If you are a marketer or advertiser you might agree that we live in the most interesting era for advertising. Every single event is measured. The amount of available data is extreme and everything is analyzed in real-time down to the second.
New platforms introduce new technologies and these new technologies lead to more and more reporting. With new capabilities comes great responsibilities. Without noticing, when we start advertising on platforms like Facebook and Google, we’re allowing them complete access to all our sacred data and they can track everything on our websites for the sake of better advertising performance.
The introduction of tracking pixels and the complete takeover of assets and data has introduced some interesting phenomena. One of them that I would like to expand on in this post is what I call the “floating” conversion effect.
If you have an online store or website that has existing traffic and decide to start advertising online, you might have noticed an interesting phenomenon. It starts when you launch your first few campaigns on an advertising platform such as Facebook, Instagram, Google, etc. Right after you launch, you open up your ads manager and you noticed that you’re already making money! The ads manager report shows that some conversions were generated and suddenly you burst with joy.
You start thinking that you are on to something and moving forward, it will only get better. In some rare cases, it can because you launched an ad for a product that everybody wants and you’re off to an exceptional start. You already get sales and conversions from people who have never heard about your brand before. In more realistic cases, those conversions are what I call “floating” conversions. This means that even though the advertising platforms are reporting these conversions and taking credit for them, most of these conversions would have happened regardless of the ads.
Think of the existing traffic that you already have. Floating conversions are like gray and dark floating clouds. They are either producing rain or can potentially produce it soon. This traffic could be users who come from organic sources, visitors coming from your social media profiles, your repeat customers, or paid traffic that is coming from other advertising platforms.
Some users might be in the process of purchasing, or planning to purchase and showing them an ad might cause them to purchase sooner. The difference in the level of intent between a user who has never heard about your brand and someone who is currently thinking or in the process of buying is extreme.
What happens from an advertising platform perspective is fascinating. The platform’s algorithms start calculating and predicting a massive range of scenarios and prediction models. The goal is to get you a conversion as fast as possible and at the lowest cost to you. They don’t care or factor in which user is already in the process of purchasing or which user has never heard about your brand. All they care about is helping you achieve your advertising goal.
If your goal is to get conversions, they will look for the users who have the highest chances of converting and these users are either in the process of converting or are likely to convert. It’s not like advertising platforms are trying to purposely claim conversions they didn’t contribute to. Take, for example, a user who regularly purchases from you several times a month. If by showing him an ad or two, you increase his lifetime value and create a lift in his total number of orders, it’s probably worth investing in. The real challenge is to identify which users were going to purchase regardless of seeing an ad.
Advertising platforms will continue searching for all of the floating conversions until they have exhausted all opportunities and have reached all the relevant users. Then, when performance starts to slightly decline, they will start looking for more broad (cold) traffic and that’s when you will see the change in performance. Suddenly from high ROAS (return on ad spend), low CPA (cost per acquisition), and quite limited delivery, you will start seeing a decline in these metrics and start getting results similar to those of targeting users who are not familiar with your brand. That’s when you know that you are now swimming in the ocean of cold traffic.
Marketers are aware of this phenomenon and their objective is aligned with that of the advertising platforms, which is getting conversions fast. Some marketers argue that it’s important to “feed” the tracking pixels with as much data as possible and start creating campaigns specifically for these types of warm users to catch all the floating conversions. This method is also known as retargeting or remarketing campaigns.
Don’t get me wrong, I am not saying that advertising to your existing users or customer base is a bad idea, if you read my previous blogs you know I am an advocate for using paid ads for your existing customer base. The point of this post is to educate you on what goes on behind the scene to explain this behavior, not to suggest a strategy. In many cases when speaking to other advertisers they can’t seem to grasp or explain these sudden changes of performance. In some cases, they make changes to try to fix performance and that can potentially do more harm than good.
To address the question of how much it is worth to invest in advertising to someone who already has intent requires a dedicated post and should be properly tested to identify the actual lift in their lifetime value or likelihood of a visitor to your site to make a purchase.
One important metric to analyze when evaluating the profitability of advertising to your potential floating conversion users is to evaluate the level of interaction between the ad and the user.
Advertising platforms report two types of conversions: View-through and click-through conversions.
It’s important to distinguish the difference between view-through conversions and click-through conversions.
View-through conversions count the number of conversions that happened after a user has viewed your ad.
Click-through conversion counts the number of conversions that happened after a user clicked on your ad.
Advertising platforms measure both metrics as they argue that they both hold a strong value and impact a user’s online purchase behavior. My general take on both types of conversions is that, even though advertising platforms can claim that view-through conversions contribute to the conversion, when we talk about warm users or users that are in the process of making a purchase or different conversion, their value should be carefully examined. Perhaps they both have value, but they definitely don’t yield the same value and therefore should be evaluated independently.
If a view-through conversion doesn’t require a user to click on an ad to count as a conversion, we have no evidence to support he actually saw the ad. Maybe it just appeared in his newsfeed while he was making the purchase and a quick glance at his newsfeed gave the advertising platform credit.
Without going into the details of how to properly make a valid test, it’s enough to use common sense when evaluating these campaigns, and checking the reports while filtering through the two types of conversions and to determine their value and impact for your business.
When running an initial ad campaign, many are elated at the seeming instantaneous success of the ads as the reports show an influx of conversions and sales. However, the silver lining is somewhat taken away when you understand that these conversions come from people who would have already purchased from you regardless of whether you advertised. These are “floating” conversions.
Once advertising platforms exhaust their reach to these easy pickings, the algorithms then go seeking for other audiences to target and you may find that your campaign’s performance declines. This is when you need to start considering retargeting options.