Navigating Marketing Mix Modeling Amid Google's Changes

With the impending demise of third-party cookies, marketers are feeling the pressure to find alternative solutions for targeting, tracking, and measurement before traditional methods become obsolete by the end of the year. Google has been focusing on its Privacy Sandbox proposals to prepare for a cookieless future, but recently announced a new tool that could assist marketers in measuring the effectiveness of their advertising efforts.

On March 7, Google introduced Meridian, an open-source marketing mix model (MMM) designed to offer marketers a strong foundation for comprehensive and privacy-conscious measurement. While the launch of Meridian is a significant advancement in enhancing marketers' measurement capabilities, industry experts warn that there are challenges and limitations that come with it.

"The initial impression here is that Google is once again rolling out a tool primarily tailored for its own products. However, what's truly commendable about this release is that Google is recognizing a pivotal shift: the demise of traditional tracking and attribution methods," said Matt Hertig, CEO of analytics company ChannelMix, in emailed comments. "This recognition is another signal to marketers that the walled gardens are getting higher, marking a significant leap forward in adapting to the evolving digital landscape."

Google's New Tool: A Step Forward in Evolving Digital Marketing

MMMs have been in use for almost a century, but Google has noticed a resurgence in their popularity. According to Kantar data cited by Google, 60% of U.S. advertisers are currently using MMMs, and 58% of those not using them are considering doing so in the future. Google describes MMMs as statistical analyses used to measure the impact of cross-channel marketing.

Meridian is a tool that is currently available in limited capacity, but there are plans to make it more widely accessible to all marketers and data scientists in the near future. It is centered around four key pillars: innovation, transparency, actionability, and education.

Meridian aims to enhance MMMs by incorporating methodology innovations around incrementality, reach, and frequency. They strive to ensure transparency by utilizing an open-source approach. Additionally, Meridian provides rich data inputs across Google and YouTube for cross-channel budget optimization. They also offer documentation and opportunities for further education.

Google's senior director for data science, Harikesh Nair, expressed that while MMMs are not flawless, they are continuously improving. With Meridian, they aim to guide teams towards their future goals through innovation and data sharing within an open-source framework.

According to Tina Moffett, principal analyst at Forrester, it is challenging to fully assess Meridian's potential before it becomes widely available. However, she believes that its four key pillars and the option for marketers to customize open-source algorithms to align with their specific business goals could make it appealing to a range of marketers.

Moffett pointed out that Meridian might be particularly attractive to mid-market brands with data scientists or individuals skilled in analytics. These professionals could leverage Meridian's algorithmic framework to create a customized marketing mix model. This could be especially beneficial for companies with limited budgets who may not be able to afford other independent marketing analytics vendors or service providers. Moffett believes that this could be the ideal target market for Meridian.

“There’s a little confusion in the market of what an MMM does versus what an advertiser actually needs.”

Tina Moffett

Principal analyst, Forrester

However, Meridian should not be considered a direct substitute for the measurement capabilities offered by third-party cookies, similar to Google's Privacy Sandbox proposals. Marketing mix modeling, by its nature, does not offer the same detailed insights into day-to-day ad performance targeting specific audiences at specific times.

Moffett emphasized the importance of understanding the limitations and capabilities of marketing mix modeling (MMM). He highlighted the need for clearer communication on what MMM can deliver and what it cannot. This clarity is essential to bridge the gap between what MMM offers and what advertisers truly require.

Despite relying on third-party cookies for a long time, advertisers have found them to be unreliable for tracking online behaviors and targeting media buying in a fragmented marketplace. Google's decision to phase out third-party cookies is pushing marketers to explore alternative tactics like MMMs, which may offer more effective results, even if they are less detailed.

According to Moffett, detailed data from third-party cookies may not be necessary for making investment decisions. Google's move towards MMMs provides advertisers on YouTube or Google with a framework to make smarter investment choices within the ecosystem. This shift can assist in making larger decisions regarding budget allocation.

Essential Steps for Marketers

Marketers who want to create their own Marketing Mix Models (MMMs) using Meridian must follow several important steps, as advised by Moffett. One of the main obstacles faced by enterprise clients when using marketing analytics models like MMMs is the challenge of transparency and convincing business leaders of its value. This is despite the fact that businesses highly value analytics and technical expertise, as highlighted in a recent Forrester Wave report. It is important to note that even though Meridian is open-source, it does not automatically guarantee complete transparency.

Moffett explained that data scientists and machine learning engineers find it easy to understand because they can see the code. According to Forrester's research, VPs and CMOs often purchase marketing analytics model tools and services without fully grasping how the underlying models or algorithms function.

To achieve genuine transparency with models such as MMMs, organizations need to develop strategies to involve not just the stakeholders who utilize the models, like data scientists, but also key stakeholders and marketing executives who make purchasing decisions. Moffett points out that the levels of transparency will vary among these different groups.

Transparency is key when it comes to understanding different service providers. It's not just about their measurement skills, but also their capability to create customized strategies that suit a brand's requirements.

According to Moffett, advertisers should focus on developing a comprehensive strategy. This involves considering various marketing options and determining which methods can best address specific questions and goals.

MMMs can assist in allocating budgets to the right programs and channels for achieving short-term revenue goals. However, marketing executives may require additional models and tools to measure incrementality and identity-based approaches, which are areas where Forrester notes marketers are investing in measurement. Although Meridian may only address specific measurement cases, it represents a significant advancement for marketers preparing for the cookie's demise.

According to ChannelMix CEO Hertig, Meridian signifies one of the most notable changes in marketing in the last 15 years. Tools like Meridian provide marketers with the opportunity to revitalize the analytics space by utilizing advanced technologies such as AI for effective navigation in this new era. This marks the beginning of the future of marketing measurement.

Editor's P/S:

The impending demise of third-party cookies has prompted Google to introduce Meridian, an open-source marketing mix model (MMM), to assist marketers in measuring the effectiveness of their advertising efforts. Meridian's focus on incrementality, reach, and frequency aims to enhance the capabilities of MMMs, while its open-source approach ensures transparency. Despite its potential, experts emphasize the need for clarity in understanding its limitations and capabilities. Meridian may not be a direct substitute for third-party cookies but provides a framework for making smarter investment decisions within Google's ecosystem.

Meridian's launch highlights the growing recognition of the need for marketers to adapt to a cookieless future. While MMMs have been used for nearly a century, their resurgence indicates the challenges faced by traditional tracking and attribution methods. Meridian's open-source nature and customization options make it appealing to marketers, particularly those with data scientists or analytics expertise. Understanding the strengths and limitations of MMMs and developing comprehensive measurement strategies will be crucial for marketers to navigate the evolving digital landscape.