Uber - 80% of Advertising Spend Cannibalized Organic Traffic

In June 2019, UBER made an unprecedented move by filing a lawsuit against several ad networks claiming Fraud after Uber found that cutting away spend by two thirds (almost $100M) had no impact on the performance user acquisition. You can read the full lawsuit here.

Kevin Frisch, former Head of Performance Marketing and CRM for Uber at the time (full story available in this podcast by Marketing Today)

Uber described the process of last touch attribution very well in their lawsuit, showing that fraudulent players triggered a lot of fraudulent clicks to win the attribution credit and get paid for conversions.

While we don’t want to take any sides in this (ongoing) lawsuit - one thing we can’t help from mentioning: The Attribution mechanism worked perfectly. It did what it’s supposed to do - give credit to whomever was the last media vendor to generate the last click.

The problem was not with the attribution solution - the problem is that the system is broken.

AirBNB - $650M Spent on Performance Marketing Had No Impact

While UBER found that “only” $120M of their spend was redundant - AirBNB found over half a billion dollars in spend produced no outcome.

“In 2019, we had elevated spending of performance marketing [as part of a 71% increase in total marketing spend from $666 million to $1.14 billion], And then 2020 occurred, our business drops by 80% in eight weeks, and we pulled back all marketing, including performance marketing. But something remarkable happened. Even before we started resuming our marketing spend, our traffic levels came back to 95% of the traffic levels of 2019 without any marketing spend.”

Brian Chesky, CEO @ AirBNB

Cannibalization is a side effect of attribution in performance marketing.

Quid Pro Quo, Clarice. Quid Pro Quo.

Last Touch Attribution

Last Touch Attribution, also referred to as last-click, is an attribution model which gives 100% credit to the last ad a user interacted with before conversion. 

Example: A user finds the app Featured on the app store and installs it. The user clicked an ad on Twitter for your app a week prior to downloading, but didn’t install. In this example - Twitter will get 100% credit for the install.

Pros & Cons of Last Interaction Attribution

• Last touch attribution is the easiest to implement and evaluate.
• Last touch attribution works in real time.
• The downside is that this model ignores everything that happens before the final touch. The engagement and touch points prior to that last touch will be just as important.
• This model commonly causes over-attribution and over-crediting paid media for results that would have been organically achieved without paid media activities.

Performance Marketing isn’t “Bad” 

What both UBER and AirBNB learnings should be is not that performance marketing doesn’t work. 

It is that making marketing budget decisions only based last touch attribution data - leads to waste. 

Attribution provides means for tracking, but attribution is not measurement.

Performance marketing caveat is that publishers and ad networks need and want real time postbacks for optimization. This almost automatically “skews” optimization algorithms to search for users that are most likely to already convert, leading to a scenario where performance marketing takes credit for results that would have been achieved without the performance marketing spend happening. 

Read More: Does incrementality measurement replace attribution?

INCRMNTAL is an incrementality testing platform, using marketing data to provide Advertisers with incrementality and cannibalization insights to unlock the full value of their marketing budget. 

If you want to learn more, visit INCRMNTAL or book a demo today!