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FutureNow Post
Tuesday, Mar. 6, 2007 at 4:36 am

Automated Revenue and Profit Lift?

By Howard Kaplan
March 6th, 2007

In the wake of Omniture’s acquisition of Touch Clarity, pundits have weighed in on the lofty claims made in the acquisition press release:

Omniture and Touch Clarity have joined forces to enhance online business optimization—bringing together the power of Web analytics and advanced behavioral targeting technology. The combined technology delivers automated revenue and profit uplift to customers derived from Web analytic data.

Consensus has been good deal for Omniture, a great deal for Touch Clarity, and a good deal for the industry at large. But these claims will be tough to make good on.

I mean, c’mon, automated lifts in profits? Actually, this isn’t the part that got me. I tend to think this is a great deal for both Josh James and co. as well as Tim Brown’s crew, and I even buy that Touch plus Omniture will lead to higher conversions in the short term. After all, how could it not?

With the bar being set industry-wide with average Conversion Rates of about 2.4%, doesn’t personalization based on past success have to lead to greater scent, higher relevance to the visitor and, therefore, an increase in conversion, revenue, and profit? Frankly, the bar is set so low, any number of Marketing Optimization toolsets should increase conversion rates above this abysmal benchmark. But if you think these results won’t eventually reach the point of diminishing returns, well, that’s a different story. It’s the difference between measuring success in increments versus multiples.

We’re always looking to ask bigger questions. Here’s a few I’m pondering:

  • Does automating “taking action on analytics data” replace planning for success in advance?
  • Does Behavioral Targeting atop Analytics provide any real analysis, or generate any true customer insights?
  • Is past performance an accurate predictor of success, if the past performance happened by accident?
  • If you optimize cowpaths, how do you know how high the ceiling for ROI can go? (How do you know you’re not simply measuring local maximums?)
  • What value does targeting bring if you don’t understand the motivations driving the visitor’s search, and the angles of approach they take?
  • Who will be taking the time to plan and create intelligently and thoughtfully designed variations.

What we are dealing with here is the Infinite Monkey Theorem.

The infinite monkey theorem states that a monkey hitting keys at random on a typewriter keyboard for an infinite amount of time will almost surely type or create a particular chosen text, such as the complete works of William Shakespeare.

No amount of automated variations produced by a semi intelligent system will produce the results that are ultimately needed, nor can a device that produces a random sequence of letters ad infinitum reproduce Shakespeare.

It was Sam Walton who said “… a computer can tell you down to the last dime what you’ve sold. But it can never tell you how much you could have sold.” Selling and selling online is about people first and machines second. Omniture & TouchClarity are two very juicy pieces of pie together, but it isn’t whole. The missing piece remains the people who might otherwise plan in advance the stories of customer/visitor interactions which must be told in order to produce a conversion masterpiece.

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Comments (4)

  1. How many times have we mistaken tools for intelligence, reporting for analysis? While it is clearly true that you can make a process better by hammering on it with brute force testing, it is also true you are likely to end up with a process that is better, but not optimal. I’m hoping the community can agree that the quality of the output is directly related to the quality of the inputs. How do you choose the right inputs, can the machine do this for you? I have no doubt machine optimization is better than doing nothing at all, but it always leads to painting oneself into a corner, often with suboptimal results.

    This has been true every time such a computerized Holy Grail has been introduced. Remember Data Mining? Turns out to get good results with data mining, you can’t just mine any data, you have to mine the right data. Do you know what the right data is? Do you know how to generate that data, the kinds of testing you have to do to create this data in the first place? Or will you join the ranks of those who have spent millions of dollars on these data mining projects only to find that the best target for the acquisition program has the first name of John – the most popular first name in the database?

    These are tools. They simply automate execution. If you start with a faulty set of ideas in the first place, you can easily end up automating worst practices. If you’d like to see a real world example of this very idea using Google AdWords, check out this blog entry:

    http://blog.jimnovo.com/2007/03/07/automating-worst-practices/

  2. [...] Howard Kaplan wrote a very insightful post about the combination of web analytics and advanced behavioral targeting technology (be sure to read Jim Novo's comment at the end). Personalization based on past success is certainly promising, but Howard digs deeper with these key questions: [...]

  3. Hi Howard and the Future Now team. What follows is a copy of a reply I left for Jim Novo after his blog posting. I thought your readers may find it educational as well so I am posting it here. Thanks, Brent
    Hi Jim,
    It is nice to talk with you again; we know each other from my 6 years running marketing at WebTrends. I hope you are well. I read your recent post and thought it appropriate to address some of the points you make, as a fellow analytically-driven marketer with a unique perspective. I discovered Touch Clarity last Spring after I left WebTrends and initially, I too had great suspicion about the ability to automate the serving of the most valuable message to each visitor. I think all of us who have been deep in the analytics world hear this story and say “no way can that truly work.” But then I spent many hours with Paul Phillips the founder of Touch Clarity, who is a multiple award-winner of the most prestigious direct marketing data-mining competitions in the world, the PhD’s on the modeling team, and the client services team who walked me through an actual customer implementation, and showed me their uplift reports. Was I convinced? Yes, and in fact, I then bet my career that what they were doing was the next evolution of Interactive Marketing. And now 10 months later, it can honestly say it was the right bet. It really does work, and I personally offer my time to walk you through how the system has been designed to accommodate everything you mention, such as the fact that the content delivery can be optimized to achieve not only the highest click-throughs, but even better to achieve increased conversion, or to maximize revenue or profit.
    The modeling algorithms that drive all of this in an automated manner consider hundreds of variables in their scoring of visitors and in deciding which content to serve. All past behavior and current behavior of each visitor is considered…including recency and frequency of past visits, previous content exposures, referral sources and keywords, temporal and technographic and geo-location factors along with all of the other web analytics variables collected anonymously. Each one of these variables has a small amount of predictive power which collectively add up to a clear determination of the best content to serve to that visitor at that moment. In addition, we do consider sales cycles to watch for conversions or purchases that occur over several visit cycles after the first offer or content engagement. And you are absolutely right—other so-called “automated” systems that consider a few variables are apt to deliver the wrong answers, and may optimize simple click-throughs but over the long term degrade business results. That is why business rules engines that hard-wire a few simple decisions will fail.
    So how else does Touch Clarity continuously ensure the best decisioning of content serving? The system always targets versus a concurrent control group, which can be a champion/challenge scenario or a random serve. The system will automatically detect when perhaps there isn’t a clear best piece of content to serve and then test more until it knows for certain the best content to serve. Response curves vary several times every single day, so the system needs to be able to detect those curve shapes and change how it serves content accordingly.
    The solution also gives the marketing team full view of all of this through real-time reporting of the lift generated versus the control. So they know exactly the ROI of the targeting solution, at all times.
    So yes, this sounds amazing. It’s why the folks at Omniture made an investment to acquire the company rather than just partner. Knowing the analytics space very well, I believe it was a brilliant move and a natural extension for web analytics in general.
    Jim, we absolutely see marketing consultants and interactive agencies as being key partners with this technology. We automate the optimization and targeting of the best content from a catalog of candidate content options, but our customers must determine the content strategy–which products and product categories to promote, the best manner in which to promote them, which design styles to build, which offers to test, which calls to action, etc. etc. There is even more of an opportunity to work in both the left and right brain arenas with the Touch Clarity technology, and the best thing, is that it’s no longer an arbitrary decision or a political decision about what to put on the home page or key product pages. Marketers can get back to marketing strategy and creating different versions of creative and letting advanced mathematics and computers process untold amounts of data in milliseconds, considering hundreds of factors, to choose the best piece of content for that visitor at that time, and then be absolutely rigorous in making sure it is right, based on hitting a specific objective that the marketer defined. Perhaps accountants feared that Lotus 123 and Excel which automated the calculations of thousands of rows and columns of numbers in seconds would put them out of work, but frankly, it allowed finance professional to become more strategic business advisors and today we see the CFO as a key player of business teams, because they were freed up along time ago to focus on more strategic decisions than adding up numbers.
    I look forward to continued dialogue about this subject. Let me know when we can arrange a personal briefing.
    Best,
    Brent Hieggelke
    Chief Marketing Officer
    Touch Clarity from Omniture

  4. Brent, Thanks for posting that here as well. I don’t think you’ve addressed all of Howard’s or Jim’s comments. Nevertheless, you are a smart guy whose integrity I respect so I’m sure the product is at least worth looking into. I hope the readers dig deeper themselves.

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