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Archive for March, 2011

Groupon, the Super Bowl, and Buzz

Thursday, March 3rd, 2011

This is a companion article to “Groupon Really a Super Bowl Traffic Loser?”.

In a previous article, I took a look at the assertion that Groupon’s traffic lift from its Super Bowl ad was inconsequential.

Here I want to take a look at a different part of the Fast Company article on Groupon’s Super Bowl performance: Buzz.

The article shows a graph put out by Nielsen showing that Groupon had a very large amount of buzz relative to other digital brands that advertised during the Super Bowl. While I’m not a huge fan of sentiment (it’s still very much an inexact science), it seems clear that some concept of sentiment is missing from the FastCo article. If the majority of buzz is bad, then it wouldn’t be surprising to find that actual direct response to the ads was low.

More importantly, however, this reinforces how important it is to not live by buzz metrics alone. It’s easy for people to say something about your brand one way or another. What is more telling is what they actually choose to DO. Lots of talk (even very positive talk) doesn’t guarantee any impact on your brand. People may have had an interaction, fired of a tweet about it, and then totally forgot about it. Sure, there would appear to be more opportunity for people to do something, and certainly more opportunity for brand impressions on a person’s followers, but the relationship between buzz and actual response is not straightforward, and likely differs not just between brands, but between kinds of efforts inside a brand.

It’s best to measure not just what people say, but what you are trying to get from a campaign so that you can get a sense of what kinds of buzz actually move the needle on your business, and what kinds are just hot air. And, of course, if you can’t do that, we can do it for you ;)

Groupon Really a Super Bowl Traffic Loser?

Thursday, March 3rd, 2011

I was just reading this article on Fast Company comparing the response to Groupon’s now infamous Super Bowl ads to that of other advertisers (notably GoDaddy), and thought it was worth pointing out a couple of things.

First, the article uses % increase in traffic week-over-week as the primary metric. That certainly makes for a dramatic looking metric, but it probably doesn’t give you the insight into “success” that you might think it would. First of all, for this kind of performance, you need to be looking at raw numbers. Percentages are great for comparing things that are directly comparable, but if we’re looking at direct-response-type metrics (which site visits would be), then what you care about is how much you had to spend to get a volume of response. So knowing that Groupon’s 3% increase – which seems paltry next to HomeAway.com’s 27% – accounts for 420,000 visits (as pointed out by commenter Rob Day) compared to HomeAways’s 230,000 provides a more meaningful comparison.

And if you’re looking at direct response, then what you need to know is what the cost of the effort was versus its value.

Assuming that the cost of a Super Bowl commercial is $10 million (and I have NO idea what the actual cost was), then we’re looking at about $29 per visit. Is that worth it? Well now we’re into the realm of things we probably can’t know. To know for sure, we’d need to know what percent of visitors Groupon is able to convert on their site, and what the lifetime value of each conversion is.

By way of a hyperbolic example, let’s look at Groupon’s numbers versus GoDaddy’s. GoDaddy (again, according to commenter Rob Day) gained 4,100,000 new visits compared to Groupon’s 420,000. If they were both able to convert 10% of visitors, then GoDaddy will have gained 410,000 customers, where Groupon gained only 42,000. But if the lifetime value of a customer is $10 for GoDaddy, and $100 for Groupon (again, numbers pulled out of thin air to make a point here), then GoDaddy has added $4,100,000 in revenue, and Groupon has added $4,200,000, making their overall performance about equal, despite very different seeming traffic percentages.

A final note on this: If they each paid $10 million for their spots, then their ROI is going to be the Return divided by the Investment, or $4,100,000/$10,000,000 for GoDaddy, and $4,200,000/$10,000,000 for Groupon. That’s 41% ROI for GoDaddy, and 42% for Groupon. If neither got any additional value out of the ads, then they are both underwater on this effort – that is, they spent more than they earned – making this not a good candidate to repeat for either one of them next year.

I also want to talk about the “buzz volume” metric in the FastCo article, but I’ll do that in a separate article.