With all the (well-deserved) fuss over attribution management these days, it’s probably worth spending a little time on why it’s important from a macro, problem-solving perspective.

We think CMO’s and CFO’s are trying to solve two big problems:

1.    Lack of Historical Insight

This is the Yesterday Problem. With all the complexity of running multiple campaigns across several different media, advertisers are unable to accurately determine whether their overall mix of online advertising investments generated a sufficient return. Attribution is important because it allows marketing folks to roll up performance by categories (or as I call them, asset classes) while taking into account their influence and interdependence within the overall portfolio.

Attribution is a requirement for accurate performance measurement. If you want to know how much your banner campaign contributed to the bottom line, for example, you have to understand the role display ads played in introducing or influencing the ultimate sales. The ads might have been more, or less, valuable than your initial assumption.

Without attribution, you’re just guessing at the past performance. Guessing is okay for explaining why the Cleveland Indians haven’t won the World Series in the last hundred years. But as an historical financial tool, it’s generally frowned upon by CFO’s.

2.    Lack of Actionable Intelligence

This is the Tomorrow Problem. Historical insight is all well and good, but what marketers really care about is how it can be used to predict what they should do next.  Attribution provides the data they need to optimize the financial performance of their portfolio. It provides the inputs for budget allocation models and helps marketers decide into which advertising bucket they should drop a marginal dollar.

Attribution is a requirement for accurate valuation – in other words, figuring out what an advertising asset is really worth. Without accurate valuation, allocation analysis is pointless. And even the most sophisticated optimization and simulation tools won’t help. If you’re asking, for example, whether to allocate more spend to search or display (given current market conditions, business objectives, etc), you’ll just get a highly refined and sophisticated answer that happens to be completely wrong.

Without attribution, you’re just guessing at the future performance. Guessing is okay for picking which team other than the Cleveland Indians will win the World Series this year. But as a predictive financial tool, it’s generally frowned upon by CFO’s.

The way to solve the problems of Yesterday and Today is to build tools that accurately measure and optimize returns across a complex, cross-media advertising portfolio. Attribution Management is a critical piece of the solution.

This entry was posted on Friday, June 19th, 2009 at 12:47 pm and is filed under All Blogs, Attribution Management. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.