By Terricka Beckford

Last month’s M6D blog post on the value of the introduction prompted me to reflect on a recent call with a client during which we discussed the power and value of “acquisition targeting.”

Social Targeting, a concept invented by Media6Degrees, is a powerful tool that helps marketers drive conversions at scale while delivering significant return on investment. Most of the time our clients are focused on conversions regardless of whether it comes from a new customer or a loyal repeat purchaser. But our data suggests that, while marketers should continue to focus on ROI and their effective cost-per-acquisition, they should also be putting a heavier emphasis on the value of delivering new customers via their targeting efforts.

A truth well understood is that it’s far more difficult to acquire a new brand advocate than it is to convert an existing customer.  Yet, some advertisers put so much weight on overall conversion metrics that they lose sight of how tactics like Social Targeting benefit long-range profitability by introducing their brand to an entirely new customer base.

I love it when a client says, “let’s talk about new-to-file!” That’s a sure indication that long-term profitability is on their minds. The minute the sophisticated advertiser starts talking to you about new-to-file (as a strategic solution), you know that they have witnessed some true benefit from the introductions you are providing. However, there are some challenges that need to be addressed, the most important being how you provide proper attribution and compensation for that value?

One client I was recently speaking with was a very sophisticated marketer who emphasized ROI goals for the majority of the conversation. But eventually we were able to discern that new customer acquisition is what they were really looking for. This prompted me to propose a new pricing model based on the long-term value of a new-to-file customer.

Now for the math! Let’s say that in July 2010, M6D generated 3,900 conversions for an advertiser. Let’s assume that 1,300 (33%) of those conversions were new-to-file. Let’s also throw in an average order size (AOS) of $250. That’s $325,000 in revenue for the advertiser from brand new customers. In this case, M6D billed $50,000 for that July activity. That translates into a 6.5 to 1 ROI on new-to-file business alone (15% Ad Cost Ratio).  All the repeat business ($650,000!) is a bonus.

Now let’s assume that a certain percent of those 1,300 new customers are happy with the product and make an additional purchase at the same AOS.  Think about how much incremental revenue the advertiser is then earning. Now think about what that would look like after a third or fourth purchase.

My question is: What if advertisers paid providers based on the lifetime value of a new customer? What would that pricing model even look like? A flat CPA based on a percentage of an AOS over a specific period of time? A revenue share based on the same AOS strategy? And when do we begin to think about trust?

Am I being overly optimistic here – or could there be room in this industry for a viable pricing model based on lifetime value?

At KDD this year, we were excited to see the dominant themes validate Media6Degrees’ philosophy that, when privacy-friendly data mining techniques are used, social data presents a huge opportunity for online advertising.  This year, we also saw significant progress in how the data mining industry measures the ROI of online advertising campaigns by looking beyond the standard click-through.

No fewer than three workshops addressed the exact types of information that feed the Media6Degrees targeting approach:

-Social Media Analytics (SOMA)” focused on user-generated content and was co-chaired by M6D’s Foster Provost;

-”Social Network Mining and Analysis (SNA-KDD)” investigated virtual communities and their influencers; and,

-The workshop on “Mining and Learning with Graphs (MLG)” explored mining graph data (such as the social graph).

Privacy was also a key topic. Several of the main conference presentations discussed novel algorithms to support “privacy friendly” and “privacy preserving” data mining.

We also saw an increase in papers on the topic of display advertising and predicting conversions.  Predicting conversions, and measuring campaigns based on view-through, is where we’ve focused for a long time.  This is significant, as the data mining community has traditionally measured the success of campaigns strictly based on clicks.

To add to the measurement discussion, Google and Yahoo! addressed the ever-present question of how to use efficient experimentation to assess the impact of different campaigns and targeting strategies, without spending excessive resources on formal A/B testing.

For the M6D team, it was very exciting to participate in this year’s event.  Not only were we able to tell our story, but we saw many of our approaches reflected in the presentations.  We also observed a growing and positive trend of thought leadership punctuated by a marked increase in collaboration and convergence between academia and industry.

By Lauren Crane and Gabriel Celis

Social Targeting is a new concept, and because of that, it can be difficult for advertisers to fully evaluate its effectiveness using standard online advertising success metrics. While Social Targeting performs well when judged using standard metrics such as ROI—we have seen that a typical campaign tends to outperform other forms of targeting by 3-5x or more on an ROI basis—measuring performance based solely on standard ROI metrics does not fully capture the full value of Social Targeting.

A Social Targeting campaign not only drives conversions, it also introduces the brand to new consumers and drives them to the brand’s website. These are the consumers who have not visited the marketer’s website previously. They have not been cookied by that marketer and are not being reached via standard retargeting efforts.  So how does one measure the “fuel” that Media6Degrees adds to the “fire” of an advertiser’s retargeting plan?

Another way we need to measure the impact of campaigns is by looking at the path consumers take before conversion.  For example, when we serve an ad to a user who is socially connected to a marketer’s current customers, we may see that user a few minutes later or a few days later through our pixel on the advertiser’s homepage.  Later that week, this “connection” might be retargeted by another advertising vendor, and navigate back to the advertiser’s website to eventually convert.

This very common scenario illustrates how multiple vendors can work together to drive conversions by new customers, and how marketers can succeed no matter which vendor delivers the last impression prior to conversion.  If Social Targeting was responsible for introducing that user to the marketer’s message, then it deserves a major share of the credit for the eventual conversion. In the above scenario, it is highly likely that the customer would not have converted without Social Targeting.  The initial introduction has the potential to yield a lifetime of value for that advertiser – even more reason to assign proper credit to the initial introduction.

On Wednesday, August 11th, the Media6Degrees team distributed clothes and food to homeless New Yorkers as part of its participation with Midnight Run.  Midnight Run is an organization of volunteers from churches, synagogues, schools and other civic groups that distribute food, clothing, blankets and personal care items to the homeless poor on the streets of New York City.

The late-night relief efforts are unique in their ability to create a forum for trust and sharing among a community that is shunned by most of society. The human exchange, and not just the goods distributed, is the essence of the Midnight Run mission.

Today on our blog, CEO Tom Phillips and Office Manager Maria Mendez share their thoughts on the importance of Midnight Run and discuss the recent M6D team participation.

Why is the Midnight Run organization so important to you?

Tom: Midnight Run does such wonderful work, and with so little fanfare.  The organization grew up organically 26 years ago.  It connects over 200 volunteer groups — some that participate once a year and some involved almost weekly — with the homeless poor in New York to forge a unique community of caring and generosity.  It’s as close to pure good as we’re likely to find in this fabulous and chaotic city.

How long have you been involved with the organization and to what extent?

Tom: I’ve been volunteering for ten years, and on the board almost nine.  The one full-time staff member, who is a good friend, and three part-timers are all formerly homeless, as is half the board.

How important are volunteers to the Midnight Run organization?

Tom: The essence of the organization is its volunteers, who provide 99% of the labor and most of the goods that get distributed.  In its very subtle way, Midnight Run ties together more churches and synagogues and school groups and other volunteers in greater New York than any entity I know about.

How many people at M6D participated this month?

Maria: 14 members of our team joined the August 11^th effort.

How often do you conduct these Runs?

Maria: This is the second Midnight Run that we’ve participated in this year.

What was the extent of our participation?

Maria: Before the day of the Run, we asked all of our employees to collect or donate clothing for the event.

The day of the Run, one group made lunch bags (sandwiches, fruit, water, granola bar, juice box) and sorted the clothing by size and type.

Another group then took a couple of vans around the city to distribute the food and clothing to more than 50 homeless people.

For more information about Midnight Run, go to http://www.midnightrun.org/.

Today on the M6D blog, CEO Tom Phillips answers questions on how retailers can integrate social targeting into their online marketing initiatives. Speaking of retail, Tom will also be a panelist at the upcoming eTail East Summit, which takes place next week in Baltimore, MD.

On your website, you include several examples of how social targeting drives exceptionally high ROIs for retailers.  Can you explain why social targeting is so successful in retail?

We’re in our eighth quarter of generating revenue at Media6Degrees, and retail has now overtaken travel and tech as our largest industry vertical.  We always envisioned that social targeting would resonate with retail marketers.  We’ve achieved the success we have because – plain and simple – our technology performs for retailers.  We deliver audiences that buy goods.  The company was founded on a very simple but powerful concept – that a marketer’s best prospective customers are the people most closely connected to their existing customers.  We’ve cracked the code on how to mine those connections in a privacy-friendly way and at scale. The result is ROIs that our customers report to us are 5x, 10x, 15x and higher.

Are there particular marketing problems common to retailers that social targeting is uniquely positioned to solve?

The hardest task for any retailer – online, in-store or catalog – is to identify and acquire new customers.  At Media6Degrees, finding new customers for brand-name marketers is what we do best.  We do it not by tracking behaviors and categorizing people into buying groups (an exercise fraught with privacy and scalability issues), but by analyzing an immensely wide but extremely thin layer of anonymous data to generate a social graph unique to each brand.  No other targeting technology delivers high-performing audiences at scale across every conceivable retail sub-vertical.

Should marketers look to implement social targeting as a standalone initiative or should it be used to complement other online marketing activities?

We invite comparison of our results to other targeting technologies.  While there is a time and place for contextual, demographic and other targeting, we have shown time and again that we can outperform these traditional targeting methodologies.  We recommend testing social targeting alongside other approaches, and scaling each to hit performance objectives.

We have two major shopping seasons around the corner:  back-to-school and Christmas.  What should marketers consider if they want to integrate social targeting into their advertising mix for these two seasons?

The key is to establish key learnings before the shopping season is in full swing.  For the upcoming holidays, we recommend testing in September in order to roll out campaigns that run October through December.  For back-to-school, the season is upon us.  But we can move fast to test in August and deliver campaigns at scale for the September back-to-school season.