What Is Performance Marketing?
There seems to exist two definitions of performance. One is the definition that our industry has used almost since the inception – a sale or a lead. Performance for us has been about risk further down the funnel. It has been about getting paid when the other person makes money or at least defined by the ability to lose money in the process.
More recently, the term performance has been adopted, if not slightly hijacked by those who wanted nothing to do with both the term and those who helped legitimize the term. Imagine that you have been fighting what feels like an uphill battle – first to convince advertisers that a no-risk model works for them and then to deliver scale. Year and after year, you chip away at both the internal issues and the ever changing ad landscape. You have finally come to a point where, through tireless effort and no shortage of money lost testing, you feel the road start to level out. Then comes a company or two who wouldn’t touch performance or adopt their practices to performance previously start to talk about performance. That’s what we have seen recently.
When you think about how Google or Facebook have shifted their messaging to advertisers over time, you see more talk of performance. But, it’s not true performance the way that our industry understands it. Leaving alone the notion of getting paid on a sale, as we said to open, the idea of performance means that the traffic supplier can lose money trying to hit the objectives of the advertiser. That cannot happen for Google or Facebook. If they charge on a per-click basis, there is no chance for them to lose money. They aren’t taking any risk.
That’s the most difficult part for someone who has spent a significant time focusing on what they thought was performance – to see companies who haven’t had to risk as much as we have leveraging the benefits of the term. It might have been naive to think that when performance became paramount to advertisers, that those with expertise in performance marketing would benefit. That was certainly optimistic if not incorrect, and it has been interesting to watch it play out as brands still spend heavily on things with light performance metrics – Facebook likes, video views, Twitter followers, etc. Those in our space can tell you that the hundreds of millions of dollars that continue to flow through these channels, have only in the slightest percent come their way.
It feels like we sit on the cusp of another major shift. One that might create new opportunities for the classic performance marketer. Advertising is not necessarily in a good place. More and more it feels similar to 11+ years ago, to a period where internet advertising was booming but the foundation supporting the spend tenuous at best. Then, the companies spending money were almost incestuous. You had big spenders buying clicks to get traffic. Prices were arguably high, and equally important, the pool of spenders was both limited with big budgets backed by feeling not data. It was a period of hype and hope, but the crash showed just how stable a base built on hype and hope can be.
With some parts of social and mobile, it feels like another period of hype and hope. We know without a doubt that time spent in mobile is increasing in the same manner that time spent online did during the first internet advertising boom. Just as connected PC’s changed how we worked and how business could be done so too is mobile. The tablets of today are more powerful than the laptops of the early 2000’s and the connectivity speeds equivalent to what used to cost a business $1500/month.
With mobile or perhaps more broadly the Post-PC era, there is something there there, but we just don’t know what we don’t know yet. The world is changing, but it’s very possible that we could experience another growing pain. There is something slightly unsettling when we see mobile games buying ads on mobile devices with money that isn’t directly tied to profits, or apps buying incentivized installs on Facebook from a marketing budget that isn’t correlated to the profitability of the channel. Hopefully, today’s dollars spent on new channels and platforms have greater grounding – both as a percentage of profits and from profitable companies – than the marketing budgets of the first internet boom. Whether we see a slight correction or not, it feels to us like a chance for those who understand how to evaluate the true value of a channel / platform to shine. Performance may not be what it once was, but it doesn’t mean that it’s no longer the domain of those who helped create it.
