Transacting On Business Outcomes Is A Bad Idea

“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Marc Guldimann, CEO at Parsec Media.

Paying for business outcomes has recently gained popularity with media buyers and brands.

The idea is that media buyers only pay for advertising when a desired result happens, such as a consumer buying a hamburger. By paying for performance, the argument goes, media buyers don’t take any risk and capture the profits of what works.

At first blush, outcome-based advertising seems like an excellent deal for brands. They can control the cost of customer acquisition and scale without risk. All they have to do is cut their media partner a check for every unit sold and, voila, no more ROI risk.

Except it’s not that easy, nor is it actually a good idea for a number of reasons.

Risk Requires Control

When a media company guarantees results from advertising, it is inherently assuming risk of creative performance, checkout flow and even product quality. The media company will inevitably demand control of those aspects. That is something no brand is comfortable giving up.

Atrophy Of Customer Acquisition

Whatever control brands do relinquish will result in long-term diminished skill sets. While the brand’s abilities weaken, the media company becomes more sophisticated at finding customers and connecting them with advertisers. Information about who buys and who doesn’t is used to strengthen the media platform and make it more efficient.

In the long run, there is little doubt this expertise would be used to drive outcomes for the highest-paying brand. What’s to stop a competitor from simply offering more money to a seller of outcomes and cornering the market for new customers?

Low-Quality Outcomes

When a brand pays for an outcome, it is likely to get the cheapest version of that outcome. After all, a media company is out to maximize its own margin.

In many cases the outcomes are customers who have been incentivized with coupons and other discounts, convinced to buy something because of a bargain rather than a meaningful connection with a brand.

Attribution Is Intrusive And Imperfect

Attribution requires a massive tracking infrastructure, creative exposures need to be recorded and data about outcomes must be shared between systems. This flies in the face of consumer opinions, which have made it clear that tracking is unwelcome, especially when it’s shared between firms.

There is also no way for attribution systems to take into account the long-term impacts of branding. How can an attribution system know that I bought a new M3 because I used to pore over the 2002tii stats with my dad, and not because I saw a pre-roll on YouTube recently? Short answer: It can’t.

It’s common knowledge that the metrics used to transact digital media are opaque and fraught with risk, but the idea that a marketer should only pay for outcomes is a pendulum swung too far. Buying outcomes is akin to outsourcing a marketer’s reason for existence: to generate demand for their product, moving farther away from the consumer and closer to a role as a cog in the supply chain, which is something no brand should be aiming for.

Follow Marc Guldimann (@guldi), Parsec Media (@ParsecMedia) and AdExchanger (@adexchanger) on Twitter.

This post was syndicated from Ad Exchanger.