Saturday, January 12, 2008

Five Nines: 99.999%

Is that level of precision good?

Well, it depends on what you're measuring. For systems like 911 it is an indicator of reliability or guaranteed up time. Even at five nines the system could be down around 5 minutes a year; still might be considered too much. It is a very expensive proposition to get this level of service - triple redundancy, remote hosting across different parts of the power grid, etc.

In marketing, particularly lead generation in competitive categories, five nines is often the level of misaligned effort. Consider the following for display ads:

Click-through Rate: 0.1% (yes that is one tenth of one percent)
Convert to Lead: 1%
Convert to Sale: 5%

So, for every 2 million impressions you get 1 sale. This makes even bargain basement networks or sites look expensive in the end. A $2 CPM equates to a $4,000 Cost per Acquisition.

Since well over 99.999% of the impressions are "wasted", what can we do?

  1. Target better - explore behavioral, geo, and related category options. But that still works on the assumption that a clear link from a click to a sale is the only thing on the path, so don't stop there.
  2. Capture intent better - the standard 'give me your name and we'll send you' info may work in the CPL-compensated world but may not be the best strategy for this category
  3. Treat it is branding - this alone is a cop out. But the impact of branding advertising on search and choice should be understood because it does help cut through the clutter of unknowns. Now it is true you end up paying twice in a sense - once for the display ad and then again for the lead from an aggregator/affiliate, but you do end up with the lead.
  4. Say it differently. Even a slight improvement in the original CTR cascades into financial metrics that would make the CFO smile. And this means understanding your audience really, really well.

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