Creating a new generation of data to solve social problems.
There’s a scene in the television show Mad Men in which copywriter Peggy Olson, confronted by her boss Don Draper about a risky marketing stunt she pulled for a client, defends her actions by arguing that the client’s sales are up. It’s an entertaining stunt and an entertaining argument, but this scene demonstrates something more important: just how imprecise advertising effectiveness measurement was at the time. Sure, sales were up after the marketing campaign, but how could she know whether this was due to marketing or to something else entirely?
Until relatively recently, this lack of precision measurement meant that the ad industry used a reach-based pricing system. Companies bought campaigns based on how many people of a given demographic would be exposed to the ads. Without a better system for directly measuring the impact on sales, companies had to have faith in the skills of the Don Drapers of the world.
Then Google came along and had a truly revolutionary insight: What if instead of paying for the reach of an ad, companies could use the unique attributes of the internet to pay only for ads that actually led to results? Thus the “Pay Per Click” (PPC) market was born, wherein a company pays nothing to post an ad but instead pays for what matters, namely customers actively clicking through to the target site.
So what does this have to do with the social sector? The vast majority of non-profits are still stuck in the Mad Men era when it comes to fundraising. Most rely on grants based on their activities and the number of beneficiaries they reach. When it comes to measuring effectiveness, many non-profits use imprecise metrics to indicate that their programs contribute to long-term social impact, much like the folks on Mad Men pointing to increased client sales to demonstrate an ad campaign’s success.
But there is a movement underway to bring the social sector into the Pay Per Click age. Through rigorous, outcomes-oriented measurement systems and a focus on impact instead of activities, a number of organizations are creatively importing the results-based model to the social sphere. One such organization, Twin Cities RISE!, closely tracks how its job placement programs save valuable resources for the Minnesota state government. This allows it to use what it calls a “Pay for Performance” pricing system; instead of asking for donations, the Minneapolis-based non-profit “sells” the valuable and tangible results that its programs produce.
On the supply side, major international donors are also experimenting with this approach through so-called “Cash On Delivery (COD)” foreign aid programs, which promise aid only when certain pre-determined, high-value outcomes are met.
Though an outcomes-based funding model may seem intimidating, with smart and practical measurement systems we can demonstrate clear value at relatively low cost. Just like PPC ads generally measure an accessible but powerful outcome—click-throughs—rather than eventual sales, nonprofits can measure attainable but robust short-term indicators of long-term impact.
For example, it’s hard for a program focused on ultimately increasing the college enrollment of 9th graders to analyze student results four years later. However, measuring more immediate indicators that are known to increase later college prospects, such as a student’s understanding of financial aid, allows the program to demonstrate a clear contribution to a valuable long-term social outcome.
PPC advertising has helped internet ad revenues increase by 15% in the last year alone, far outpacing traditional media. Companies without the ability to invest in reach-based marketing are much more willing to put money behind guaranteed results; the same is true for many potential social sector funders, from foundations to governments to corporations. With purse strings pulled tight on traditional funding, it’s time for social programs to become less Don Draper and more Sergey Brin.