“Sustainability Plus Profitability” Requires A Mix of Metrics
Brands want to be more sustainable, but they’re also under pressure to hit revenue goals in a tough market, and that pressure rolls downhill to agencies, ad partners and publishers. New phrases have emerged to assuage concerned advertisers, like “profit and progress” and “sustainable growth.”
The idea that advertisers can hit their goals and be more sustainable is exciting and valid, as long as everyone is smart about how they measure the two elements individually and together. Focus on the wrong measurements and you risk increasing overall emissions, or curbing emissions but ruining campaign performance.
This is not a hypothetical situation, it’s a reality today. While total emissions reduction is the main goal, it’s hard to measure at an accurate, granular level, and even harder to optimize for. Setting up measurements across all emission-driving activities is extremely complex. That’s why estimations are key to understanding “hot spots” for reduction.
Keep in mind that optimizing using estimations, especially for only part of a media buy, can have side effects. For example, a partner using averages for one part of their media buy might underestimate the actual emissions impact of a particular ad type or channel and might, with good intentions, wrongfully select them over a more efficient option with granular measurements. On the other hand, if an advertiser uses estimations everywhere, two partners could look the same even if one uses renewable energy and the other does not.
No two impressions are truly created equal. As advertisers have worked to get accurate sales metrics, we also need to get accurate emissions metrics to measure and optimize activity and outcomes. Advertisers are starting to embrace sustainability measurements specific to a campaign and add them onto the pile of other metrics they use to judge performance. They still want high conversions, low CPMs and long-term brand lift, but with the added layer of more sustainable delivery. In the interim, proxy metrics are starting to emerge—though they can do more harm than good if not used wisely.
It’s crucial to understand the implications of optimizing for these new sustainability metrics and how they interact with one another. Here are three that, in combination, can help get advertisers started in the right direction.
CO2e per impression
This is an efficiency metric that allows advertisers to understand the emissions of an average impression. And that’s where it stops: Emissions per impression doesn’t consider quality, viewability or channel—it won’t actually tell an advertiser that much unless they consider the value of the impression.
Working with supply path optimization is one way to reduce the emissions of an impression through improved efficiency. Each additional ad-tech partner comes with a carbon cost; making sure you work with the right partners, and that they add value, will optimize emissions per impression.
However, optimizing for the lowest CO2e per impression in isolation can have strange outcomes too, like advertising in the middle of the night when energy demand is lower, removing high-performing but energy-heavy channels like linear TV, or favoring extremely compressed creative that can barely be seen. And don’t forget—this is largely based on estimates today, so partners will look more similar in terms of their carbon emissions than they really are.
Emissions per dollar
This metric is based on total emissions for a specific campaign budget. Dividing the campaign emissions with the budget in dollars creates a “comparable” KPI—emissions per dollar. It’s a companion to total emissions because, in the advertising industry, there is little incentive to stop a campaign before a given budget is fully spent, even if campaign goals are hit early. So assuming all budget is spent, reducing this metric will reduce total emissions.
The most effective way to optimize for this metric would be to never negotiate rates. This would keep CPMs high, which would limit the number of total impressions per budget, which is obviously unlikely. Comparing the emissions per dollar across channels or partners will make any cost-efficient solution look bad because it’s affordable to run a lot of impressions, with no consideration if money, or emissions, were well-spent or not.
Emissions per dollar is a way to splice total emissions, but it’s not best to optimize for unless the spend is actually connected to value-creating outcomes. Inflation happens and budgets go up, so emissions can increase without being easily detected if the rate of budget increase is higher than the rate of emissions increase.
Carbon cost per outcome
Not all impressions are the same. And not every dollar spent provides the same value. Outcomes can be the great equalizer.
A third measurement that ensures a win-win for sustainability and performance and prioritizes quality over quantity, carbon cost of business outcomes may be less straightforward to measure but should be every advertiser’s ultimate goal. A specific outcome could be ROI, ROAS, attention or brand lift; an easier-to-measure proxy could be used during a campaign, with richer measurement happening afterward to drive future optimization and spend. One channel might deliver the highest ROI but also high emissions, and another lowest emissions but low ROI. Dividing emissions by ROI provides a comparable KPI bringing these two goals together.
An advertiser should use this insight to improve ongoing measurement so that media buyers and partners can optimize for emissions reduction and real campaign performance rather than relying on the flawed optimization metrics described above.
Sustainability and campaign performance go up and down based on a number of variables, and our metrics need to account for these variables correctly. The goal is to build a picture of how they intersect to support innovation and growth. In some situations, a solution both reduces emissions and increases campaign performance—like streaming technology over traditional ad-serving. In other situations, an improvement in sustainability is a bonus with little effect on performance—such as working with a company that uses renewable energy. These three metrics can work together to ensure a campaign performs sustainably without going sideways.
Advertisers must beware the claim that a solution delivers efficiency without a connection to total carbon footprint. While this word does apply to both sustainability and performance, advertising as an industry is subject to the Jevons paradox.
Ideally, the solution would be for advertisers to favor cost-efficient solutions and simply pocket the margin, rather than reinvest in more advertising impressions—but that’s not how growth works today. That’s not an excuse to keep using inefficient and expensive technology though. Drawing that conclusion would stifle the innovation crucial for sustainability progress. Each player in each step of the value chain, advertisers included, is responsible for designing away waste and becoming as efficient as possible—and all the better if that’s both in carbon cost and financial cost.
Advertisers must work with their agencies to build a measurement structure that works across the ecosystem. A combined focus on emissions per impressions, budget and campaign performance helps us all get off to a good start.
This article was published in AdWeek.
Dec 20, 2023