What exactly is performance marketing? Historically, it has been easy to define. Its objective was to drive a specific action, and advertisers only paid when that action, such as an acquisition or sale, was completed. Performance marketing included search advertising, pay per acquisition, email marketing and more. This was in contrast to brand advertising where the objective was to build awareness and payment was typically based on impressions (CPMs) or sponsorship.
Recently many different types of campaigns and programs are being called “performance.” This is in large part due to the development of programmatic buying and other technological platforms that allow for more opportunities in real-time measurement and optimization. As many have pointed out in the future all digital marketing will be classified as “performance.”
As a result, a new vision is emerging of what is performance marketing. A group of more than 15 members of IAB’s Performance Marketing Committee have put together what we believe to be the new definition of performance marketing in the context of today’s digital landscape.
Here is a preview.
Requirements for a Performance Marketing Campaign
- The intention of the campaign is to drive consumer action, as opposed to raise awareness
- The cause and effect between the advertising and consumer action can be clearly measured
- The buyer can optimize their buy in real or near real-time based on the measurement
- In many cases payment is made based on consumer action (this is not necessarily required if the other three criteria are met)
The closer the performance action is to a sale or transaction, the more accountable is the outcome.
The most important component of a performance marketing campaign is the performance action that is being measured, optimized and potentially monetized. The closer that consumer action is to the sale or final transaction, the more likely it can be used to calculate a true return on investment. For example, a lead form or phone call is closer to a sale than a social engagement.
Real-Time or Near-Time Optimization is a key ingredient to continued growth in performance marketing.
Real-time bidding (RTB) has been a part of search engine marketing for a decade, and is a growing quickly in display advertising. It is now a central component in today’s digital marketplace, growing to more than $3 billion (estimated) in 2013 and expected to more than double again in the next few years. We expect that real-time performance optimization will move in lockstep with RTB over the next few years.
Download the full IAB Digital Simplified: Defining Performance Marketing in Today’s Digital Landscape PDF here.
On behalf of the IAB’s Defining Performance Marketing Working Group, we’d love your feedback.