The curious (and not so secret) case of paid media spend spillage

paid media spillage title graphic

I want to own and operate a microbrewery with my brother sometime in the semi-near future. And, as part of any good business planning, you have to really understand your numbers. During my initial dive into the financial side of running a brewery, I came across the notion of “spillage rate” – the expected amount of beer you are going to spill/waste (from a variety of occurrences).  

Soon after this discovery, I had a great conversation with our Head of Partnerships around a similar concept but one that is happening in paid digital advertising. In brewing, spillage is to be expected, but it seems rather bizarre to me that many also accept a “spillage rate” in paid media. It somehow seems acceptable to knowingly waste a certain amount of ad dollars – primarily due to failed tracking and attribution set-ups. And those failures are usually due to missing or inaccurate data. 

What’s most incredible is that this is acceptable by media agencies when spending someone else’s money (the brands they advertise for)! How does this continue to carry-on 20+ years into the digital advertising domain? 

Especially given two things: the financial impact (both cost savings and lost revenue) and the relative simplicity of fixing the problem. Let’s think about these two things in a little more depth.

Have you considered the financial impact of data noncompliance in your paid media

I’ll try to keep this as simple as possible. Say you are running a campaign and your budget is $1,000,000 with an expected ROAS of $3 for every $1 spent (not far-fetched, see the chart). So the target revenue attributed to this campaign is $3,000,000. 

Fast forward and the campaign has completed and you are doing your performance analysis and find out the campaign only produced $2,000,000 – not a terrible return. But then you come to find out that 30% of your campaign tracking was misconfigured – either not implemented or the underlying metadata was missing, incomplete or inaccurate. 

There is a strong argument that you missed your expected ROAS due to incomplete campaign data. Better said, say performance of your campaign improved by 10% because you had 100% data compliance. That means you left, at minimum, $100,000, on the table per $1M spent on a campaign. A $10M annual media spend is costing you at least $1 Million in top line revenue. And we know a lot of brands (aka our customers) who spend exponentially more than that annually on paid media. Coincidentally, some of our customers have reported a 10-15% lift in ROAS when having 100% campaign data compliance. 

Per Jeff Moore, our Head of Agency Sales, “In general, we tend to see between 20% and 30% non-compliance, which is arguably insane. If you’re looking at investment levels measuring in the millions of dollars, moving from 30% non-compliance to < 1% non-compliance is business changing. I get a wide range of reactions when I attempt to shine a light on this. Some agencies with tens of millions of dollars of media under management tout, for instance, 90-95% compliance. When I suggested to one in this circumstance that it is worth getting that to 99%+ at the kind of scale they deal with, the reflexive reaction was – remarkably – dismissiveness. 

Another recent episode went the other way. A contact at a major OpCo touted 98% compliance – which is fairly impressive. What was even more impressive was the unsolicited statement that, ‘with the scale involved, if we can eek out 1 or two more compliance points leveraging external tech, that would absolutely be worth it.’  Absolutely right! But these are uncommonly rosy scenarios. I’ve also seen instances where the taxonomy application is tracking at near-0% compliance. Whatever the situation, it begins by illuminating the magnitude of the problem which, once seen, can’t be unseen.”

It’s actually pretty simple to solve

If just a little additional effort (and technology) was applied to being compliant with your taxonomy, imagine all the extra money you’d be making your company or your client. But who cares right, what’s a little spillage here and there? Well, it’s a lot. 

(Side note: I once watched an episode of Brewmasters on The Discovery Channel where the brewery, Dogfish Head, had to dump an estimated $500,000 in beer because it wasn’t good enough. That’s what you’re doing with your campaign dollars when you don’t comply with taxonomy and data standards.)

The craziest part is that this really isn’t that difficult to solve! The Data Standards Cloud (our core product at Claravine) is helping many of the biggest brands in the world maintain data compliance with some rather easy to implement technologies and best practices. By simply applying data guardrails, you can ensure data is compliant before it ever ships off in a paid media campaign. 

About the Author

Michael Shearer headshot; Head of Digital at ClaravineMichael Shearer is a marketing and digital strategist currently leading the Marketing team at Claravine. He has 20+ years in the digital space working for start-ups, agencies and companies that went public (once). 

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