A Forrester Total Economic Impact™ Study Prepared For Google
Measuring the Total Economic Impact of Google DoubleClick Search V3 Multicompany Analysis
Project Director: Jon Erickson December 2011
Forrester Consulting
Measuring the Total Economic Impact of Google DoubleClick Search3
TABLE OF CONTENTS Executive Summary ............................................................................................................................................................................... 2 Google DoubleClick Search Generates Improved Workflow Efficiency and Reduced Cost .............................................. 2 Factors Affecting Benefits And Costs ........................................................................................................................................... 5 Disclosures ......................................................................................................................................................................................... 5 TEI Framework And Methodology .................................................................................................................................................... 7 Analysis .................................................................................................................................................................................................... 8 Interview Highlights ........................................................................................................................................................................ 8 Benefits ............................................................................................................................................................................................. 10 Costs.................................................................................................................................................................................................. 15 Flexibility.......................................................................................................................................................................................... 16 Risk.................................................................................................................................................................................................... 16 Financial Summary .............................................................................................................................................................................. 18 DS3: Overview ...................................................................................................................................................................................... 20 Appendix A: Composite Organization Description ...................................................................................................................... 21 Appendix B: Total Economic Impact™ Overview........................................................................................................................... 21 Appendix C: Supplementary Tables ................................................................................................................................................. 23 Appendix D: Glossary ......................................................................................................................................................................... 26
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Measuring the Total Economic Impact of Google DoubleClick Search3
Executive Summary In October 2011, Google commissioned Forrester Consulting to examine the total economic impact and potential return on investment (ROI) agencies and advertisers may realize by investing in Google DoubleClick Search 3 (DS3). The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of the DS3 on their organizations. DoubleClick Search V3 (DS3) is a centralized Web-based tool for creating, managing, and tracking campaigns across multiple search engines (currently Google, the Yahoo! and Microsoft Search Alliance, and Yahoo! Search Marketing). It is a search engine marketing technology solution for campaign management, bid management, and reporting.
Google DoubleClick Search Generates Improved Workflow Efficiency and Reduced Cost Our interviews with 4 existing global agencies and subsequent financial analysis found that a representative organization based on these agencies we interviewed experienced the risk-adjusted ROI, costs, and benefits shown in Table 1. [See Appendix A for a description of the representative organization.]
Table 1 Three-Year Risk-Adjusted ROI1 of Adopting DS3 – Representative Organization NPV - ROI
195%
Payback period
10.1 Months
Total benefits (PV) Total costs (PV)
($353,375)
Net present value
$478,146
$831,521
Source: Forrester Research, Inc.
• Benefits. Due to the improvements in efficiency enabled by the use of Google DoubleClick Search V3, the
representative organization experienced the following benefits:
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o
Campaign Management. Ability to reduce the cost of managing multiple campaigns within and across clients.
o
Reporting. Ability to reduce the cost and time to report and analyze real time data across campaigns and clients providing a broader view of the effectiveness of search.
o
Bid Optimization. Ability to reduce the cost through automation of bid strategy and execution while at the same time reducing the impact of error and delay in setting bids.
Forrester Consulting
Measuring the Total Economic Impact of Google DoubleClick Search3
Table 2 illustrates the percent time savings as noted by the interviewed organizations across campaign management, reporting, and bid optimization
Table 2 Percent Impact to Workflow – Time Improvement and Cost Reduction
Workflow Task
Time Improvement
Cost Reduction
Campaign Management
13%
22%
Reporting
21%
21%
Bid Optimization
19%
22%
Source: Forrester Research, Inc.
• Costs. The representative organization experienced the following costs:
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o
Platform Cost. The platform cost is estimated as a fraction of the total cost of the platform, reflecting the amount attributable to this product.
o
Planning and Implementation. The planning and implementation includes the cost of vendor selection, stress testing and upgrading to the new platform
o
Administrative Costs. The administration needs for DS3 are minimal, and Include the cost of first line support and managing the Google relationship.
o
Change Management Costs. The change management costs for this implementation occurred in three areas: training, documentation, process change, all of which occurred during the initial implementation..
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Measuring the Total Economic Impact of Google DoubleClick Search3
Figure 1 Cash Flow Over Time
Financial Analysis (Risk -Adjusted) $450,000
$1,600,000
$400,000
$1,400,000
$350,000
$1,200,000
$300,000
$1,000,000
$250,000
$800,000
$200,000
$600,000
$150,000 Cas h F lows
$100,000
$400,000
$50,000
$200,000
$0
$0 1
2 Costs
Source: Forrester Research, Inc.
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3 Benefits
4 Net Cash Flow
Forrester Consulting
Measuring the Total Economic Impact of Google DoubleClick Search3
Figure 2 Investment Cost and Benefit Breakdown
3 Year Benefit Breakdown
Improved Workflow -‐ Campaign Management Improved Workflow -‐ Bid Optimization Improved Workflow -‐ Reporting
3 Year Cost Breakdown
Platform Cost Planning and Implementation Administrative Costs Change management costs
Factors Affecting Benefits And Costs Table 1 illustrates the risk-adjusted financial results that were achieved by the representative organization. The riskadjusted values take into account any potential uncertainty or variance that exists in estimating the costs and benefits, which produces more conservative estimates. The following factors may affect the financial results that an organization may experience: • Percent of search campaign spend managed through DS3 vs. not managed through DS3. • Prior method for managing search campaigns • Staff turnover/training.
Disclosures The reader should be aware of the following: • The study is commissioned by Google and delivered by the Forrester Consulting group.
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Measuring the Total Economic Impact of Google DoubleClick Search3
• Forrester makes no assumptions as to the potential return on investment that other organizations will receive.
Forrester strongly advises that readers should use their own estimates within the framework provided in the report to determine the appropriateness of an investment in Google DoubleClick Search 3. • Google reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and
its findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study. • The customer names for the interviews were provided by Google.
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Measuring the Total Economic Impact of Google DoubleClick Search3
TEI Framework And Methodology Introduction From the information provided in the interviews, Forrester has constructed a Total Economic Impact™ framework for those organizations considering implementing DS3. The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision.
Approach And Methodology Forrester took a multistep approach to evaluate the impact that DS3 can have on an organization (see Figure 2). Specifically, we: • Interviewed Google marketing/sales/consultants personnel and Forrester analysts to gather data relative to DS3
and the marketplace for DS3. • Interviewed 4 organizations currently using DS3 to obtain data with respect to costs, benefits, and risks. • Designed a representative organization based on characteristics of the interviewed organizations (see Appendix
A). • Constructed a financial model representative of the interviews using the TEI methodology. The financial model is
populated with the cost and benefit data obtained from the interviews as applied to the representative organization.
Figure 3 TEI Approach
Perform due diligence
Conduct customer interviews
Design composite organization
Construct financial model using TEI framework
Source: Forrester Research, Inc.
Forrester employed four fundamental elements of TEI in modeling DS3’s service:
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1.
Costs.
2.
Benefits to the entire organization.
3.
Flexibility.
Write case study
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Measuring the Total Economic Impact of Google DoubleClick Search3
4.
Risk.
Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, Forrester’s TEI methodology serves the purpose of providing a complete picture of the total economic impact of purchase decisions. Please see Appendix B for additional information on the TEI methodology.
Analysis Interview Highlights A total of 4 interviews were conducted for this study, involving representatives from the following organizations: 1.
A US based search marketing agency that provides paid search, natural search, social, display, affiliate and mobile marketing solutions to a variety of Fortune 500 and smaller clients.
2.
A company which provides marketing communications services for business-to-business clients offering strategy development, digital advertising, media research and planning, interactive marketing, and public relations services, with offices across Europe and the United States.
3.
The interactive division of a larger media company, which provides data driven media solutions across all interactive channels: digital, direct response, relationship based media.
4.
A global marketing agency that provide search engine marketing to both Fortune 500 and Fortune 1000 organizations.
The 4 interviews uncovered several common themes which ultimately drove the financial analysis: • Migration Path. All of the organizations interviewed had previous experience with earlier versions Google
DoubleClick Search and saw the move to Google DoubleClick Search V3 as a way of providing their clients with the most up to date search engine management platforms. • Need to consolidate. Organizations generally had multiple search engine management platforms in place within
their environment. In several cases, the decision to move to a SEM platform was determined by client demand and input, requiring familiarity different platforms by client teams • Driving workflow efficiency. Among the organizations interviewed, the primary reason for moving to Google
DoubleClick Search V3 was to improve the efficiency and speed of individual client teams. For many organizations who were on previous versions of Google DoubleClick Search, the process to complete specific workflow tasks around campaign management, bid optimization, and reporting was growing inefficient with manual workarounds for daily tasks. • Cutting though clutter. Google DoubleClick Search V3 provided organizations with a way to reduce their
reliance on manual spreadsheets during Search Engine Management functions. The reliance on spreadsheets was
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Measuring the Total Economic Impact of Google DoubleClick Search3
seen as a liability for many organizations in the difficulty of maintaining consistency of reporting across clients and campaigns. • Improved Decision Making. The adoption of DS3 provided a way to improve visibility across campaigns,
increasing the speed to create client and internal reports • Qualitative Impact. In addition to the quantitative impacts to workflow cited during the interviews, several
organizations noted key qualitative benefits that were part of the overall decision to move to Google DoubleClick Search V3. These included faster response time of ad-hoc client questions leading ultimately to greater customer satisfaction, improved speed to react to changes within individual campaigns leading to higher campaign effectiveness, as well as faster training of new hires to client support teams. • Risk Impact. While organizations believed the benefits were compelling to move to Google DoubleClick Search
V3, the interviewed organizations did note several concerns and potential risks around the migration. Google DoubleClick Search V3 is a relatively new platform and most of the clients interviewed felt they had to allocate additional internal resources for a smooth change management transition.
Representative Findings Based on the interviews with the 4 existing agency customers provided by Google, Forrester constructed a TEI framework, a representative organization, and an associated ROI analysis that illustrates the areas financially affected. The representative organization that Forrester synthesized from these results represents a US-based agency with total annual revenue under management of 48 million. Table 2 illustrates the client and staffing characteristics of the representative organization. The organization divided their client teams into analytic and search functions with a combination of junior and senior staff for each.
Table 3 Client Description – Client Number and Size of Client Team
Total Clients Small Mid Sized Large Total
50 20 10 80
Size of client teams Average Revenue Under Management Analytics Search Junior Senior Junior Senior $400,000 1 1 1 1 $800,000 1 1 2 1 $1,200,000 2 1 4 2 $48,000,000
Framework Assumptions Table 4 provides the model assumptions that Forrester used in this analysis. Forrester uses fully burdened salary in our benefit calculations.
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Measuring the Total Economic Impact of Google DoubleClick Search3
Table 4 Model Assumptions Ref.
Metric
Calculation
Value
V1
Hours per week
40
V2
Weeks per year
52
V3
Hours per year (M-F, 9-5)
2,080
V4
Hours per year (24x7)
8,736
V5
Senior Analytic FTE
$120,000
V6
Junior Analytic FTE
$90,000
V7
Senior Search FTE
$100,000
V8
Junior Search FTE
$80,000
Source: Forrester Research, Inc.
The discount rate used in the PV and NPV calculations is 10% and time horizon used for the financial modeling is 3 years. Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are urged to consult with their respective company’s finance department to determine the most appropriate discount rate to use within their own organizations.
Benefits This next section illustrates the potential benefit impact on a representative organization from the migration to DS3. Interviewed agencies noted benefits of Google DoubleClick Search in three primary areas: •
Campaign management – Being able to improve specific campaign management workflows including moving between advertisers and engine accounts, improved integration with adCenter campaigns, as well as faster uploading of changes or updates to individual campaigns.
•
Reporting – Being able to improve specific reporting processes including being able to drill down into specific data sets allowing for easier and streamlined of common segmentation formats.
•
Bid Optimization - Being able to improve the process of managing and creating a bid strategy ultimately leading to a more effective and timely campaign.
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Measuring the Total Economic Impact of Google DoubleClick Search3
For all of these areas, Google DoubleClick Search provided the ability of agencies to move away from manual Excel based processes to a more automated tool. Ultimately, this allowed organizations to reduce the time to complete common processes steps, reduce error and costly mistakes, and improve the efficiency of the search and analytics functions within client teams. All three of the benefit categories included in this analysis can be attributed to the improved workflow that the interviewed organizations experienced due to their use of DS3. In order to quantify the financial impact of these improvements, we have divided the benefits into three categories: campaign management, bid optimization, and reporting. For each category, we first estimate the current costs of both search and analysis in that area, based on several variables: the size of the client company, the number of both junior and senior resources needed for the task, the time to complete the process in question, and the number of times the process occurs per week. Once that baseline cost is determined, we then apply a percentage reduction in the time required, which allows us to quantify the benefit attributable to the use of DS3 in assisting with the identified task. For the detailed calculations to quantify the current cost of search and analysis in each of the three categories, please refer to Appendix D. In the following sections, we use the current cost of these activities and show the financial impact of the improvements due to the use of DS3. We follow the same method for quantifying the benefits due to the workflow improvements in each of the three categories.
Campaign Management
Organizations who had migrated to Google DoubleClick Search noted the improved efficiencies from the campaign management process. Specifically, interviewed organizations noted the improved user interface as well as built in templates to reduce the number of processes steps to manage the overall campaign process. Prior to the migration to Google DoubleClick Search the functionality found in past Google DoubleClick Search tools was limited, forcing client teams to rely primarily on spreadsheets to manage and keep track of individual campaigns. Google DoubleClick Search v3 provided a way for client teams to see across campaigns, allowing for comparison of campaigns within a single interface and being able to make changes and updates to individual campaigns within minimal process steps. Examples of ongoing to tasks required in managing large search campaigns: • • • • • • •
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Creating new keywords, ad texts, ad groups, and campaigns Keyword bid management (sometimes daily, often weekly, sometimes monthly) Modify keyword landing page URLs Modify ad text copy (new offer, new landing page, price change) Managing campaign budgets (need to hit specific monthly or quarterly targets, therefore, needs to change campaign daily budgets and/or keyword bids to increase or decrease spend) Syncing changes made directly in the search engines (adwords, adcenter) with DS3 - so DS3 matches adwords and adcenter Diagnosing unexpected changes in performance (spikes in spend, CTR, impressions, etc)
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Table 5 Campaign Management Improvement Ref.
Metric
A1
Baseline workflow cost - pre investment Search
A2
Workflow cost - post investment – Search
A3
Percent improvement
A4
Baseline workflow cost - pre investment – Analytics
A5
Workflow cost - post investment – Analytics
A6
Percent Improvement
At
Improved Workflow Campaign Management
Calculation
Initial
Year 1
Year 2
Year 3
855,006
855,006
855,006
104,488
104487.5
104487.5
$210,915
$210,915
$210,915
Total
Present Value
1,048,533
18% 121,875
14%
Source: Forrester Research, Inc.
Reporting Another area of benefit for organizations that had migrated to Google DoubleClick Search v3 was improved reporting capabilities found within the platform to track and report traffic and conversions resulting from paid search campaigns. In previous versions of Google DoubleClick Search, much of the reporting involved extracting information out of spreadsheets and creating common templates for the around the campaign and bid optimization process. In addition, this manual processes involved a combination of junior and senior staff to create and run both internal and client reports. Examples of common reports reports run when managing large search campaigns: • • • • • • • •
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Trending reports (week over week, month over month, year over year) Pacing reports (actual spend to target) Ad text performance Keyword/query performance Conversion/sales performance Top keyword performance Brand keyword performance Exception reports (i.e. keywords without a conversion, drop in CTR or conversion rate)
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Measuring the Total Economic Impact of Google DoubleClick Search3
Table 6 Reporting Improvement Ref.
Metric
C1
Baseline workflow cost - pre investment Search
C2
Workflow cost - post investment - Search
C3
Percent improvement
C4
Baseline workflow cost - pre investment Analytics
C5
Workflow cost - post investment - Analytics
C6
Percent Improvement
Ct
Improved Workflow Reporting
Calculation
Initial
Year 1
Year 2
Year 3
392,107
392,107
392,107
362,987
362,987
362,987
$147,507
$147,507
$147,507
Total
Present Value
468,800
16% 433,800
16%
Source: Forrester Research, Inc.
Bid Optimization Organizations noted specific improvements found in Google DoubleClick Search V3 that made the bid optimization process more efficient. Using prior versions of Google DoubleClick Search, organizations noted the inability to get to precise position bidding to one decimal point (for example, a range of 1.4 to 2.5) resulting in more time spent to monitor and update potential bids. In addition, organizations noted more consistent results with an improved position algorithm. Examples of how agencies and large advertisers rely on automated bid management tools like those found in DS3: • • • • •
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Bid priority keywords to a specific position on the search results page (i.e. position 1 to 3) Keyword bidding to hit a desired return on ad spend (ROAS) Keyword bidding to hit a desired cost per action (CPA) for valuable activities like a sale, lead form submission, strategic web page view, etc. Grouping low volume keywords together and make bidding decision at the group level (portfolio based bidding) Keyword bidding to hit a desired monthly spend target
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Table 7 Bid Optimization Improvement Ref.
Metric
B1
Baseline workflow cost - pre investment Search
B2
Workflow cost - post investment – Search
B3
Percent improvement
B4
Baseline workflow cost - pre investment – Analytics
B5
Workflow cost - post investment – Analytics
B6
Percent Improvement
Bt
Improved Workflow Bid Optimization
Calculation
Initial
Year 1
Year 2
Year 3
Total
Present Value
77,350 67,535
67,535
67,535
300,969
300,969
300,969
$76,846
$76,846
$76,846
13% 368,000
18%
Source: Forrester Research, Inc.
Total Benefits The total quantified benefit to the organization, as a result of the improved workflows using DS3, are summarized in the table below.
Table 8 Total Benefits Total Benefit Cash Flows (Original Estimates) Year 1
Year 2
Year 3
Total
Present Value
Improved Workflow - Campaign Management
$105,458
$210,915
$210,915
$527,288
$428,644
Bto
Improved Workflow - Bid Optimization
$38,423
$76,846
$76,846
$192,114
$156,174
Cto
Improved Workflow - Reporting
$73,753
$147,507
$147,507
$368,767
$299,779
Total Benefits (Original)
$217,634
$435,268
$435,268
$1,088,169
$884,597
Ref.
Benefit Category
Ato
Source: Forrester Research, Inc.
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Initial
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Measuring the Total Economic Impact of Google DoubleClick Search3
Costs Investment costs represent the incremental cost of the agency to invest in Google DoubleClick Search V3. These costs include the cost of license, planning and implementation, administration, as well as change management costs.
Platform Cost In order to estimate the cost of the license which can be attributed to the related campaigns, we begin with the average yearly cost to support campaigns, which is $4.5 million for the representative agency. We then assign 2.25% of that to cost of the platform, which gives an annual cost of $101,250 per year, which we consider to be the licensing cost for the purposes of this study.
Planning and Implementation The planning and implementations costs for this project were upfront and fairly minimal. For the sample company, 6 people were involved for about half a work week (20) hours each. At a cost of $60 per hour, that gives a total cost of $7,200 for planning and implementation.
Administrative Costs The administrative costs for the platform are likewise fairly minimal. For the composite organization, we estimate a single resource devoting 150 hours a year, or approximately 12.5 hours a month, to maintaining the product. This gives a total internal administration cost of $9,000 per year.
Change Management Costs The change management process to begin using DS3 consisted of three components: training, documentation, and testing, all of which occurred in the initial phase of the deployment. For the sample company, we estimate these costs to total $63,000; the breakdown in the three areas is listed in the table below.
Total Costs The total costs for this project over the three years of the analysis are summarized in the table below.
Table 9 Total Costs Total Cost Cash Flows (Original Estimates) Ref.
Cost Category
Initial
Year 1
Year 2
Year 3
Total
Present Value
Ato
License Cost
$0
($101,250)
($101,250)
($101,250)
($303,750)
($251,794)
Bto
Planning and Implementation
($7,200)
$0
$0
$0
($7,200)
($7,200)
Cto
Administrative Costs
($9,000)
($9,000)
($9,000)
($9,000)
($36,000)
($31,382)
Dto
Change management costs
($63,000)
$0
$0
$0
($63,000)
($63,000)
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Measuring the Total Economic Impact of Google DoubleClick Search3
Total Costs (Original)
($79,200)
($110,250)
($110,250)
($110,250)
($409,950)
($353,375)
Source: Forrester Research, Inc.
Flexibility Flexibility, as defined by TEI, represents an investment in additional capacity or capability that could be turned into business benefit for some future additional investment. This provides an organization with the “right” or the ability to engage in future initiatives but not the obligation to do so. There are multiple scenarios in which a customer might choose to implement DS3 and later realize additional uses and business opportunities. Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix B).
Risk Forrester defines two types of risk associated with this analysis: implementation risk and impact risk. “Implementation risk” is the risk that a proposed investment in DS3 may deviate from the original or expected requirements, resulting in higher costs than anticipated. “Impact risk” refers to the risk that the business or technology needs of the organization may not be met by the investment in DS3, resulting in lower overall total benefits. The greater the uncertainty, the wider the potential range of outcomes for cost and benefit estimates. Quantitatively capturing investment and impact risk by directly adjusting the financial estimates results in more meaningful and accurate estimates and a more accurate projection of the ROI. In general, risks affect costs by raising the original estimates, and they affect benefits by reducing the original estimates. The risk-adjusted numbers should be taken as “realistic” expectations since they represent the expected values considering risk. The following implementation risks that affect costs are identified as part of this analysis: • The risk that change management cost may be higher than anticipated due to the complexity of the search and
analytics environment The following impact risks that affect benefits are identified as part of the analysis: • The risk that the efficiency savings may be lower than anticipated due to slower adoption of new features and
functionality found in Google DoubleClick Search V3. Table 18 shows the values used to adjust for risk and uncertainty in the cost and benefit estimates. The TEI model uses a triangular distribution method to calculate risk-adjusted values. To construct the distribution, it is necessary to first estimate the low, most likely, and high values that could occur within the current environment. The risk-adjusted value is the mean of the distribution of those points. Readers are urged to apply their own risk ranges based on their own degree of confidence in the cost and benefit estimates.
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Measuring the Total Economic Impact of Google DoubleClick Search3
Table 10 Cost And Benefit Risk Adjustments Costs
Low
Most likely
High
Mean
Platform Cost
100%
100%
100%
100%
Planning and Implementation
100%
100%
100%
100%
Administrative Costs
100%
100%
100%
100%
Change Management
100%
100%
100%
100%
Benefits
Low
Most likely
High
Mean
Campaign Management
80%
100%
103%
94%
Bid Optimization
80%
100%
103%
94%
Reporting
80%
100%
103%
94%
Source: Forrester Research, Inc.
Readers are urged to apply their own risk ranges based on their own degree of confidence in the cost and benefit estimates.
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Financial Summary The financial results calculated in the Costs and Benefits sections can be used to determine the return on investment, net present value, and payback period for the organization’s investment in DS3. These are shown in Table 13 below.
Table 12 Cash Flow — Non-Risk-Adjusted Year 1 -ROI
15%
Year 2 -ROI
118%
Year 3 -ROI
165%
NPV - ROI
150%
Payback period
8.9
Total benefits (PV)
$884,597
Total costs (PV)
($353,375)
Net present value
$531,222
Source: Forrester Research, Inc.
Table 14 below shows the risk-adjusted ROI, NPV, and payback period values. These values are determined by applying the risk-adjustment values from Table 12 in the Risk section to the cost and benefits numbers in Tables7 and 11.
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Measuring the Total Economic Impact of Google DoubleClick Search3
Table 13 Cash Flow — Risk-Adjusted Year 1 -ROI
8%
Year 2 -ROI
105%
Year 3 -ROI
150%
NPV - ROI
135%
Payback period
=F4
Total benefits (PV)
$831,521
Total costs (PV)
($353,375)
Net present value
$478,146
Source: Forrester Research, Inc.
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Measuring the Total Economic Impact of Google DoubleClick Search3
DS3: Overview According to Google, Agencies and advertisers use DS3 to organize campaigns and run reports for campaign, ad group, and keyword activity. The DS3 technology: • • • •
Allows you to manage keywords, ads, and bids across multiple search engines. Enables bulk uploading to search engines. Provides numerous ways to manage and track keyword performance. Automatically adjusts keyword bids based on specific business goals.
Without DS3, you'd need to manage your ads and keywords on each search engine, and it would be much more difficult to analyze your ad/keyword performance across engines. You also wouldn't have the automated bidding power of DS3 bid strategies. With DS3, you save time, reduce complexity, and have the ability to make better decisions and increase your Return on Investment (ROI) for search marketing.
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Appendix A: Composite Organization Description For this TEI study, Forrester has created a representative organization to illustrate the quantifiable costs and benefits of implementing DS3. The representative agency is intended to represent a US based agency with 12 offices throughout the globe (6 in the US) and total annual revenues of 48 million dollars. The representative agency is based on characteristics of the interviewed customers. The representative company has the following characteristics: • •
• •
The organization uses a variety of SEM tools within their environment, including Google DoubleClick Search. The choice around tools are largely driven by client demand. The organization has a total of 80 clients ranging in average revenue from 400,000 per year to 1,200,000. Each account has both a search and analytics team providing support. The size of these teams will vary depending on client size. Over the past several years, the organization has a 15% annual growth in client revenue as well as campaign spend under management. Prior to the migration, roughly 60% of clients were on the Google DoubleClick Search platform. With the investment in Google DoubleClick Search V3 80% of clients were new platform.
For the purpose of the analysis, Forrester assumes that the representative organization was replacing their existing footprint with Google DoubleClick Search with Google DoubleClick Search V3.
Appendix B: Total Economic Impact™ Overview Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-making processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders. The TEI methodology consists of four components to evaluate investment value: benefits, costs, risks, and flexibility.
Benefits Benefits represent the value delivered to the user organization — IT and/or business units — by the proposed product or project. Often product or project justification exercises focus just on IT cost and cost reduction, leaving little room to analyze the effect of the technology on the entire organization. The TEI methodology and the resulting financial model place equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organization. Calculation of benefit estimates involves a clear dialogue with the user organization to understand the specific value that is created. In addition, Forrester also requires that there be a clear line of accountability established between the measurement and justification of benefit estimates after the project has been completed. This ensures that benefit estimates tie back directly to the bottom line.
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Costs Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the business units may incur costs in the form of fully burdened labor, subcontractors, or materials. Costs consider all the investments and expenses necessary to deliver the proposed value. In addition, the cost category within TEI captures any incremental costs over the existing environment for ongoing costs associated with the solution. All costs must be tied to the benefits that are created.
Risk Risk measures the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is measured in two ways: 1) the likelihood that the cost and benefit estimates will meet the original projections, and 2) the likelihood that the estimates will be measured and tracked over time. TEI applies a probability density function known as “triangular distribution” to the values entered. At minimum, three values are calculated to estimate the underlying range around each cost and benefit.
Flexibility Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits can typically be the primary way to justify a project, Forrester believes that organizations should be able to measure the strategic value of an investment. Flexibility represents the value that can be obtained for some future additional investment building on top of the initial investment already made. For instance, an investment in an enterprisewide upgrade of an office productivity suite can potentially increase standardization (to increase efficiency) and reduce licensing costs. However, an embedded collaboration feature may translate to greater worker productivity if activated. The collaboration can only be used with additional investment in training at some future point in time. However, having the ability to capture that benefit has a present value that can be estimated. The flexibility component of TEI captures that value.
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Appendix C: Supplementary Tables As discussed in the benefits section, the details of the underlying calculations are captured in the following tables.
Table D1 Campaign Management - Search
Client size
Process Steps
FTE involvement
Time to complete (min )
Proces ses per week (per client)
Estimated time reduction
Small
5
1
1
120
1
10%
25%
Cost Before $ 58,667
Medium
5
1
1
160
2
10%
30%
$ 156,444
Large
8
2
1
160
4
15%
35%
$ 833,422
Jr.
Sr.
Jr.
Sr.
Cost After $ 49,850 $ 130,311 $ 674,844
Savings $ 8,817 $ 26,133 $ 158,578
Cost After $ 4,388 $ 11,700 $ 88,400
Savings $ 488 $ 1,300 $ 15,600
Source: Forrester Research, Inc.
Table D2 Campaign Management Analytics
Client size
Process Steps
Time to compl ete (min )
FTE involvement Jr.
Sr .
Proces ses per week
Estimat ed time reducti on Jr.
Small
5
0.25
0
60
1
10%
Medium
5
0.25
0
80
2
10%
Large
8
0.5
0
100
4
15%
Source: Forrester Research, Inc.
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Sr . 0 % 0 % 0 %
Cost Before $ 4,875 $ 13,000 $ 104,000
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Measuring the Total Economic Impact of Google DoubleClick Search3
Table D3 Bid Optimization - Search
Client size
Process Steps
Time to compl ete (min )
FTE involvemen t Jr.
S r.
Proces ses per week (per client)
Estima ted time reducti on Jr.
Small Mediu m
5
0.25
0
120
1
10%
5
0.25
0
160
2
10%
Large
8
0.25
0
160
2
15%
Proces ses per week
Estima ted time reducti on
Sr. 15 % 20 % 30 %
Cost Before $ 9,750 $ 26,000 $ 41,600
Cost After $ 8,775 $ 23,400 $ 35,360
Savings per week $ 975 $ 2,600 $ 6,240
Sr. 25 % 30 % 35 %
Cost Before $ 29,333 $ 78,222 $ 260,444
Cost After $ 24,925 $ 65,156 $ 210,889
Savings per week $ 4,408 $ 13,067 $ 49,556
Source: Forrester Research, Inc.
Table D4 Bid Optimization - Analytics
Client size
Process Steps
Time to compl ete (min )
FTE involvemen t Jr.
S r.
Jr.
Small Mediu m
5
1
1
60
1
10%
5
1
1
80
2
10%
Large
8
2
1
100
2
15%
Time to compl ete (min )
Proces ses per week (per client)
Estima ted time reducti on
Source: Forrester Research, Inc.
Table D5 Reporting - Search
Client size
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Process Steps
FTE involvemen t
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Measuring the Total Economic Impact of Google DoubleClick Search3
Jr. Small Mediu m
2
1
3
1
Large
3
1
S r. 0. 5 0. 5 0. 5
Jr. 120
4
10%
160
4
10%
160
6
15%
Proces ses per week
Estima ted time reducti on
Sr. 25 % 30 % 35 %
Cost Before $ 78,133 $ 156,267 $ 234,400
Cost After $ 67,960 $ 134,347 $ 189,800
Savings per week $ 10,173 $ 21,920 $ 44,600
Sr. 15 % 20 % 30 %
Cost Before $ 46,933 $ 93,867 $ 293,000
Cost After $ 41,453 $ 81,333 $ 240,200
Savings per week $ 5,480 $ 12,533 $ 52,800
Source: Forrester Research, Inc.
Table D6 Reporting – Analytics
Client size
Process Steps
Time to compl ete (min )
FTE involvemen t Jr.
S r.
Jr.
Small Mediu m
2
1
1
60
4
10%
3
1
1
80
4
10%
Large
3
2
1
100
6
15%
Source: Forrester Research, Inc.
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Appendix D: Glossary Discount rate: The interest rate used in cash flow analysis to take into account the time value of money. Although the Federal Reserve Bank sets a discount rate, companies often set a discount rate based on their business and investment environment. Forrester assumes a yearly discount rate of 10% for this analysis. Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are urged to consult their respective organization to determine the most appropriate discount rate to use in their own environment. Net present value (NPV): The present or current value of (discounted) future net cash flows given an interest rate (the discount rate). A positive project NPV normally indicates that the investment should be made, unless other projects have higher NPVs. Present value (PV): The present or current value of (discounted) cost and benefit estimates given at an interest rate (the discount rate). The PV of costs and benefits feed into the total net present value of cash flows. Payback period: The breakeven point for an investment. The point in time at which net benefits (benefits minus costs) equal initial investment or cost. Return on investment (ROI): A measure of a project’s expected return in percentage terms. ROI is calculated by dividing net benefits (benefits minus costs) by costs.
A Note On Cash Flow Tables The following is a note on the cash flow tables used in this study (see the example table below). The initial investment column contains costs incurred at “time 0” or at the beginning of Year 1. Those costs are not discounted. All other cash flows in Years 1 through 3 are discounted using the discount rate (shown in Framework Assumptions section) at the end of the year. Present value (PV) calculations are calculated for each total cost and benefit estimate. Net present value (NPV) calculations are not calculated until the summary tables and are the sum of the initial investment and the discounted cash flows in each year.
Table [Example] Example Table Ref.
Category
Source: Forrester Research, Inc.
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Calculation
Initial cost
Year 1
Year 2
Year 3
Total
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