When it comes to digital marketing, people have radically different opinions about how money should be spent. I’m going to get down to dollars and cents on this, hopefully giving you some perspective on this thorny topic.
First, let’s tackle how much digital campaigns (e.g. Pay-per-click/PPC advertising) cost. Some say it takes a lot of money. My response is that ‘a lot’ is a relative term and that comparing Pay-per-click vs traditional media rarely takes PPC’s fundamental differences into account.
To fully explain my point, let’s go back to the 20th century, when mass media was the only advertising option around. Print, radio and TV essentially came in one size – LARGE. This disadvantaged those making products suited for niche buyers because they had to pay the same high advertising costs to reach their small target audience as the major consumer brands paid to reach their mass audience. This put them in a dilemma. They could choose to waste a lot of their advertising spending and hope it worked (akin to going through a whole haystack just to access a single needle), or they would get out of that business.
Then in the 1990s and early 2000s the Internet ended the era of one-size-fits-all media. Chris Anderson, a Wired Magazine writer, penned his observations about the change the Internet brought in his book “The Long Tail.”
He claims that current reality follows the principle of a Long Tail. The term stems from the work of Economist Vilfredo Pareto, who noticed that the distribution of any statistical quantity was usually split along an 80/20 curve. That means when numbers are lined up from largest to smallest, there are a few large or high-frequency numbers, followed by many small-frequency numbers that usually “tail off.” The top 20% at the “head” of the line may account for the lion share, but the other 80% in the “tail” count for something too. When it comes to numbers, 20% of any number, especially the global economy, is a pretty big number!
As the Internet has given everyone access to information, it has suddenly brought the cost of marketing within reach of the 80% of companies that are in “tail” industries. This new model allows companies serving niche audiences that couldn’t afford offline, budget-bursting marketing programs to get in the game via the web. In Anderson’s opinion, the Long Tail effect makes reaching that needle-in-a-haystack buyer not only possible, but even economical. No offline media lets you reach an audience this big, this cost-efficiently, this interactively for an outlay of a few thousand dollars per month. Online marketing simply works at a price point that traditional offline media can’t touch.
So to sum up, the Long Tail makes digital advertising channels like PPC a bargain relative to the media channels that preceded it. Two companies that prove the merit of the Long Tail are Amazon and eBay. They make heavy use of Pay-per-click advertising to sell us niche products that bricks-and-mortar stores would lose money trying to stock. We should look to emulate how companies like these leverage the Long Tail.