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Why Retargeting Providers Don’t Help You Deliver Net New Revenue

Written by: Erik Mansur, VP, Product and Engineering

Here are two gripes that unify all marketers: First, there’s limited time to accomplish the tasks at hand, and second, as marketing efforts advance the list of tasks gets longer every year.

Lack of time and an expanding workload have given rise to specialized services that help make a marketer’s life easier by removing the burden of being responsible for every function in the marketing funnel.

For example, creative agencies take on graphic design and video production, eliminating the need to do it internally. Public relations firms serve as the publicity arm for marketing, with an established network of media contacts too vast for most marketers to manage.

Related post: Retargeting Management: It’s Time to Change Your Approach

Display retargeting is also a task often handled by agency-style solutions. But while creative and PR agencies are collaborative by nature, retargeting services often put their own interests ahead of their clients’.

A “black box” approach to reporting ad performance data allows these agencies to take on media spend and obscure true delivery metrics, with media markup as high as 42% helping to pad the agency’s bottom line. A brand’s lack of understanding over true performance goals allows these agencies to optimize for the wrong metrics, which could be costing an advertiser money instead of driving higher revenues.

Retargeting metrics done wrong

Retargeting providers typically focus on CPC (cost per click) or CPO (cost per order) — and will aim for achieving an agreed-upon goal … the lower the better.

But the agency knows that the advertiser will only continue to spend if those cost goals are achieved on a regular basis, so it behooves them to seek out either more affordable clickers (on lower-tier websites with lower CPM rates) or users more prone to buy products given their active purchase history. That way providers can deliver more clicks or more orders, showing lower costs for higher levels of spend.

With a lack of data transparency, nothing can be done to stop retargeting providers from taking credit for purchases that would have happened regardless of an ad.

However, if those clickers didn’t lead to increased revenue or if those purchases weren’t influenced by the retargeting ads themselves, then those advertising dollars were ill-spent.

The same goes for ROAS (return on ad spend) or ROI (return on investment) goals — revenue as a function of an available advertising budget. With the aforementioned lack of transparency, nothing can be done to stop retargeting providers from taking credit for purchases that would have happened regardless of an ad, particularly because the providers need to show higher revenue to justify the continually increasing ad spend.

Incremental Revenue: The only measure the matters

Ultimately, it seems silly to judge the success of retargeting ad spend on fungible metrics from a vendor that has seemingly all the data yet is unwilling to provide a clear and transparent way to measure it. It’s the reason why net-new revenue — as in incremental revenue, not that unreliable number calculated against ad spend — should be the only metric that matters to an advertiser.

The reason why marketers can’t use net-new revenue as their key performance metric is because they don’t have access to those numbers. Why? Retargeting providers keep them hidden because it doesn’t benefit them to show those numbers.

Related post: Why Battle Over Advertising Attribution When Incrementality Can Win the War?

Furthermore, retargeting providers play the attribution game by taking credit for more orders and thereby making more money. As a result, they’ll only optimize toward users with higher predicted purchase rates and never toward higher incremental revenue.

But with the amount of data available to these providers, measuring for incremental revenue wouldn’t be difficult. If they can predict a user’s purchase rate using actionable data from other advertising campaigns, they could just as easily do A/B testing to predict that a user would be more likely to purchase from having seen an ad — or not having seen one.

That’s how a company determines incremental revenue, which is an optimization goal that’s far more in-line with the company paying for the retargeting spend than the company providing retargeting services. This is the reason why marketers are being taken advantage of, and it’s making their jobs harder instead of easier.

Go in-house to save time and money

It’s often said that “time = money.” Marketers, like most professionals, are willing to give up a portion of money to help improve time efficiency. But when it comes to retargeting, most agency-style solutions are willingly wasting ad spend and lining their own pockets under the guise of saving time.

The tide is changing, however, and busy digital marketers are waking up to the idea that it’s possible to accomplish both time and money goals by taking their retargeting spend in-house, gaining full transparency of their data and optimizing toward net-new revenue.

Retargeting agencies are simply not in the business of delivering those results for you.

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