At Last, a Way to Measure Ads

By Michael Totty
Staff Reporter of THE WALL STREET JOURNAL

Marketers have long quoted John Wanamaker, the Philadelphia retailer who famously said, "Half my advertising is wasted. I just don't know
which half."

With the Web, online marketers say, they finally know which half.

That hasn't always been the case. Until recently, online businesses could figure out how many visitors came to their Web site from a particular banner ad or e-mail pitch. But they couldn't easily tell which of those visitors were spending money, or how much they were buying.

But now a new set of tools, by tracking every click a visitor makes through a site, can not only tally the number of visitors drawn by a particular ad but also tell which campaigns are bringing in the most sales and the most profits.

These tools "marry data about who's buying what with traffic data -- who's going where," says Matthew Berk, a senior analyst with Jupiter Research in New York. "When you combine those things, it can be really powerful."

Just Looking, Thank You

The ability to measure ad performance is only one feature of "Web analytics" software, which e-tailers increasingly are using to better understand how customers interact with their sites. Forrester Research Inc., a Cambridge, Mass., technology consulting firm, counts at least 27 vendors selling Web analytics tools, including NetIQ Corp., San Jose, Calif.; SPSS Inc., Chicago; WebSideStory Inc., San Diego; Omniture Inc., Orem, Utah; and Coremetrics Inc., Burlingame, Calif.

The tools make it easy to spot ads that bring in a lot of browsers who don't spend a lot of money. For instance, Dartek.com, an online discount computer store, last year launched a series of banner and pop-up ads.
The campaigns were expensive, accounting for about a third of Dartek's fourth-quarter advertising budget, and they brought a lot of visitors to the site ( www.dartek.com <http://www.dartek.com/> ) -- at the peak, the pop-up campaign brought in nearly 1,900 visitors in one day.

But these visitors weren't buying enough to cover the cost of the ads. "Fortunately, we were able to see that [the banner campaign] was not for us," says JoAnn McNeely, Dartek's marketing projects manager in Naperville, Ill. Ms. McNeely uses analytics services from WebSideStory to track the 30 or so advertising campaigns she's running.

Paying by the Word

Mr. Berk, the Jupiter analyst, says retailers' growing reliance on search-engine advertising is helping drive their use of analytics tools. Advertisers often buy scores or hundreds of search-engine terms, and pay whenever someone clicks on the ad. Costs can add up, so sites want to know which ones are delivering.

Restoration Hardware Inc., the Corte Madera, Calif., home-furnishings retailer, used an analytics tool from Coremetrics to find out which ad terms would pay off and which wouldn't. It tested about 120 keywords on Microsoft Corp.'s MSN search portal and found that many of the most popular -- and expensive -- terms were attracting visitors but not producing sales.

For instance, Restoration discovered that the term "mirrors" accounted for 5% of its total "click" charges in March, but not many of those shoppers actually bought anything. More specific terms -- "bathroom mirrors," "wall mirrors" and "decorative mirrors" -- cost less because there was less demand from other advertisers for them, but they produced three times the conversion rate, or the percentage of visitors who ended up buying something.

"We now can quickly and easily identify the individual terms that are driving sales, or driving costs, taking the guesswork out of search marketing," says Feather Hickox, Restoration's Web manager. "For a company our size, it's critical."

Coremetrics, like WebSideStory and many other Web analytics firms, is an "application service provider," selling its analytics tool as a subscription-based service that its customers access using a Web browser. Costs for the services vary: Coremetrics' charges start at $6,000 a month for its total analytics package, and $4,000 a month for the marketing module alone, depending on the volume of site traffic or total number of marketing campaigns that are being tracked. WebSideStory's service starts at $15,000 a year.

Inevitably, all this data collection raises concerns about privacy. Many analytics companies use "cookies" to identify each visitor to their customers' sites; the cookies let trackers tell when a customer returns to a site, so they can give credit to a particular marketing campaign even if the shopper doesn't purchase until the second or third visit. The analytics companies say they don't keep any personal information, such as names or credit-card numbers, that can be used to identifyindividual shoppers.

Still Some Mysteries

Despite their success at unraveling the mysteries of online marketing, more data can't always explain everything.

CompUSA Inc., a Dallas-based computer retailer, began using Coremetrics last fall to test the effectiveness of different e-mail marketing messages. Its marketers sent to a group of prospective customers nearly identical messages with different subject lines. Some subject lines touted specific prices and products, while others offered more-generic low-price messages or highlighted new technologies, such as Intel Corp.'s new Centrino wireless chip.

But they found that no single message consistently brought in more sales. The message with the price information did well during the post-holiday period in January and early February, while the Centrino message outperformed the others around the time Intel launched the new chip in March.

The test is continuing, but CompUSA's marketers are still trying to make sense of the results. "We haven't found the key," says Al Hurlebaus, CompUSA's director of e-commerce. "Sometimes I have to remind my team members, and remind myself, that we've been in this business for years and we're very successful. It's not necessary that we forget everything we've learned and use the tool to make decisions for us."

Mr. Totty is a news editor for The Wall Street Journal Reports in San Francisco.

Write to Michael Totty at [email protected]