A vanity metric is a metric that lacks context and isn’t actionable. Vanity metrics are often used by marketing teams to paint their work in a positive light. Something is always going up and to the right. 📈
For example:
Marketing team: “Good news boss, impressions are up 200%!”
The executive nods politely while thinking “who gives a crap!?”
ROI (return-on-investment) has long been used as a trump card. After all, it’s a stat that can’t be gamed, right? Impressions and clicks may not matter, but ROI is the absolute “source of truth” 🙄
Marketing team: “Of course, you should increase our budget, our Google ads are returning at 6x. We spend $100, we make you $600. Easy money!”
But there’s more to the story…
To be intellectually honest, marketers have to evaluate advertising ROI in light of these 3 questions:
1. Would we have gotten those buyers anyway?
If you are bidding on your own brand name on Google, the revenue reported by Google is revenue you likely would have had anyway. It’s not “incremental” or extra revenue you wouldn’t have had otherwise. Another example – if you are showing ads to people that have already visited your website on Facebook, Facebook may tell you the return is 20x. But really, the majority of those users would have purchased anyway. The real “incremental” return is likely much lower.
2. Are the ad driven buyers replacing organic buyers?
If you sell a product with a capacity limit, you have to ask yourself if those same tickets or products would have sold to someone without spending money on advertising. Maybe you did bring in new buyers, but was demand sufficient to sell the product/slots without advertising?
If you sell tickets on Groupon, you pay Groupon a commission. If your event would have sold out without Groupon, then you gave Groupon a commission for no reason and the buyer a discount for no reason.
3. Can this channel be scaled?
You can’t spend money endlessly and effectively on any channel. Facebook is famous for having a point of diminishing return. At some point the ROI drops because you’ve tapped out relevant audiences. The lesson here – don’t ask for a bigger budget if you can’t maintain the ROI at the higher spend.
ROI is absolutely the best way to evaluate advertising spend BUT you still have to scrutinize ROI. Ad platforms like Google and Facebook want to report a high ROI so you will increase your investment.
They don’t have to be intellectually honest…But you do.
