Increasing click-through rates with ad morphing — Glen Urban and John Hauser

MIT Sloan Professor Glen Urban

MIT Sloan Professor Glen Urban

MIT Sloan Professor John Hauser

MIT Sloan Professor John Hauser

From Fortune China

Everyone is trying to make their banner ads and new media more effective. In the banner area, 90% of the effort is spent on targeting. If you click on a link, you’ll get a particular ad. A whole industry has emerged focused on collecting click stream data and making recommendations.

But that is only half the picture. Equally important is the question of how you should talk to consumers once they are targeted. This is what ad morphing is all about.

For example, a car company may target a consumer whose click history indicates he is interested in buying a car. However, instead of just randomly sending him car ads, it can track the consumer’s online behavior to determine his preferred communication style. We also call this his cognitive or thinking style. Does the consumer want a picture of the car at a NASCAR race? Or would the consumer prefer to look at the technical aspects of the engine? Or does the consumer want a fashion shot of a driver pulling up to a country club? What will the consumer best respond to?

This is a multi-arm bandit problem because it’s like a slot machine with many arms. The advertiser needs to choose the ideal lever to pull to match the ad to the consumer’s thinking style. However, it’s more difficult with ads because there is uncertainty as to the consumer’s thinking style.

Our algorithm addresses this issue by monitoring click stream data to determine how a consumer makes decisions on the web. After enough information is gathered, the algorithm determines the consumer’s likely thinking styles and matches the optimal ad to our estimates of thinking styles – all in real time.

Partnering with companies like General Motors to test our algorithm, we found that morphing has tremendous potential to increase banner ads’ productivity. Companies work hard just to get a 1-2% improvement in click-throughs, but we found that morphing ads based on thinking styles can improve that rate up to 83%. We also found that morphing can lead to 30% better brand recognition. These are very significant effects.

While our algorithms (see our paper for the algorithms) can be implemented by any good programmer skilled in the art, morphing can challenge the budget. To use this tool, companies have to design more ads – ads that appeal to each of the various thinking styles of customers. There also may be cross-organizational issues, as the people who create those ads must coordinate with the analysts doing the targeting.

However, this is the only algorithm that we’re aware of that integrates thinking styles and morphing in real time. It’s very cutting edge, but it can help move the market to the next wave of action in banner advertising.

Also see the post in Chinese at Fortune China.

Glen Urban is the David Austin Professor in Management, Emeritus, Professor of Marketing, Emeritus, Dean Emeritus, and Chair of the MIT Center for Digital Business at the MIT Sloan School of Management. 

John Hauser is the Kirin Professor of Marketing and a Professor of Marketing at the MIT Sloan School of Management. 

The dialogue party — William Isaacs

MIT Sloan Senior Lecturer William Isaacs

MIT Sloan Senior Lecturer William Isaacs

From The Hill

Two hundred years ago (August 24, 1814), the British burned the U.S. Capitol and White House to the ground. This took place at a time of an intensely divided American government — where rancor, bitterness, and profane curses were commonplace in Congressional debates between Federalists and Republicans.  Yet, these same Members of Congress stood together to turn back the British and rebuild Washington.

Polarization and intense difference hold sway today too. Shall we come together or let the house burn down?

One of the inspiring lights of that earlier era was Dolley Madison, remembered as the country’s  first “first lady.”  She took it upon herself to provide a context for engagement that cut through the animosity of the time. She redesigned the White House, carving out grand social spaces, to make it possible for people to meet together.

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How to use LinkedIn for career success — Bryn Panee Burkhart

Associate Director of Alumni Career Development Bryn Panee Burkhart

Associate Director of Alumni Career Development Bryn Panee Burkhart

From Financial Times

Do companies really use LinkedIn to hire MBA talent?

Absolutely! The world’s largest professional networking site has become integral in the recruiting strategy of all types of companies, from start-ups to multinationals. Most of LinkedIn’s revenue comes from their corporate talent solutions, which are paid-for services, offering recruiters and companies sophisticated search tools to find highly qualified professionals.

According to LinkedIn, 89 of the Fortune 100 companies currently use those services. Smaller companies purchase premium subscriptions or might even have employees sift through their personal connections to find potential candidates.

The bottom line is by creating a LinkedIn profile, you are putting yourself into a global resume database and there is a chance you could be tapped for job opportunities.

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The retailer’s dilemma: Deep discounts make the holidays less than joyous — Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

From Bloomberg Businessweek

For retailers, this holiday season has been far from merry. Indeed, much of the cheer retailers have managed to generate has gone to consumers.

Retailing has become a multichannel free-for-all. To the brick-and-mortar giants, online retailers are no longer pesky niche players but life-threatening rivals. The online retail space itself has gotten crowded with formidable competitors. Established stores also must compete with each other and local mom-and-pops for the dwindling number of shoppers willing to brave the frequent snowstorms that hit much of the U.S. in this key shopping month. Add the growing threat of mobile platforms, and your average retailer, online or offline, senses danger everywhere.

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The challenges of using social media for marketing purposes — Catherine Tucker

MIT Sloan Professor Catherine Tucker

MIT Sloan Professor Catherine Tucker

From the Chicago Tribune

In an era when marketers spend billions on managing social media, is that investment worthwhile? Should firms actively guide, promote and shape online conversations, or leave them to grow organically?

To investigate this, my colleague Amalia Miller from the University of Virginia and I recently studied what happens when hospitals started to actively manage their profiles on Facebook. We focused on Facebook because it’s the most visited media site in the U.S., accounting for 20% of all time spent on the Internet. We also chose it because the Facebook Places initiative created a page for every single hospital in the U.S., allowing organizations to choose whether to actively manage their pages or not.

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