Internet Advertising MBA

When you just start out in any space, it is easy to feel out of place, and when you’ve worked in a space for a long time, it’s just as easy to spot those who haven’t. If you are the newbie, you might understand the concepts but not know the right language to describe them in a manner that others around you will easily get or in a manner where they won’t think you somehow less knowledgeable. I certainly don’t envy those just beginning out. Our world especially is one full of acronyms – cpc, cpa, cps, cpl, ctr, cvr, cpm, ltv, roi, sem, seo, etc. It’s one that deals with landing pages, sub-id tracking, creatives, email versus search versus display. It encompasses various companies and entities – affiliates, publishers, ad networks, affiliate networks, advertisers, and cpa networks, along with jobs that don’t exist anywhere else – affiliate managers, traffic coordinators, campaign managers, search specialists, etc. If you’ve worked in the space for a while, you probably take for granted all that you know that others might not. I know I certainly do, and it isn’t until I talk to someone who knows only that Internet advertising might have something to do with Google that you realize the information you have absorbed as a part of working in the space. Working in the space, though, isn’t just about picking up the lingo and rattling off names of companies and terms. The beauty of the space is that believe it or not, it does help you understand the business world at large. Let’s take an unlikely example, IKEA.

By now, a good percentage of those reading have probably now visited an IKEA. My first experience took place before I started working in the Internet advertising sector, and at the time, I found myself awed by the affordable style, the layout, selection, and of course the meatballs. Now, though, I look at IKEA much differently. I still like the meatballs, but instead of seeing the store as just a place to shop, I see it as real-life example of what we in the performance marketing space deal with on a daily basis, digital concepts with lingonberries.

• Squeeze page / Conversion funnel – So much of the direct response space focuses on the sale, but saying "Buy now!" doesn’t always, work. You have to lead them to the sale, to build their interest and as importantly, control their experience. In the online world, we refer to squeeze pages and the conversion funnel. Have you ever thought about IKEA and why shopping there requires following a set order; you don’t get to just wander indiscriminately; you follow a path. At first it might seem like Scandinavian quirkiness or good traffic flow, but it’s all about controlling the experience and bringing you closer to a sale.
• Engagement – We want people to spend time on our sites. We want a conversion to happen, but we want them to engage first, as that will lead to more conversions. If a person feels more attached to the place, they will feel more comfortable. If they spend more time on a site, they will feel more comfortable buying. The meatballs aren’t just to be cute. They build the experience; they aren’t cheap because of poor quality. They get you thinking about IKEA in a certain way. Spend five dollars, and you’ve spent five dollars, but you are much more likely to spend five-hundred now as your mind equates that couch to the meatballs – good quality at a price I can’t pass-up.
• Conversion rate – The first two concepts certainly play a role in this one. IKEA isn’t just successful because of its price and style. Plenty of places have good style and good prices, but IKEA does well because people buy. Their conversion rate is higher than other stores. People that go into IKEA are more likely to come out of IKEA with something than they are at other stores. You might think you go there to just look, but their conversion funnel is just that good – from the one way traffic, the restaurant, the ordering of the departments, and even the way they show you fully-set up rooms, but also much of the furniture in an a-la-carte setting.
• Cost per sale (average order) – Had I not worked in the performance marketing space, I also wouldn’t have thought about a shopping experience in terms of cost per sale. I would have looked at IKEA, seen people buying, known that it has often met my needs, but not stopped to consider not only the percentage of people that buy but how much each person buys on average. Again, I suspect that another quantitative measure of IKEA’s greatness comes when comparing their average order to their peers. Getting back to their conversion funnel, you must experience almost everything in the store just to get to checkout. They’ve smartly built in a few short-cuts, but in many respects, they are like buying a domain with GoDaddy. We might think that GoDaddy has an incomprehensibly ugly checkout process, but they do it on purpose. Their customer is not the net savvy person, but the one likely to think they need these other services. They don’t want to make it easy to buy a domain. There’s not money in $10 names, but there is a lot of money in $19/month and up hosting packages that have a ridiculous profit margin. The same holds true at IKEA, except their shopping experience has a more pleasant feel to it. But, their genius is using that feel to lead to more orders per people and more money spent per person.
• Lifetime value – The last component of IKEA’s success, at least in the direct response comparison, is the amount people spend with IKEA throughout their life. With more sales per shopping experience and more money spent per visit, the more visits they get the more money they make off a person. And here comes the meatballs again. IKEA has figured out how to get people to want to come back to their stores, not to mention the level of innovation they have on their website to make the physical destinations not a barrier to sale. At IKEA, it’s the little things too – noticed the super cheap hot dogs and yogurt after checkout? It’s all a way to continue the parting of money but in a way that both makes the person feel good and bring them back.

• Cost per acquisition – We focused on IKEA and their revenue components, but we didn’t even get to talk about their cost basis. IKEA might have huge stores, but they place them in locations with generally low rent compared to the Bed Bath and Beyond or other "big box" stores. You don’t see IKEA’s piled high with products, an innovation that Bed Bath implemented to reduce the space needed for housing inventory. In other words, their cost to acquire a new user is lower, especially with their overall limited number of stores and the incredible buzz they generate from other shoppers.