The Only Two Metrics That Actually Matter In Advertising

There are only two metrics that actually matter in advertising: cost and revenue. Cost is readily available in all ad platforms, but revenue can be difficult and costly to obtain. Because of this, many agencies and marketing departments fail to track this crucial metric, leaving them to spend client dollars blindly.

Advertising’s Sole Purpose Is to Drive Sales

It’s easy to lose focus on the ultimate goal of sales with the staggering amount of data relating to bounces, traffic, impressions, view counts, likes, comments, shares, and heart reactions. But, bounce rates become irrelevant when your content doesn’t sell. Traffic doesn’t matter when your website doesn’t convert. Facebook page likes are completely meaningless when people don’t click your posts.

It’s not that marketing VPs, account executives, and creative directors don’t agree with the sentiment that advertising should drive sales, it’s that they fall into the trap of trying to derive value from sources where there is none. 

This phenomenon goes back a lot further than just the digital age, as made evident by this David Ogilvy clip from several decades ago:

Ogilvy praises direct advertisers for their ability to measure results “to a dollar.” While the entire 7-minute speech is worth a listen, the relevant sentiment is best summed up here:

You direct response people know what kind of advertising works and what doesn’t work, you know to a dollar…The general advertisers and their agencies know almost nothing for sure because they cannot measure the results of their advertising.

We recently worked with a client who had been sold (and burned) by another agency that Ogilvy might call general. The client had entrusted the agency with a 6-figure ad buy promoting a single event, and they were rightfully furious that the agency was unable to tell them how much revenue had been generated after the campaign was done (though, I’m sure the agency’s accountant had no problem telling the client how much money they’d spent). That client contracted Flint Analytics to fix and automate their revenue attribution, making tracking a non-issue for future campaigns.

Learn how Flint Analytics may be able to help you solve your company’s revenue attribution problems.

We believe there is a certain amount of negligence and irresponsibility in spending client dollars without having the slightest idea how much value that client received in return. For ecommerce, you can and should know, down to the dollar, your earnings from each individual advertising source. For clients with longer sales cycles involving multiple consultations and touchpoints, you can and should know, at a minimum, the source of every single lead generated. If you cannot report on the true business impact of your spend, you are doing your client a disservice.

If you’re the type who can sell a ketchup popsicle to a woman in white gloves, and you use that ability to convince clients to spend money on the idea that weak metrics like social follows or heart emojis on posts are absolutely good for business, you’re sitting somewhere between misguided and dishonest.

The Narrative Fallacy

To be fair, a lot of marketing professionals seem to honestly and wholeheartedly believe that increased pageviews, lower bounce rates, higher domain authority, and more social engagement definitively (key word) lead to more sales. This is innocent enough. When agencies and marketing departments are technically incapable of tracking actual sales results, they tend to justify their strategies, actions, and budgets by taking any stats they can — no matter their relevance — and creating causal links where they might not actually exist. In his book The Black Swan, Nassim Taleb writes extensively on this practice, referring to it as the narrative fallacy. He writes:

The narrative fallacy addresses our limited ability to look at sequences of facts without weaving an explanation into them, or, equivalently, forcing a logical link, an arrow of relationship, upon them. Explanations bind facts together. They make them all the more easily remembered; they help them make more sense. Where this propensity can go wrong is when it increases our impression of understanding.

Think about that in the context of digital marketing: sometimes all we have are sequences of facts in the form of sessions, bounce rates, engagement, view counts, impressions, and more. It’s information overload, and our job security is partially dependent on convincing clients and superiors that we can make sense of it all.

Any marketer with a basic Google Analytics setup — but no way to tie revenue back to its source — is probably guilty of committing a narrative fallacy. If quarterly sales increased, they might tell their CEO that increased web traffic from clicks on a Facebook campaign were the root cause of the increase in sales. If this marketer was an agency pitching a potential client whose sales had been dropping, they may point to a lack of advertising budget as the root cause. The same goes for anyone pitching or justifying SEO work, a creative strategy, or social media management: these are all things that can help business, but they do not definitively do so.

This is why revenue tracking is so important: it eliminates the human tendency to rely on biases and allows you to focus on identifying marketing practices that have real, valuable business impact. It is only through knowing how much money your efforts made that you can accurately analyze if the money you spent was worth it.

Need Help with Revenue Tracking?

The technical process of tracking revenue is extensive and worthy of volumes, which is why we’ve limited this article mostly to the importance of this data point. If your company or your client is struggling with revenue attribution, contact us to schedule a free consultation.

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