads to the conclusion that the efficiency of display campaigns should be measured not with clicks, but rather by whether an ad was displayed (so-called “view-through”).

This Criteo research paper aims to show that the bias against clicks is misguided. We have reviewed over $10B of e-commerce sales and have learnt that the audience who clicks on timely, relevant ads is extremely valuable.

1 INTRODUCTIONA much-cited comScore research paper from 2008 entitled How Online Advertising Works: Whither the Click? found that a small subset of people – less than 10% of all internet browsers – were responsible for more than 80% of all clicks. Most worryingly, it produced evidence to suggest that the demographics of clickers are skewed towards younger users aged 25 to 44 earning less than $40,000 per year. comScore concluded that clickers were “…hardly an attractive target segment for most advertisers” 1. Taken at face value, these findings cast significant doubt on the value of clicks and clickers. This study has been so often repeated that it has become axiomatic within the world of online advertising.

But it is often forgotten that the original intent of that study was to discover whether clicks in a brand context were meaningful, and that the study is based on untargeted, non-personalized banner ads. At some point, it became accepted that clicks in any online context are not valuable.

Normally, marketers go to great lengths to get responses from customers, using the marketing channels in which they invest. So before writing off the click, it is worth taking a second look. What we found was surprising and does much to counteract some of the myths that surround click-based advertising.

2 DATASETCriteo collects purchase data from the sites with which it partners in order to provide personalized display adver-tising. For each purchase that occurs on one of our partners’ sites, we record the items bought and their prices, and link this to an anonymous unique identifier stored in a cookie. This provides Criteo with what may be the internet’s biggest structured database of e-commerce transactions. In 2011, Criteo recorded nearly $100BN of online transactions, an amount that is larger than the e-Commerce revenues of either Amazon or eBay.

For this study, we looked at internet browsers exposed to a Criteo retargeting ad during the first seven days of March 2012. This population numbered 147 million unique browsers.

We then split this population into two – those who had clicked on a Criteo banner in the previous six months, and those who had not. For each group, we looked at the sales that these browsers had completed online during the entire first quarter of 2012 – January 1st to March 31st, 2012. We should note that any browser who clicked on other ads but not on a Criteo ad is therefore viewed as a “non clicker” in this study.

The total sales considered in the study amounted to $11.5 billion dollars.

RESEARCH PAPER # 12

MYTH 1“People who click don’t buy”

“The demographics of clickers are skewed towards younger browsers aged 25 to 44 earning less than $40,000 per year. This is hardly an attractive target segment for most advertisers” 1

Demographics are taken by comScore as a proxy for user value. We have the luxury of being able to measure user value directly, in terms of the online purchases of clickers and non-clickers. We see that the clicking audience is much more valuable than the audience who does not engage with our ads.

Figure 1. Number of tracked online sales per browser exposed to an Ad (Q1 2012)

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RESEARCH PAPER # 13

3 EXPLODING MYTHS ABOUT CLICKERS

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Clickers Buy 3x More Frequently than Non-Clickers

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MYTH 2“Nobody clicks on ads anymore”

“Recent research conducted by comScore on behalf of Starcom and Tacoda showed that average click rates on display ads in 2008 were less than 0.1%....The comScore research also revealed that two-thirds of Internet brow-sers do not click on any display ads over the course of a month” 1

Our research shows very different results.Almost half of regular buyers on our clients’ e-Commerce sites are clickers on Criteo ads. In contrast, those who don’t buy are much less likely to click on an ad. Thus the behavior we see is what you would expect: the more interested you are in buying, the more interested you are in the ad.

This study is able to track only whether users clicked on Criteo ads: if we were able to track clicks on all (Criteo and non-Criteo) advertising, the proportion of regular buyers who click would be likely to be higher.

Our conclusion is that the most valuable browsers of an e-commerce site – their buyers – are engaging heavily with online display ads.

We have wondered why comScore sees such different results. Our hypothesis is that the comScore results are based on traditional display ads, which are not personalized and targeted to an individual browser’s interests, and may not always be optimized to ensure that the ad is seen.

Figure 2. Share of client site visitors that are clickers on Criteo ads, as a function of their buying behavior. *

RESEARCH PAPER # 14

* “Occasional Buyers” are those who made one purchase in Q1 2012. “Regular Buyers” are those who made 5 or more purchases.

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REALITY 2

Almost half of regular buyers click on Criteo ads alone.

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MYTH 3 “A small number of people are responsible for a disproportionate number of clicks”

“The comScore research also revealed ….that only 16% of Internet browsers account for 80% of all clicks” 1

This statement is in fact partially true, but should not be taken as surprising, or even problematic. We see that 80% of clicks are contributed by 50% of clickers, so much less skewed than the comScore research, but still with most clicks coming from only half the browsers. This is actually a classic exponential distribution, which we see in many other cases.

One compelling example is the share of online sales that come from a small number of browsers. This shows a very similar distribution to that of clicks.

RESEARCH PAPER # 15

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Figure 3. Shows independent Distributions of Sales and Clicks (Q1 2012)(For the intersection of these groups, and an answer to the question “Do people who click more also buy more?” see Myth 4.)

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20% of browsers are responsible for 50% of clicks and sales

MYTH 4“People who click a lot don’t buy a lot”

A final variation on these myths is the idea that there is a small group of browsers who have nothing better to do than to click on online ads, but who are not serious shoppers. This too is inaccurate: those who click heavily are the same people who are buying heavily.

Figure 4. Average sales per user as a function of the number of clicks (Q1 2012)

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RESEARCH PAPER # 16

REALITY 4

The more browsers click, the more they buy.

4 CONCLUSION

REFERENCES[1] comScore, How Online Advertising Works: Whither the Click? (2008) http://www.comscore.com/layout/set/popup/content/download/1214/13682/file/How_Online_Advertising_Works.pdf[2] comScore, Natural Born Clickers (2009)http://www.comscore.com/Press_Events/Press_Releases/2009/10/comScore_and_Starcom_USA_Release_Updated_Natural_Born_Clickers_Study_Showing_50_Percent_Drop_in_Number_of_U.S._Internet_Browsers_Who_Click_on_Display_Ads[3] Nathan Woodman, Natural Born Clickers (2012)http://www.clickz.com/clickz/column/2166536/natural-born-clickers

RESEARCH PAPER # 17

Together, this data makes a compelling case that the “click” can be a genuine expression of purchase intent, and is not, as was suggested, mainly accidental or spurious.

This is not to deny that some clicks on online display are of low value. If you show someone a badly-targeted, poorly-timed, or irrelevant ad, then the clicks gathered will not contain any meaningful intent. If your CTR is 0.06% – fewer than 1 in 1,000 impressions are leading to a click – then it should be no surprise that the clicks the ad is driving are inherently worth very little.

Nothing here should be taken to cast doubt on comScore’s original paper, which was based on the performance of low-CTR, branding-oriented advertising. However, the clear message is that their lessons cannot be applied to properly-executed performance display advertising. If your relevant and timely ad campaign shows a CTR of 0.8%, which means that almost 1 in 100 Ad impressions is sufficiently engaging to interrupt what the user was doing on that page, it is a strong sign of genuine interest from real browsers who want to buy your products.

i) Almost half of regular buyers on e-commerce sites click on Criteo’s online display ads

ii) These clickers buy much more, on average, than non-clickers

iii) Those who click more, buy more

We have demonstrated that, within the population who have seen Criteo ads: